Why Dropshipping Doesn’t Work Anymore: The Digital Products Revolution

We all remember when dropshipping looked like the next big thing.

The business model behind it was simple:

1. create a Shopify store,
2. find a supplier,
3. list their products at a slightly higher price,
4. let the supplier handle fulfillment,
5. collect the difference.

You didn’t need inventory or a warehouse. All you needed was a product with enough margin to run ads.

And for a while, it worked. Super well.

Plenty of early online entrepreneurs built real businesses using this model. That success fueled the hype. And everyone from YouTubers to side hustle blogs started recommending dropshipping as the go-to business model to earn your first $1000 online.

But that’s no longer the case, anymore.

So what happened?

In today’s guide, I’ll explain why dropshipping isn’t the opportunity it once was: and why digital products offer a more stable, higher-margin path for building online income in 2025.

Chapter 1: Why Is Dropshipping No Longer as Lucrative as It Used to Be?

According to Oberlo, the global dropshipping market is projected to exceed $500 billion by 2027, with an average annual growth rate of 23.6%.

Another study suggests that dropshippers can earn up to 50% more profit than sellers who manage their own inventory.

But beyond the flashy stats, real-world sentiment tells a different story.

After researching extensively, one thing became clear—many dropshipping businesses fail. 

And skepticism around the model is only growing.

So why isn’t dropshipping as successful and lucrative as it used to be?

Here’s why.

1. It’s Become Brutally Competitive

Dropshipping isn’t what it was in 2016. The market is mature now, and entry is harder than most people admit.

It’s estimated that only 10–20% of dropshipping businesses thrive.

And it’s not hard to see why.

Most product categories are saturated. 

For example, let’s say I want to start a dropshipping business selling baby products, like baby strollers.

A quick search on Amazon shows over 650 listings.

That tells you two things: yes, there’s demand—but also, you’re stepping into a highly competitive market.

Chances are, those who’ve dominated the market have locked in better suppliers, faster fulfillment, stronger reviews, and lower pricing. They’ve also built backend systems, optimized ad funnels, and have teams handling creative, support, and logistics.

The bigger problem is that you’re not just competing with other Shopify sellers. You’re going up against Amazon, Temu, AliExpress, and other marketplaces that dominate consumer trust.

Now ask yourself:

If a customer can get the same product tomorrow from Amazon with free and faster shipping, why would they wait 7–14 days from a random Shopify store?

That’s the real challenge. You’re not just competing on a product. But on speed, trust, and customer experience.

And in that game: 

It’s hard to beat e-commerce giants like Amazon on delivery.

You also can’t build loyalty around a generic product from a third-party supplier.

2. Dropshipping Business Model is Fundamentally Flawed

Dropshipping has too many failure points outside your control. 

It might look like an “easy” entry point into ecommerce, but under the hood, it’s a fragile stack of dependencies.

Let me explain:

Firstly, you don’t own the product.

That means, you have little to no control on the quality assurance of the product you’re selling.

A supplier can claim that their products do something excellently, but when you actually use it, you quickly realize the claims don’t really hold up. 

I’m sure you’ve ordered something online only to realize it’s not as functional or outstanding as it was advertised.

I know what you’re thinking…

“But I can first ask the supplier for a product sample where I can inspect it before listing it”.

Sure, you can. 

But that’s a one-time snapshot.

• Suppliers frequently rotate products based on availability.
• They often switch manufacturers without notice.
• Quality can degrade over time to preserve margins.

That sample you inspected last month doesn’t guarantee anything about next month’s shipments. 

And if the supplier makes a mistake, even once—you’ll be the one dealing with complaints, refunds, and chargebacks.

Secondly, you don’t control fulfillment. 

So basically, every part of the delivery experience is on your supplier. You’ll be promising delivery timelines without any actual say in how fast orders get processed, packed, or sent. You have no visibility into warehouse backlogs, customs delays, or international tracking issues.

Any mistake on their part—wrong product, late delivery, damaged packaging—becomes your problem to fix.

And because most dropshipping suppliers operate at volume with thin margins, they’re incentivized to move fast and cut corners. There’s no quality assurance process tailored to your store. You’re one of thousands of sellers they fulfill for.

3. Thin margins

One of the big problems of dropshipping that leads to failure for many businesses is tight margins.

Finding a cheap product and marking it up higher is one thing, but when you do the math, you’ll realize that there are a lot of hidden costs that’ll emerge which will eat away your profits.

Let me show you:

Let’s say you find a supplier on AliExpress or CJ Dropshipping selling an eco-friendly bamboo cutting board at $8. You price it at $25 on your Shopify store. 

The math looks decent at first glance:

$25 sale price – $8 product cost = $17 gross margin.

But now let’s layer in the real costs.

Paid Ads (Meta/TikTok):

You run cold ads to target eco-conscious consumers. Let’s say your CAC is on the lower end: $12 per sale (which is generous in 2025).

Now your margin is: $25 – $8 – $12 = $5 left

Shipping:

Shipping from China with basic tracking costs approximately $4 through your agent.

$5 – $4 = $1 left

Payment Processing (Stripe/PayPal):

2.9% + $0.30 = $1.03 on a $25 order.

$1 – $1.03 = negative margin already

Refund Buffer:

Even a 5% refund or dispute rate eats into any leftover margin. Some customers will complain about your product’s quality. Others will say delivery took too long. One lost package a week means you refund the customer, not the supplier.

Now factor in fixed costs:

• $27/month for Shopify
• $30/month for apps (upsell, reviews, analytics)
• $200/month to run and test creatives
• Maybe $100/month for a VA if you’re not handling support yourself

And this doesn’t include the time you’re spending managing all of it:

• Replying to emails
• Handling support tickets
• Monitoring ROAS
• Tweaking product descriptions, landing pages, checkout flows

You’re left with no breathing room. You might earn $1/order on good days. But that’s assuming no hiccups, which we all know in businesses anything can happen.

4. Digital Marketing is Changing

Many dropshipping businesses depend on platforms like Meta, TikTok, YouTube and Google for traffic. 

But if you’ve ever been on either of the platforms as the creator or publisher, you know that change is the only constant.

Platform policies change. Algorithms get tweaked. Ad cost increases based on topic or product popularity and competition.

And now in this age of AI, search engines are no longer sending the same volume of traffic. 

Infact a study by Ahrefs shows that AI overviews reduce clicks by 34.5%.

That’s because Google is now answering more queries directly with AI-generated summaries. 

That means even if your site ranks, fewer users are clicking through. For product discovery and SEO-driven sales, that’s a serious threat. And with Google’s AI mode in the rolling, the trend is accelerating.

And don’t get me started on attribution.

Attribution means knowing which marketing channel or campaign actually led to a sale. 

Before iOS 14, platforms like Meta and Google could track user activity across apps, making attribution clear. Now, due to privacy restrictions and limited tracking windows, you’re often missing key data.

5. Shoppers Don’t Trust Generic Shopify Stores Anymore

People are more cautious than ever when buying online. One study shows that a leading reason for cart abandonment is lack of trust in regards to sharing credit card information. 

So if your store looks like every other low-effort Shopify site, it’s already at a disadvantage.

When shoppers land on your product page and see:

• Generic branding
• Stock images reused from AliExpress
• Vague shipping policies (“7–21 business days”)
• Lack of social proof or credible reviews

They’ll pause, open new tabs and search Amazon, Temu, or a local retailer they trust more.

And when they find the exact product at nearly the same price, they’ll leave your website as if they were walking on hot coal.

If you think about it, you aren’t just competing for clicks but for credibility. Which is something your new shopify dropshipping businesses wouldn’t have earned yet.

A nice Shopify theme or urgency timer doesn’t build trust. Customers now associate the typical dropshipping store look with risk. Chances are your customers have come across many low-effort stores using the same tactics and walked away with a bad experience.

That distrust lingers. And no matter how optimized your funnel is, it won’t matter if the buyer doesn’t believe you’ll deliver.

Chapter 2: Why Choose to Sell Digital Products Instead

Now that you’ve learnt why many dropshipping businesses struggle, it’s clear that it’s not the best way to start an online business today. If you want to sell online, the best business model now is selling digital products instead. 

It is more practical, scalable, and sustainable.

You control every part of the process from product creation, pricing, delivery, customer experience, and growth. Here’s why that matters:

1. Full Product Ownership With Complete Margin Control

Digital products give you full ownership. You’re selling your own assets and knowledge instead of reselling inventory. That means:

• No suppliers taking a cut
• No shipping or fulfillment costs
• You set your own pricing

Once you’ve created the product you can sell it repeatedly at near-zero marginal cost. You keep what you earn, without operational drag.

2. Your Audience Compounds

With digital products, every piece of content you publish can bring in new buyers over time. Blog posts, YouTube videos, tweets, newsletters will keep driving traffic and building trust long after they’re posted.

In contrast, physical inventory doesn’t scale with attention. It costs money to store, pack, and ship. And when the product runs out or demand drops, you start over. Audience, on the other hand, is a compounding asset. The bigger it grows, the easier it gets to sell—without increasing cost.

3. Asymmetric Scale Without Infrastructure Bloat

Most business models scale linearly: more customers = more support, more logistics, more cost.

Digital products scale asymmetrically. Your fixed costs stay flat while sales grow. Whether you’re selling a Notion template, a course, or a coaching program, delivery is instant and infrastructure doesn’t change.

Unlike dropshipping you don’t need more staff, space, or tools to serve more buyers. That keeps operations lean and margins high even as you grow.

4. Digital Products Turn You Into a Brand, Not Just a Vendor

When you sell physical products from a third-party supplier, you’re replaceable. There’s nothing tying the product to your identity.

With digital products, you’re selling knowledge, systems, or value rooted in your experience. 

That creates differentiation. People don’t just buy the asset. They buy because of who it’s from. 

5. No Reliance on External Fulfillment to Deliver Value

When someone buys your digital product, delivery is instant. You don’t need to coordinate with suppliers, check inventory, or deal with cross-border shipping delays. 

That makes your email campaigns, automations, and offers immediately actionable—without support bottlenecks.

In contrast, if you’re running a dropshipping store, even with an email list, your success still depends on:

• A third-party supplier shipping the product
• A delivery window you can’t control
• A refund rate you can’t reduce without better fulfillment

You might own the channel, but you don’t own the outcome.

6. Digital Content Aligns With Algorithmic Distribution

Platforms like X (Twitter), YouTube, TikTok, and LinkedIn reward creators who share original insights or value.

If you’re selling a digital product that’s tied to your expertise, the same content you post to grow an audience also warms them up to buy.

There’s no need to rely on cold hard ads or short-lived virality. You can build sustained reach with consistent content and link it directly to your offers.

7. Digital Products Support Multiple Monetization Options

One product can lead to many revenue streams:

• Sell it standalone
• Bundle it with others
• License it to teams or companies
• Offer a higher-ticket course or service as a follow-up
• Add a community or coaching and charge subscriptions. 
• Tie it to events

Read our detailed guide on how to create a profitable online community.

Chapter 3: How to Build and Sell a Digital Product Online

As explained earlier, digital products offer more leverage, control, and scalability than dropshipping. You own the asset. You set the margins. And you’re not at the mercy of a third-party supplier halfway across the world.

But leverage alone doesn’t guarantee success.

You still need to build something people want. And more importantly—something they’re willing to pay for.

Here’s how to approach it:

1. Validate a Specific Problem

Don’t begin with a product idea. Start with a real problem—one that’s already costing people time, money, or missed opportunities. The narrower and more specific the problem, the easier it is to position a digital product that sells.

For example, in my coaching program Fractional Lab, I work with solo consultants and freelancers who are skilled, but financially unstable. They don’t have a steady flow of leads, they haven’t packaged their expertise into productized offers, and they lack leverage. Their income depends entirely on client work that’s unpredictable and hard to scale.

That’s a real pain with financial and emotional cost. Perfect ground for a digital solution.

So how do you find the right problem to solve? Here’s a practical process:

• Search behavior: Use tools like Google, YouTube, Reddit, and Quora to find organic problem statements. These are signals that people are actively seeking solutions.
• Spending signals: Are people already paying for partial solutions like templates, guides, coaching calls, or software? That’s a clear indicator of demand. If they’re buying alternatives, they’ll consider yours—if it’s simpler, more effective, or more tailored.
• Question repetition: Pay attention to the same questions surfacing across platforms. When a problem shows up frequently and consistently gets engagement, it means the market hasn’t found a satisfying answer yet.
• Validated competitors: If a product in your space already has traction, don’t assume it’s too late. It’s the opposite. Existing traction is proof the problem is real. Your angle could be to simplify, specialize, or personalize the solution better than the generalist version that exists.

Now here’s where Nas.io saves you time.

Instead of manually guessing or spending hours researching product ideas, you can connect your social channels and website to Nas.io.

Its AI tools will analyze your content, audience interests, and engagement data. Where it’ll suggest ready-to-use digital product templates based on what your audience is already showing interest in—plus suggested pricing. 

2. Choose the Right Product Format

Based on the problem, you need to choose a format that delivers the solution efficiently.

Good examples:

• Checklist, Notion template, spreadsheet (for workflows)
• Mini-course or workshop (for tutorials or systems)
• Ebook or guide (for knowledge transfer)
• Software tool or a custom GPT (for automation or repetitive tasks)
• A group challenge

Start with the simplest format that delivers the value.

3. Create the Product

Build the product with clarity and usability in mind. Remove filler. Keep the product focused on action and results.

Tools you can use:

• Notion, Canva, Figma (templates)
• Loom, Screenflow, Descript (videos)
• Google Docs, Adobe, Affinity (ebooks, guides)
• Glide, Softr, Bubble (simple apps or tools

Don’t aim for perfection. Focus on shipping a clean MVP that solves the problem.

4. Package and Host It

Once your product is ready, you need a way to package it, deliver it, and get paid. 

That means choosing a platform that handles all three without friction.

This is where Nas.io comes in handy. Instead of juggling separate tools for checkout, delivery, and customer management, Nas.io lets you handle everything in one place.

You can offer:

• Digital courses
• Coaching programs (group or 1:1)
• Paid communities and memberships
• Downloadables (eBooks, templates, swipe files)
• Events and webinars
  

Each product is delivered securely to paying customers, with instant access and built-in onboarding.

You also get built-in payment processing, so you don’t need Gumroad, or Kajabi for digital product hosting. You can set your pricing, accept payments globally, and get paid without setup headaches.

5. Drive Traffic Through Owned and Organic Channels First

Don’t default to paid ads.

Start with:

• Your existing audience (email list, LinkedIn, Tiktok, YouTube,X, etc.)
• SEO-optimized content or YouTube tutorials
• Communities and forums where your buyers hang out
• Cross-promotions with other creators or newsletter swaps

Focus on attention you already have or can earn—before buying.

6. Collect Emails and Feedback Early

Use every sale or download as a feedback loop.

• Ask what was useful or missing
• Let early buyers help shape future versions or offers
• Build a waitlist or newsletter around the product for future launches

Your email list becomes the most reliable channel for future sales.

7. Iterate, Bundle, and Upsell

Once the product proves itself:

• Update it based on feedback
• Turn it into a bundle with related offers
• Create a higher-ticket offer (course, live training, consulting) for those who want more depth

This is how you go from $29 products to $500+ offers with the same foundation.

Final Thoughts

Dropshipping still gets attention because it looks simple on the surface. But the deeper you go, the more fragile the model becomes—thin margins, fulfillment risks, platform volatility, rising costs, and policy shifts all working against you.

Digital products change that dynamic. You own the asset. You control the margin. Delivery is instant. Distribution can be organic. And over time, your effort compounds instead of resets. You’re not just selling—you’re building equity in your brand, audience, and knowledge.

If you’re starting today, it’s smarter to build something once that you can sell forever without chasing inventory, refunds, or ad accounts.