Here are two ads I was shown on Instagram in the span of a couple days. Different stores, different messaging, but same product. These businesses are marketing themselves as fashionable “boutique” stores, while dropshipping the same products from overseas and lacking the personal touch of a true boutique model.
Thousands of similar “boutique” stores have popped up online in the past few years, all of whom are actually dropshippers. This marketing strategy might be profitable in the short-term, but what does the “Boutique Epidemic” mean for traditional retailers and boutique brands in the long-run? And more importantly, how does the "boutique dropshipper" business model stack up against the traditional brand-building approach?
Dropshipping is a mode of fulfillment where the seller doesn’t actually design the products, store them, or have much control over production. In this model, the seller simply takes the order from the buyer to the manufacturer, who directly ships the goods to the consumer. In some rare cases, the seller will have a bit of control over the production process, but quality control is still very limited.
Dropship fulfillment has been a steady source of income for many and a way for inexperienced online sellers to get a taste of what eCommerce is like. In fact, in 2017, more than $85 billion were made through dropshipping, amounting to 23% of all online sales from that year. Dropshipping is also the main fulfillment model for more than 33% of all online stores. In other words, dropshipping contributes to a large part of eCommerce and affects every other player in the eCommerce industry.
The truth is traditional retail is dying – it has been for the past few years. As profits of large non-software based corporations dwindled, something else took its place, apart from Amazon – online boutique stores. According to Ashley Alderson, founder and CEO of The Boutique Hub, boutique stores are successful because these stores are often associated with individuals (not corporations), add a personal touch to the customer experience, and know their product and customers better than places like Amazon or Sears – they’re specialists.
This image of specialization has spread like wildfire as another group uses this image to advance its product – dropshippers. The quick, easy, and low investment business model has become a favorite among ‘wantrepreneurs’ who want to start their own business but are not willing to or cannot pay the higher price of creating a brand.
Is the boutique dropshipping trend a viable business model? Probably not… at least, not in the long-run. Dropshipping stores who ship clothes and other products from China, India, Bangladesh, etc. and market them as “boutique” and “handmade” are banking hard on this persona of specialization and personalization. Ironically, these boutique dropshippers are targeting an audience that wants a connection with the buyer, they want personalization, and they want to feel special – something dropshipping can’t deliver on.
Dropshipping takes out nearly all form of control over the manufacturing process and replaces it with the possibility of making a quick buck. Dropshippers do not have to spend any money on manufacturing, storing, and maintaining an inventory – reducing costs significantly. The low-cost barrier to entry is the reason why dropshipping has become so popular. Take the cost savings away and dropshipping as a business model doesn’t have much else to offer.
There is another reason the “boutique” image is hard to pull off through dropshipping – potential litigation. Dropshippers can only differentiate their products to an extent (copywriting and edited product images). What’s more, customizing an offering too much could set unrealistically high expectations for the consumers and, in some cases, even lead to potential lawsuits.
While dropshipping may not pose a long-term threat to the traditional boutique store, it may hurt business in the short-term. Boutique dropshippers could definitely take away business from traditional boutiques, as low prices make it easier to penetrate the market. In fact, seeing as dropshippers are making nearly as much money as all of Amazon, I would argue that they have already started cutting into actual boutique stores’ market share.
However, most dropshipping eCommerce stores are in it to make a quick profit with the least effort – they are not specialists or boutique. This makes these stores incompatible with their target audience, and customers accustomed to the true boutique experience will quickly catch on.
The next question then becomes: Is there anything that true boutique stores can do to keep up with these “instafamous” eCommerce businesses and ensure customer loyalty?
Contrary to what dropshipping gurus will have you believe, product differentiation is the key long-term strategy. There is not much boutique store owners can do to fight off the threat of dropshipping in the short-term, except doubling down on what they do best – build a connection with their target demographic.
Ashley Alderson writes “Boutiques are successful because they’re more than just stores: They’re style educators.” Boutiques target people who are looking for fashion advice and need an established authority to tell them what to buy. In other words, this audience will not spend a single penny on your store unless they trust you as an expert in your field– in this case, fashion.. That’s where the brand building comes in.
Brand building includes creating value through a unique and pleasant experience surrounding your product. Leverage social media and your blog to create a dedicated community and reader base. Creating multiple online sales channels is the ultimate goal of building your brand across different platforms. Dropshippers rely heavily on social media outlets like Facebook and Instagram to advertise their product – so be sure you have already built a community there.
It’s hard to brush off the "boutique epidemic” or the dropship fulfillment model as a fad when it’s making nearly a hundred billion dollars, but it’s also not something you should lose sleep over if you’re running a true online boutique. Keep your head down and focus on your brand. Invest time and money on providing a unique shopping experience to your customers – something these Instagram dropshipping businesses can’t do.