As a business model, drop shipping allows online retailers to market heaps of products with more options to choose from, without the burden of inventorying every possible size and colour from a product line. And, once the product is sold, have it shipped directly to the customers through the suppliers, manufacturers and distributors. A study from university professors found that it was possible for online retailers using drop shipping to earn more profit than their warehousing counterparts. In fact, the typical drop shipping retailer might earn 5.18 percent more profit than those merchants that inventory everything.
In this dropshipping business, You don’t have to hold any stock. Your financial involvement is minimal. Hell, you can start a drop shipping eCommerce store for almost nothing. You don’t have to worry about fulfilling orders and, a thing that attracts so many to this form of eCommerce, you can run it practically from anywhere.
Hence, Drop shipping may be the best answer to all the problems faced by every retailer. But Unfortunately, all is not that great with a dropship business.
And, drop shipping comes with its own problems.
Reasons for Dropshipping Failures
Below is a comprehensive list of Top 10 reasons for dropshipping failures:
This luckily never happened to me, although I know some dropship business owners to whom it did. When you market the product assuming its great quality or uniqueness; and you get your first sale. Whooaa!! You are on top of the world, feeling a sense of accomplishment. But not long after the product reaches to the customer and gets back to you with refund request either due to a faulty product or the quality is not as described and leading to poor customer satisfaction.
Thumb Rule: Always test the product quality by ordering a sample beforehand, wherever possible. Else, reflect on past user reviews of that product, seller history and the number of orders.
Best Way to Handle: This problem is actually pretty easy to solve. In most cases, the producer will ship out a replacement part or the whole item. However, it is good that you know your producers’ warranty terms and conditions. I am lucky to be working with producers that offer a lifetime replacement guarantee, however, it might be different for yours. So, better check that up.
I have to say that this hasn’t happened to me so far, however, I know it is many E-commerce store owners worst nightmare so I am including this problem on the list.
Shipping a wrong product to a customer is a bad customer service, fact. It always leaves a bad impression regardless of the goodwill of the customer. And no matter what the circumstances, it is always you who is the guilty party.
This is one of the most unfortunate aspects of drop shipping. No matter what the mistake and who made it, it is always you and your reputation that suffers.
Best Way to Handle: First of all, know your producer or drop shipper return policies back to back. In fact, you should know them before you ship your first product. This way, when the complaint from a customer comes, you will be able to instruct them on what to do straight away.
Also, it’s a good idea to offer the customer a discount for a future purchase or at least a small token to apologize for your mistake.
In America, especially after Amazon started prime delivery, people now prefer ordering products from it because they can get theirs in just a single day. However, dropshipping is usually from China, so the minimum shipping time is at least 20 days. People can’t wait this long to get their products. Another reason most dropshippers fail is that they don’t order products through Express Shipping. This means the buyer won’t get a tracking number, decreasing his trust in the store.
Also, you received an order through your store. Straight away you rush to place it with the producer and wait for it to be processed so you could inform the customer that it has shipped and passed the tracking code to them. Yet, the order confirmation does not arrive.
Best Way to Handle: The usual time to process an order is up to 24-48 hours. If you hear nothing back from the producer or drop shipper after that, follow up with them immediately. These days customers are used to have their orders processed within 24-48 hours too. It is the imperative for your own brand that even if the order isn’t processed within that time, you at least know the reason and approximately when it’s going to happen.
Why? Because the customer might ring you. This usually happens if you sell expensive products and someone has purchased through your store for the first time. Their trust levels in you are low and through their order, they are ultimately putting you to the test.
Typically, vendors will publish available inventory levels in a tab-delimited file or similar, that is made available on an FTP site. Retailers are responsible to collect those inventory levels and update website quantities. Again, this data must be automated to be efficient.
Out of stock is probably the most common of all the problems you will experience.
Even though most producers and order fulfilment companies try hard to keep their E-commerce partners informed about product availability, it often happens that the product someone ordered from your store is out of stock. Or it has been completely discontinued.
Best Way to Handle: Be Proactive, Honest and Interactive with the customers. You should make your customers aware, even if it means bad news about their order. Also, if possible, try to source a product from another supplier. Alternatively, see if you can get a similar product by another producer. Suggest any alternatives you might have to a customer. Quite often they will be happy to change their order to another product.
Running a dropship business may seem like an easy thing to do. Unfortunately, in such a business model you rely greatly on a producer whose products you use or a drop shipping company they use to ship their goods. And as always when you leave the control over such an important aspect of the business to someone else, mistakes can happen.
Luckily, usually, they are easy to rectify, albeit at first sight, they might look quite serious.
When you run a drop ship business, you are ultimately giving away the control of a massive portion of your business to someone else.
It is not you but a producer or a drop shipper that process your orders. You have very little influence over when that’s going to happen. You might be on top or at the bottom of a queue but you simply don’t know. You can’t control the packaging and what goes into the pack and all that is just the tip of the iceberg.
In short, after you have passed on the order, your control over what happens with it ends.
This is also where most problems start.
As a dropshipping store owner myself I can guarantee you one thing if something is to go wrong with the order, it will.
If you are thinking of starting up a dropshipping online store, be patient and persistent.
The other reason for the drop shipping failures is because of the wrong niche selection. A friend of mine wanted to target US traffic with one of his dropshipping stores. He chose a niche clothing line and started promoting the products in the USA. Too bad, he didn’t even receive a single order.
Niche vs General Store: Pick the Right Model for Your Dropshipping Store
He was depressed but not ready to quit. So, he started targeting the same product in Ukraine and received more than a 100 orders in a single day.
Point to note here: Targeting a wrong country with a particular niche can destroy your business. The best strategy to cope out of it is to test, test, and test.
One reason most dropshippers fail is that they are using the wrong platform to market their dropshipping stores and products. Some of the most prominent channels to market your dropshipping products are Facebook Ads, Google Adwords, and Bing Ads. If drop shippers have found products that are already selling in high volumes on other shopping stores then you only have to market them. If you are still failing, then it can be because you are not using the right platform.
The best solution to this problem is to use multiple platforms to market the product and the one that provides the most ROI, use it further on.
Most dropshippers just don’t have the patience to start a dropshipping store. So, if you aren’t patient enough then my advice is to start bitcoin trading instead because that’s where you can earn instant money (or even lose it). Patience and persistence are not only required in dropshipping but for any business. And, if you are just starting out with dropshipping then it is a prerequisite.
Most drop shippers are emotional. They are inexperienced and don’t have the risk-taking ability. They get excited seeing that someone else is making money online so they should too. And then they start their own store without testing or even doing a feasibility study. When in the first few months, they don’t get profits, they realize the whole business idea isn’t for them. So, they drop it and move to something else complaining that dropshipping doesn’t work for anyone, generalizing their own assumptions.
Dropshipping Success Rate
Unfortunately, there are no official figures available that could determine the overall success rate of the dropshipping industry (which may be as low as 10%). This is because most of the dropshippers dive into the business without properly understanding the risk factors involved.
I have come across multiple horrifying stories of drop shippers.
For e.g. dropshipper who didn’t keep in mind that refunds can also become a hurdle.
Then, I read a story about the dropshipping failure appeared on Reddit. According to the dropshipper, his business was prospering but he made one mistake and that’s how the whole profit-making empire crumbled to the floor.
Also, it is extremely important that you stay focused, keep yourself calm and believe in the system that if it can work for others, it can work for you. You just need persistence and patience!!
Don’t be afraid to reach out for help, “There is no point fighting the battle alone when you wish to win a war”. Feel free to reach out @Xtracashflow where it is about helping you build your eCommerce Empire.
We will formulate a customised plan for you and hold your hand at every step of the way keeping you accountable.
Here is an analogy to understand why dropshipping failures occur due to a bad UI. There are two stores:
One is air-conditioned and has automated sliding doors for the visitors. Inside, a gorgeous looking hostess welcomes everyone, while escorting them to the products they want to buy.
The second one doesn’t have an air conditioner and the visitors are not greeted at all. Moreover, they have to search for the products themselves and no supporting staff is available to answer customer queries, just a cashier at the cash counter.
Which store will you go to? Probably the first one.
E-commerce stores are no different from a brick and mortar store. They need to feel good and look exceptional. Otherwise, visitors just won’t trust them. This makes it one more reason why most dropshippers fail. They have bad looking websites and no one wants to buy from them.
I have seen another dropshipper who became disheartened because the paid marketing was consuming too much money, even more than what he was earning. He has said that he started his store after seeing the hype of actually making money by selling products at a cheap rate. He thought that it was easy and when he started the business he realized that he had to spend a lot on advertisements. But due to a lack of budget, he couldn’t do it. So he closed his dropshipping store permanently.
Hence, they say that the beginner drop shippers usually fail because they are inexperienced and follow the hype.
Here’s a list of suggestions and bits of advice for drop shippers on how to cope with dropshipping failures and start a successful store.
Add Value to Your Business
Max Robinson of Fish Tank Bank says:
The main reason that 90% of dropshipping businesses fail is that they don’t focus on adding as much value as possible for the customer. If all you’re just accepting orders from customers then forwarding the order onto a supplier for them to fulfil, then you’re not going to create any sort of loyalty with the customer. This was a mistake I made early on. Now I focus on adding value by providing excellent customer service – if the customer has an issue, I’ll email them back immediately, and I’ll even speak on the phone with them if they want. I have done customer survey on what exactly is their requirement. Get customized products according to their need. This is where I can add value, and how I’ve managed to succeed with dropshipping.
Drop shipping takes a lot of work and there’s a huge learning curve. When I started drop shipping I found myself bleeding money because I wasn’t getting any customers and was putting out ads that weren’t paying off. Instead of giving up I did some research and slowly learned the business. The first few months that you’re in the business you aren’t going to make very much if anything, remember that it’s all part of the process and that once you learn the business you’ll be making money hand over fist. It also may be a good idea not to jump into it so quickly take a couple of months to study the business first so that you aren’t overwhelmed when you first start. Find out what makes good ad copy, how to use Facebook ads, what kinds of products to add to your store, etc.
Pay Attention to Product Margins
Beginner dropshippers need to understand that dropshipping is not just another ‘easy money making scheme’ it is a full-time business that requires dedication, consistency, hard work and a lot of patience. Only then they will be able to thrive in this business.
Also, as Jack Ma says, “learn from your failures.” So, when they fail (and most will) they need to learn from that and start again if they are really serious about it.
XtraCashFlow will help you overcome all these dropshipping problems and support you at every step of becoming an successful Entrepreneur. So take action and Book a Free Consultation call now.