There are tons of articles on dropshipping, rightly so it’s one the most crowded e-commerce platform today. It’s easy to start up, with a relatively low capital you can go into dropshipping. It also seems convenient, a customer orders then your supplier does the packaging and shipping. You make your profit easy money right? Well trust me it’s a lot more complicated than that. Here, we would be pinpointing eight hard truths about dropshipping.
One fact that must be made clear is that dropshipping isn’t going to make you a millionaire overnight. Yes, the capital is low since you don’t need to store or manage your inventory, well so is the profit. While it’s true that you need to put less money in, you also get less money out. That means you need to make high sales to make a profit and stay in business. Most of the money goes to the supplier, so basically, your profit is streamlined from the top.
You Need High Traffic
Your profit as stated above is directly proportional to your traffic, customer base. Starting from scratch with little or no traffic can be quite challenging as you would be struggling to make sales. It’s thereby advisable to dive in only if you already have a regular source of traffic. You would only make reasonable profit enough to sustain your business and also pocket if you have large traffic and get to maintain the customer base
Competition is High
The low start-up capital makes it easy for a lot of people to start dropshipping, this makes competition high. When many people sell the exact product(s), customers would rather buy from the cheapest source. Your rivals with more resources and years of experience undercut their prices, this cuts your profit margin down considerably. An extremely specific niche is needed to reduce the competition, focusing on unique products might help but this requires a lot of research and workload.
Supply is Out Of Your Hands
When you receive an order you are totally at the mercy of your supplier. You can only hope your customers get their products safe and as at when due without issues. The order fulfilment process is totally out of your hands. When your supplier fails to deliver appropriately, your business suffers negative feedback and impact. Since you don’t inspect, pack and ship the products personally, you would be stuck between the supplier and customer. Getting the right and the credible supplier is very essential.
Another hard truths about dropshipping is legal liability issues. This is overlooked mostly, but some suppliers aren’t as legitimate as they claim. You don’t always know where the goods come from. Some suppliers also illegally use another supplier or company’s intellectual property or a trademark logo as their own. You should know that by working with such suppliers you are complicit in their illegal activities. So this is one area you should focus on when sourcing your suppliers.
Managing inventory is almost impossible in dropshipping. Since you depend on your suppliers’ stock to sell to customers, it’s going to be a nightmare if their stock is low or out without your knowledge. You would end up selling products that are out of stock. If a customer orders from 3 different suppliers through you, of course, they would receive 3 different packages at varying times. Goods cannot be consolidated in this model, as the distributors have different locations and shipping times.
Customer Handling and Customer Service is Lacking
Order fulfilment is never complete without a proper customer service platform. Although the supplier indeed does most of the fulfilment processes you are the one the customer identifies with. When issues arise from the supplier’s part you take the blame, and this affects your brand negatively. If the supplier handles it well, great, otherwise your reputation takes a dip. The relationship you have with your customer goes a long way to making or breaking your business.
In dropshipping, unfortunately, you have very little control over customer service, since you are not in charge of product fulfilment. If a customer makes a return, it gets frustrating as you must get your money back before providing a refund. Some suppliers are willing to take back faulty products and even reship, don’t count on this. You may have to buy a new product on their behalf and ship it to them from your already streamlined profit. Having dissatisfied customers doesn’t help your e-commerce store. You must also remember you need a large customer base to make a reasonable profit.
Brand building is difficult
You sell amazing products but it’s packaged without your logo or e-commerce store name it’s delivered neutrally as the supplier’s products. Your competitors also sell the same products with the same packaging. Like behind the scene songwriters or ghost-writers, all the credit goes to your supplier in dropshipping. Well, the negative feedbacks affect your store significantly though.
There you have it! Above are some hard truths about dropshipping you need to know. There are several complexities involved in operating a dropshipping business. However, knowing what to expect can help prepare your mind and make potential issues more manageable when they arise. These aforementioned facts should help potential and existing dropshippers navigate through the complexities of the business model.
Are you considering starting a dropshipping business? Contact us today at Fulfillman to know more about the services. Our dedicated team will be available to speak with you and discuss your possible dropshipping options. Our experts will provide suitable answers to your questions and concerns. We guarantee you excellent services.