With its low barrier to entry, the dropshipping model has become a natural choice for those who want to run an online store without making substantial upfront investments.
However, many drop shippers are often lured by the ease of this business model to cut corners, neglecting what should be viewed as fundamental. This leads to the eventual failure of their venture.
To ensure your dropshipping business does not suffer the same fate, you need to know all the ways your success could be jeopardized.
Many of the most common dropshipping business failures are avoidable or manageable for anyone who knows where they could arise and how to mitigate them.
With that in mind, let’s take a closer look at some of the reasons why drop shippers fail and how you can keep it from happening to you.
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Reason #1 Having unrealistic expectations
You thought drop shipping would be easy money, but now your margins are too thin to make a profit.
You’ve no doubt encountered Youtube videos of dropshipping success tales that often sound too good to be true. The kind of success story where you can buy a product, put it up for sale on your site, and the day after you make enough sales to become a millionaire overnight.
However, many are disappointed to see their dreams of making easy dough shattered when hardships beset their stores, and they are unable to cash in on the life-changing sales they were hoping for.
How to fix it?
When starting a dropshipping business, the biggest mistake most people make is expecting everything to magically fall into place. In reality, there’s no way around hard work and patience. It requires energy, effort, and patience – much like any other entrepreneurial endeavor.
So, take it slow and lower your expectations. Each task might take twice as long as you have the patience for, and sometimes you’ll have to put in twice as much work. But if you tread carefully, over time, you’ll find yourself closer to the success you expected right off the bat.
Reason #2 Picking the wrong niche
Focusing on the wrong niche can tank your dropshipping business before it even has a chance to get off the ground.
Among the ways you can go wrong are:
not offering a product to a particular market
having several competitors that have a better price
or offering a high-priced product in a market that has no interest in that type of item
How to fix it?
Making a choice on what niche to operate in is surely a crucial one. You want to select a product that you’re at least marginally interested in on some level but also comes with:
- steady sales
- good profit margin
- and most importantly, a high demand
Whether you’re starting a new business or trying to make an existing one grow, you need to know whether people are willing to pay for what you’re selling. Fortunately, there are free tools such as Google Trends that can help you measure people’s interests in a particular niche.
For instance, let’s take the example of a seller who’s looking to break into the competitive automotive market. Now, a quick peek at the trends will reveal that the car accessories vertical is becoming increasingly popular.
This is because accessories for cars are hot sellers among urban dwellers, who often spend a lot of time in their vehicles. The vendor can profit from this trend by listing anything from vinyl stickers to cell phone mounts to even big-ticket items like forged alloy wheels and composite overwrapped pressure vessels for modders who want to make their rides stand out.
Once you know what people want, it’s far easier to work out if your idea will prove profitable.
Reason #3 Not paying attention to customer service
Nothing can ruin a business, regardless of its model, more swiftly than lousy customer service. We’ve seen it happen time and time again. One moment, you’re sailing on top of the world. The next, you’re flopping around in the middle of the ocean without a paddle.
To emphasize this point further in the context of dropshipping, let’s take a look at the customer reviews for Shopolis, a defunct dropshipping business.
As you can see from the review section of the website, the majority of feedback is negative, which could be why it’s no longer in business.
How to fix it?
Dropshipping’s strongest point is that you don’t have to worry about storage, manufacture, or shipping. You’re basically a middleman between the customer and the supplier. Based on that, you might think you could ignore customer feedback and reviews. But this assumption couldn’t be more wrong.
Any customer satisfaction issues will affect your company as a whole, regardless of whether or not it’s directly your fault. It’s important to remember the customer always comes first. Though you can’t do much about the shipping delays (since you’re not actually in charge of the shipment), you do need to be responsive.
Your name is what customers associate with your brand. Responding to customer feedback and reviews quickly and politely will build trust with your customers, which will lead them to share their positive experiences with others.
Reason #4 Putting too much faith in suppliers
The dropshipping model is rooted in trust between vendors, customers, and even more so, your suppliers. After all, you’re not physically conducting the transactions or shipping the packages personally. So your business is going to depend on the supplier to fill orders accurately and within a reasonable time frame.
But if you rely heavily on a single vendor, there are a multitude of problems you may encounter:
they could go out of business
they could raise their prices on you
they might run out of the items you expect them to provide you
How to fix it?
Make sure you hedge your bets by signing at least one more supplier than you need. That way, if any vendor goes out of business or otherwise proved unreliable, you won’t be caught without a lifeline. If that’s not a viable option, a contract could be your next best thing. This will lay down what you expect from them and help keep everyone to a set standard of work.
Reason #5 Rushing through the website designing process
All too often, drop shippers fail to recognize the importance of a professional, well-produced website. They’ll purchase a domain for their website, then head to a cheap web designer to put together their website at the lowest cost possible.
Of course, this leads to a lack of design sophistication, which can cause your business dire consequences. When you offer a disjointed site with broken links and a poor user interface, your visitors will likely move on to a superior alternative.
How to fix it?
Your website is the talking point on the internet. It’s where customers will pick whether or not to do business with you. You want it to be convincing and stand out from the competition. You’ll want yours to look sharp — and to be functional, too.
To do this, you can hire a professional web developer to help. But, if you’re looking to save money and don’t have all of the coding skills needed, you’re better off using a website builder that has point and click web building capabilities.
Here’s why Notebook Therapy does a great job of designing and formatting its website:
Their website is simple and easy to use, allowing you to find your way around with minimal effort. The product descriptions are clear — not muddled by visual distraction. From listings to doodles, every aspect is rich in detail. In other words, an immense amount of care and effort has been put into creating the site’s design.
This level of dedication is what your visitors expect of you. If you want your visitors to take you seriously, be willing to spend the time and money to get yourself a professional-looking website. Take this time to figure out your lead capture strategies too, email marketing stats have proven time and again how vital this can be to the success of your business.
Reason #6 Lacking adequate marketing or branding
Many inexperienced dropshippers fail to realize the importance of branding and marketing their business. A store without any effort put into branding or marketing will be quickly lost in the shuffle, especially if other dropshippers are selling similar products.
How to fix it?
Creating a unique brand identity is essential to success in the dropshipping business. This includes things like having a professional-looking website, using quality product images, and writing unique and engaging product descriptions. Without these things, your store will likely struggle to attract attention and make sales.
If you’re not familiar with the marketing aspects of running a business, you can always hire a digital marketing agency to help you out. They’ll be able to develop a branding strategy for your business and get your name out there in the dropshipping world. Just ensure that the agency you hire has the expertise to help you with your unique goals and challenges, otherwise, you’ll just be wasting your money.
One way to make certain they have the chops is to ask for case studies or examples of their work. You can also prepare a detailed questionnaire for them, as agencies often do when onboarding new clients. This will help you gauge their understanding of your business and give you a better idea of whether or not they’re the right fit.
Reason #7 Having a poor managing system
If you’re not a naturally organized person, running a dropshipping business can be a real challenge. Without a system in place to keep track of your partners, orders, and customers, it’s easy for things to start slipping through the cracks. This can lead to misplaced orders, unhappy customers, and ultimately, a loss of revenue.
How to fix it?
One way to overcome this problem is to use a kanban board like Wrike or Monday. These tools help simplify your workflow by providing a visual way to track your tasks and progress. This can make it much easier to stay organized and keep your dropshipping business running smoothly.
Reason #8 Inconsistency in leadership
Many businesses, both big and small, have failed because of inconsistent leadership or management. Often, the people in charge don’t have a clear vision for the business, or they’re constantly changing their minds about what the company should be doing. As a result, the business can quickly become unfocused and begin to flounder.
How to fix it?
To avoid this, it’s important to cultivate leadership that is committed to the success of your dropshipping business and its goals. This means having a clear vision for the company and making sure everyone on the team is aligned with that vision. It also means being decisive and taking action when necessary, even if it means making tough decisions.
And finally, effective leadership requires an ethical foundation. You need to be able to set an example for others and show that you’re committed to doing things the right way, even when it’s not easy. Giving your team the freedom to make ethical choices, even when it might not be in the business’s best interest in the short term, will go a long way toward building a strong and successful company.
Watch out for common dropshipping mistakes.
Starting a dropshipping business is like parachuting into a warzone. You’re surrounded by chaos, with your adrenaline pumping to the max. You must prepare before embarking on such an adventure. It takes patience and persistence to lay out infrastructure for your budding empire, but it’s worth it in the end.
While the reasons behind business failure may differ for every drop shipper, there are some key reasons that can explain why many drop shipping companies fail to make it. By steering clear of the slip-ups mentioned above, you can significantly maximize your chances of success as a drop shipper.
Featured image source: Freepik Premium
Guest Author: Sam is a marketer and writer who has worked in the industry for over five years, helping tech companies develop content strategies. When he’s not working, Sam enjoys spending time with his wife and dog, reading, and playing golf.