Are you seeking to start an eCommerce business that is cost-effective and sustainable? If yes, dropshipping might be your best bet. With dropshipping, you get to make huge profits selling products that technically don’t belong to you. But that does not mean there are no downsides. In fact, we are going to share 10 dropshipping pitfalls to consider before venturing into the field. We will also look at the benefits of dropping shipping and if this business model is still viable in 2020.
What is Dropshipping?
To put it simply, here is how dropshipping works; you receive orders from your customers via your retail store and forward them to your supplier for processing and shipping.
Dropshipping has been around since the ’60s, way before the advent of the internet. Mail-order companies were the first set of people to practice dropshipping by making use of mail-order catalogues. Customers could conveniently order items from the comfort of their homes and have the company deliver it to them.
Following the advent of the internet in the ’90s, mail order companies phased out catalogues in favour of eCommerce stores. The reception was not favourable at the time as customers were not comfortable giving out their credit card details online for fear of theft. As time went on, people became acclimatized to the virtual method of ordering and paying for goods. The revolutionizing of the eCommerce industry started in the early 2000s.
Amazon and eBay were the headliners of the revolution, which redefined and restructured the entire dropshipping mechanism. These online retail companies provided a platform for people to market their products without creating their online stores. Marketers found this platform cost-effective and a step-up from what they were used to in the past.
Dropshipping in present times: 2020
Dropshipping has come a long way since its inception in the ’60s, and the model keeps getting better with each passing year. Many retail businesses on popular online shopping platforms are drop shippers. Statistics reveal that 33% of online stores make use of dropshipping to carry out customer orders. So, these stores operate based on a fulfilment model that is mostly hands-off and operated by the third-party supplier.
Additionally, Aliexpress, Shopify, and Oberlo are some of the eCommerce stores that are generating a lot of rave at the moment. With a dropshipping business set up on one of these eCommerce platforms, you simply take orders from a customer and receive payment for the merchandise. The order is then sent to the manufacturer or supplier. At the last stage, the supplier then ships it to the customer on behalf of you, the retailer.
No doubt, this method minimizes cost and risk while offering flexibility and profitability. More so, you don’t have to have the products in stock before you facilitate the transaction. The only thing that is expected of you is to sell the item.
That being said, as uncomplicated as it may seem, dropshipping has its fair share of pitfalls. We’ll now look at a few of them.
10 Dropshipping Pitfalls and Mistakes
While there are many benefits to dropshipping, there are also some drawbacks and pitfalls. Thankfully, you can now avoid these pitfalls and prevent them from ruining your business. Below are 10 dropshipping pitfalls you should watch out for before you sink your teeth into the business.
1. Selecting the wrong products
Picking the wrong products to sell is a mistake that a lot of founders make – and it can prove fatal to a startup company. The line of products you major in determines your overall success in the dropshipping business. You should have a high level of passion for the type of business you want to venture into, for starters.
Rather than invest so much money into a niche that is overrated and not valuable, the niche you opt for must be something people can relate and associate with. Carry out extensive research into the product to check for the one that suits you better. The service requires that you deliver value to your customers at all times.
2. Carrying out ineffective marketing campaigns
Engaging in marketing campaigns increases the chances of people signing up and selecting your products at the right amount.
So, the main questions to ask is, how can I promote this brand? How can I trigger customers to make orders? These are the questions that should be running through your mind as you seek to excel in the dropshipping business.
As a merchant in dropshipping, you need to act like a real business owner and create a compelling promotional plan. While you may not reap massive benefits initially, a proper and strategic promotional plan can drive traffic to the business and, in turn, mean enormous ROI for you.
3. Dropshipping pitfalls: Near-zero customer support
In dropshipping, your primary responsibility is to promote the brand/product and plan marketing strategies to influence customers’ orders. This business arrangement empowers the supplier to meet customers’ demands and handling the shipping.
This invariably means that your retail store won’t have any customer service department or unit. In addition to that, you won’t be directly involved in rendering support and assistance to your customers.
This makes the process challenging because there could be instances when orders could go wrong, or suppliers don’t meet clients’ demands. In such cases, you as the retailer will have to accept all the blame, even when you are doing everything right.
4. Failing to brand your online retail store
You may have heard some self-proclaimed dropshipping experts say that you can simply add random products to your e-store and then promote them through various online marketing campaigns. Please don’t make that mistake!
When it comes to any form of business, branding should be a top priority for the entrepreneur. You want your business to stand the test of time, so you should focus on branding your store rather than creating a nameless store with only products on display.
5. Low-profit margins at the beginning stage
As far as the 10 dropshipping pitfalls go, this is one that people dread. During the early stages, you’ll need to cope with a low return on investment (ROI). Having small startup profits cannot be described to be such a bad thing seeing that you’re new in the dropshipping business.
Furthermore, this situation does not mean that profits won’t rise as you progress in the business. What you need to do is look for subtle ways of earning your prospective clients’ attention and trust. Doing this can pose some sort of challenge due to the competitiveness of the market.
6. Poor website design and structure
Inviting clients to a poorly designed website can be an instant turn-off, which tends to make them not place any orders on your retail outlet. Something as minute as this can invariably lead to low sales and minimal profits.
Your online retail store platform should be user-friendly and easy to navigate. Customers shouldn’t have a hard time trying to work their way to the items they want to buy.
In addition to that, the interface of your eCommerce website should look appealing and exceptional to the eye. While you may not be a coding or WordPress guru, you can always employ experts and management tools to set up a website for your retail business.
7. Dropshipping pitfalls: Badly-written product descriptions
Your customers should get a sense of what they are buying by just reading through the product’s description. While a poorly designed website can cause you troubles, incorrectly described products can leave customers wondering why you are in the market.
It’s best to explore each product on display and write a creative product review for them. This product review gives your customers the chance to know the pros and cons of the products you’re promoting.
8. Investing in only one product promotion plan
Although it is essential to understand your niche, it is equally important to invest in more than one product promotion plan to reach a large number of online visitors. Investing in more than one product promotion plan means that you’ll be accumulating a higher ROI over a short time instead.
For instance, if paid ads are your only technique for promoting your business, consider adding the “influencer market” promotion method. Focusing on only one promotion method is like putting all one’s eggs in one basket.
9. Not investing in SEO
Beginners tend to overlook the importance of SEO because they want to start turning over profits as quickly as possible. You could try investing in paid ads or influencer marketing to boost your marketing campaign. I must warn, though, both platforms are expensive to run and can pose some risks for your startup.
Search engine optimization is a more preferred marketing option. SEO ensures that your business or product you are selling ranks high in Google search for prospective customers to see them. If you’re not familiar with the endless possibilities SEO holds, we’d suggest you research it and see how to integrate it into your dropshipping business.
10. Dropshipping pitfalls: Early loss of interest
Dropshipping can be a very enticing and captivating business to venture into before you start it. Many entrepreneurs get disappointed when they encounter a tougher terrain that they had expected. Some are forced to give up the idea entirely and seek other business models.
Starting a dropshipping business is the simple part, persevering and staying your ground through the downturns is the hard part. All these dropshipping pitfalls are expected to lead to business failures, but they shouldn’t deter you from your goal. Otherwise, you may join many other drop-shippers who had quit when the going became tough.
For starters, don’t place all on your expectations on getting fast results as you might likely get disappointed. Be in it for the long term and suit your strategies to this effect. If your mindset isn’t in it, these 10 dropshipping pitfalls may get the best of your business idea.
Is Dropshipping Still Profitable in 2020?
If you want to earn something on the side, dropshipping is definitely worthwhile. However, there is hard work and diligence behind this business model. This means that if you want to make a lot of money in a short period of time, then dropshipping might not be suitable.
Although dropshipping is not so capital-intensive, the margins with dropshipping can be sometimes very low – if you don’t do sufficient marketing. More so, making your own shop visible means more investment when it comes to marketing.
That being said, there are still many benefits of dropshipping, which will be looked at below.
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Benefits of Dropshipping
Despite the 10 dropshipping pitfalls listed above, here are some reasons why it’s a good business venture. Dropshipping has a lot of benefits that accompany it. Nevertheless, we will only be considering a few of these benefits.
1. Simple to set up
Setting up a dropshipping business is not as complicated as people attribute it to be. Dropshipping requires very little background knowledge on how to run a company to get started.
All you need to do is to familiarize yourself with the basics, and you’re good to go. Your supplier or wholesaler bears the brunt of the logistics of the entire business, leaving you with very little to worry about as it progresses.
Furthermore, dropshipping is relatively hands-off and needs little or no assistance. This means you can conveniently set up your dropshipping business from your home’s comfort.
2. Dropshipping has low startup costs
We’ve mentioned how easy dropshipping is to start up, but we haven’t pointed out how cost-effective it is. In addition to not being capital intensive, dropshipping does not incur substantial overhead expenses.
Furthermore, you’re not mandated to own a warehouse as you won’t be needing one. What’s more, you get to save the money you would have used initially to stockpile products and increase your inventory.
Since dropshipping is a hands-off business method, you don’t need to hire much technical and managerial staff. Compared to starting a full-fledged business, dropshipping is relatively cheap, with a significantly low inventory cost.
3. Business operations are easy to manage
A regular retail business requires you to make frequent visits to your warehouse to take inventory, organize, and dispatch your orders. With dropshipping, you’re relieved of that burden; your supplier or wholesaler takes care of all of that.
The retailer’s only job in dropshipping is to receive the orders from customers, process them, and ensure they get to the supplier. Furthermore, the business model doesn’t change much in the face of scaling up the overall business.
You may need to put extra effort into the sales and marketing of your products to keep up with the growth trend. Other than that, everything else stays the same.
4. Dropshipping offers you flexibility
Flexibility is arguably one of the strongest suits of the dropshipping business model. What this means for you is that you get to work on your terms and regulations. Dropshipping is, by a long way, one of the most flexible business ventures to pursue.
You can work from anywhere and at any time using your laptop and other devices. With the time and space this business model affords you, you can think through decisions and opt for what works for you. In addition to that, dropshipping allows the retailer with adequate time to pursue other endeavours.
5. Dropshipping reduces startup risks
Entrepreneurship comes with many risks and dangers. Dropshipping businesses are less susceptible to the risks that accompany regular startups.
Seeing that the business is not so capital intensive, the loss you’d get to bear if the company falls through is at an all-time low. In addition to that, dropshipping doesn’t factor in the economic and political climate of the market. Any unfavourable change, you can easily pack up shop and set up somewhere else.
Furthermore, this business model is not susceptible to environmental risk that could cause catastrophic problems for you if the business was to be on the ground.
6. Dropshipping minimizes product costs
Retail marketers using the dropship business model can launch new products without having to invest so much money. Product launch is relatively cheap in dropshipping compared to other business models.
With dropshipping, you can choose from a wide range of suppliers to find the best price to increase your profit margin. Additionally, a fewer number of goods get damaged during shipment when using the dropshipping business method.
Retail store managers have access to better shipping rates, which ultimately reduces the price of products.
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How COVID-19 Has Affected Dropshipping
With the 2020 Coronavirus crisis, internet commerce has become a lifeline. While traditional businesses were forced to close, everyone who had a website based their survival on it. Those who did not have it did everything they could to achieve it.
Hence, platforms like Amazon have exploded with the crisis and many companies that previously had their page as a secondary aspect has gone crazy to catch up. But, as usual in the network, not everything is as beautiful as it seems. In the midst of the ‘boom’ of ‘e-commerce’, ‘dropshipping ‘ has flourished. We can confidently say that this is a great time to get into dropshipping.
Dropshipping Pitfalls: To Summarise
Many successful entrepreneurs regard the dropshipping business model as a more practical and less cost-intensive way of venturing into the business world. You’ll see this when you compare it side-by-side to the conventional retail way. You don’t have to set up a physical store, accumulate running costs, or stockpile products.
More so as mentioned, dropshipping offers the leverage to choose a niche from a wide range of products. However, you must pay attention to the 10 dropshipping pitfalls we pointed out. More so, bear in mind that the marketing costs can be high if you really want your store to be found online.
We’d love to hear from you, so please feel free to leave your thoughts and contributions in the comment section below. There are many emerging startups and budding entrepreneurs using the dropshipping method out there. Help share this article to guide them towards a more informed and profitable path.
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