What No One Tells You About Dropshipping

Dropshipping is an online business model which allows a company to operate without the need to purchase inventory, store products and ship products to the customer.

Dropshipping works where the retailer partners with a dropship supplier or manufacturer/warehouse and ships them directly to the end customer on the retailer’s behalf.

Here is a breakdown of how dropshipping works:

• The customer places an order on the retailer’s online store.
• The retailer sends the order and the customer’s details to the dropship supplier.
• The dropship supplier packages and ships the order to the customer directly in the retailer’s name.

Dropshipping is popular for a number of reasons. The most prominent reason is that the dropshipping model is extremely attractive and simple. It eliminates the need to have a physical business/storage location and it’s extremely easy to get started. Basically, once you pick your product, supplier and set up your store, you’re ready to go.

However, dropshipping’s simplicity and ease of set-up is what leads to its downfall. (More on this in a moment)

Some other benefits of starting a dropshipping store are; the low overheads, the ability to start on a small budget, ease in scaling (as your ability to procure the product is dependant on your supplier and the ability to have a healthy cash flow).

The second reason why dropshipping is so popular is because of all the online “content” and “gurus” promoting their dropshipping courses on youtube. They promise newbies a house in L.A. and a Lamborghini in six months without the grind. Sounds good right?

For the gurus, they make the majority of their money off Amazon, Oberlo, Shopify affiliate links, and courses. Not dropshipping itself.

Despite all the positives from earlier, there are several pitfalls with the dropshipping model that should be taken into consideration. Some of these are driven by the simplicity of the dropshipping model itself, and some by many other factors like; shipping times, lack of control, unreliable suppliers, operating in an overcrowded market and more.

The first issue with shipping is the long shipping times.

The most popular dropshipping method is to create a store using an ecommerce platform like Shopify and then add products from Aliexpress, which has warehouses in China that will directly ship the product to your clients. Sounds great in theory but not in practice.

The biggest issue with this is the shipping time. On average, packages sent from China will reach their final destination in 2-3 weeks. This is far too long when in reality, customers expect delivery in 2-3 business days, if not the next day.

The next issue in shipping is that orders arrive in multiple packages.

“Wait, they don’t use one package for multiple items?”

That’s right. When a customer orders multiple items from your website, they won’t receive one package with all of the items in the order. Instead, they will receive one package with one item on the first day. Then, three days later, another package arrives with another ordered item, and so on.

Your customer will likely get confused as they wonder where the other half of their package is. You will likely get customer service requests where customers are enquiring about the location of their parcel.

Lastly, suppliers from China may not provide you with tracking details.

Not all suppliers from China will provide you with a tracking number or link, making customer service a lot more challenging when a customer asks for a tracking link or sends an email asking, “Where’s my parcel?”

Tracking links, like fast delivery times, are desired and expected by online shoppers today.

The dropshipping model may be simple, but in its simplicity comes a lack of control.

As a dropshipper, you only have control of 2 things;

• Products
• Pricing

That’s it.

As the products are being sent directly from your supplier to the customer, you have no control over;

• the quality of the product
• the design of the product
• product photos
• product branding
• labels on the product and the package
• inventory stock levels
• shipping methods

What separates successful ecommerce businesses from the rest is customer experience. Big brands such as Amazon and Apple are great examples of customer-centric brands that control and optimise the entire customer experience to separate themselves from the pack.

With such little control over processes, it leaves you with a substandard experience.

Finding a reliable supplier is crucial for your dropshipping store. Your dropshipping supplier is responsible for offering you a reliable and working product at a wholesale price. They are also responsible for the fulfilment of the order to your customer. Your supplier is effectively the operations side of your business, so you must choose your supplier wisely and build a great relationship with them. If something goes wrong, you will have to explain things to an angry customer, not them.

What about Oberlo?

Oberlo lets you find products, add them to your Shopify store, and ship them directly to your customers. Oberlo is also a quite reliable supplier, as their business model relies on dropshipping store owners pushing the volume to their platform.

The problem with Oberlo and other similar platforms is that these supplier platforms serve thousands of merchants just like you. Making it harder for you to build a relationship with these more reputable suppliers as you are just a drop in the ocean.

Furthermore, chances are if you are selling products from Oberlo on your site, someone else is selling the same product to the same niche, which leads you to enter an over-saturated market.

It has been said that 20 per cent of new businesses fail in their first year—and it’s not hard to imagine that statistic is much higher for dropshipping stores, especially given how saturated the market has become.

We spoke earlier about how popular dropshipping has become, especially over the last 3-5 years. Unfortunately, this popularity means you and your Aunt Mary want to start a dropshipping venture.

The over-saturated market and its high competition mean that online advertising costs increase as more people begin to advertise the same products in the same niche to the same people.

The high competition also affects the quality of service from your suppliers as a high volume for a particular product affects shipping times to your end customer. Depending on your supplier, the cost of the product you wish to sell may also increase due to the product’s high demand and your supplier wanting to cash in on the winning niche.

As you do not own any products when running a dropshipping store, customer returns can be one of the biggest issues when doing dropshipping.

For example, if someone bought a blue bag but received a black bag, they will either want a return or their money back or a blue bag.

So how do you do a return when you don’t own any product?

As you don’t have any stock on hand, the best method for returns would be to offer a refund. A product swap would take too long, and there is no guarantee your supplier will accept the return and ship a fitting replacement.

What many dropshippers do regarding returns is offer a 100% refund and tell their customer that they can keep the incorrectly shipped item. That way, customers who requested the refund will be left happy.

When you start your ecommerce store, no one will know your brand. That’s why growing your e-commerce store’s brand will be crucial to its success.

This can be difficult if you can’t have your own branded products, exclusive design and exclusive products which don’t feature on thousands of other ecommerce stores.

Ecommerce businesses spend a lot of time and money on making their ecommerce brand well-known and trustworthy, through constant innovation and improvement. This can be a tough task for dropshipping businesses as they have very little control over there business model leaving branding options limited.

Who gets the most benefit out of the dropshipping model? That would likely be the product’s original owners (this does not necessarily mean the manufacturer).

This is because they would have full control over their production values and marketing, unlike the dropshippers that need to sell them.

Then again, dropshipping is still a relatively easy way to get money as long as you know your marketing and have a passion for that niche. It is just that you won’t get as much benefit as the original owners.