Dropshipping is a great option for merchants who are new to E-commerce, but it has many risks and downsides. While there are definitely perks to dropshipping in 2021, there are quite a few downsides you should strongly consider before you take the plunge. Here are the top five challenges you should keep in mind before starting your online store, and how you can tackle them.
While many entrepreneurs find dropshipping to be an easy way to get started, it isn't the best means for building a profitable business. Dropshippers are buying from wholesalers at retail prices and not getting wholesale rates because they don't buy in bulk like other retailers do. Because you won’t be buying products in bulk, but rather one-by-one as your customers order them, the wholesaler will charge a pick and pack fee for every customer. Your profit margin is going to suffer significantly from this overhead cost because it's not just about product price - there are also additional costs of picking each individual item before shipping. Your best bet? Avoid big-ticket items if at all possible and focus on accessories or lower-priced goods that can deliver higher margins while still being affordable with fewer fees attached. Dropshippers typically come out on top when they sell accessory products because their margins tend to be higher than those who sell higher-priced items like chandeliers and appliances; but high profit doesn’t always mean better profits.
Returns have always been a part of E-Commerce, and it's even more the case with dropshipping. According to data from eMarketer, up to 25% of all online purchases being returned. Fashion items and health/beauty products show the highest rates for return, as explained by the issues with finding the right fit with the customer needs without trying the product first. With dropshipping suppliers you may find that your product is returned more often than not because there are potential malfunctions or quality issues that can be outside your control. If this happens, make sure you are frequently communicating with the supplier as they might reimburse some expenses (like shipping).
Despite what some influencers may be telling you online, running a dropshipping business is not easy. There is so much involved in running an online business (including accepting payments, customer service and more), and that goes for dropshipping websites as well. As a retailer, you are responsible for providing customer service, placing orders maintaining your website bringing in online traffic - all while keeping up with product sourcing from suppliers. The key here is to outsource any non-critical tasks related to your business while making sure that your customer receives the best care and experience possible. The best part about being a successful e-commerce entrepreneur? Building something out of nothing - knowing every day what it feels like when people come back because they absolutely love their purchase (and repeatedly return).
Be warned, Dropshipping is a field packed with tough competition. Many of your competitors will taking the lowest-priced approach to sell their products and this also impacts on how much money you make in profit margins. So, how exactly can one set his shop apart? In simple words. The foundation of picking a specific niche and giving them well-targeted ads featuring what makes you unique. There are a lot of different dropshipping niches to explore, but you'll want to find one that is not already too competitive. One way you can do this while still making your product listings stand out with quality descriptions is by importing products from other countries and languages into the US market (e.g., Canada) or vice versa for an English-speaking audience in another country like Australia). If there's something specific about your niche that sets it apart as unique, you have to highlight those features on social media channels. Here dropshipping competitive intelligence is highly important as it would help you identify the best performing ads and copies thus saving you immense advertising spending while increasing demand.
It can be hard to make a profit when you operate on the dropshipping model, but it is even harder if your customers order multiple items from different suppliers. Shipping is a constant headache in this case because it becomes your responsibility to pay for each shipment. Suppose you ship clothing and have three suppliers A,B & C. If one customer orders items that come from all three suppliers, you'll need to pay shipping on all of those items instead of just paying once with other E-commerce models where inventory management would be based off the 'grouped' order (e.g., fulfill an order that contains both t-shirts from Supplier A, as well as skirts from Supplier B). It can be difficult for dropship stores to find ways to cover these added costs without passing them off onto their customers or using separate individual shipments for each item in an order. The solution? Limit yourself by only choosing one or two good suppliers. Using this approach will help you avoid getting stuck paying too much on expensive products while still making sure all items are shipped together as they should be.
For those who want to get their foot in the door without too much financial risk, drop shipping may be an option. However, there are still some downsides that need attention such as high delivery costs and low profit margins. You’ll also have less time for sourcing quality products while on-the-go than if you were at home because of tight deadlines set by suppliers or customers alike. That is why ShopiSpy makes it easy for you to identify the best e-commerce shops and products. You can save endless hours on finding what to sell next by easily browsing shops and products that are generating tens of thousands of monthly revenue in few clicks. Using the right technology and with enough research, dropshipping in 2021 can be a gateway to financial freedom amidst the pandemic.