Why Dropshipping Businesses Fail
Starting a dropshipping business is a tough gig. It’s especially hard if you’re getting into it for emotional reasons, such as hearing that it made some guy halfway across the world a millionaire. After all, a lack of experience makes everything more complicated.
With this in mind, here are a few sobering facts for you.
It is estimated that 9 out of every 10 dropshipping companies fail within their first four months. Those who do succeed spend most of their resources on advertising since paid marketing is the best way to push a dropshipper’s products.
Additionally, there are several potentially devastating obstacles, such as refunds, that the inexperienced never see coming.
So, does this mean that the dropshipping business model does not work?
Is Dropshipping Worth It?
Absolutely not. Many people have found success with it, and you can too. You just need to be aware of the possible pitfalls and know how to overcome them.
The Main Reasons Dropshipping Businesses Fail
Here are some of the main obstacles to dropshipping success.
- Poor marketing
- Targeting the wrong niche
- Lack of Patience
- Poor Conversion Rate Optimization
- Poor Choice of Suppliers
- Business Operations
Let’s dive in!
There are two aspects to marketing: market research and communicating with your buyers.
Before you start your business, you should conduct market research. Doing your research will tell you what people are willing to pay for.
Once you get started, marketing serves not only to pitch your products but also to set expectations as to what your buyers will consider satisfactory.
Targeting the Wrong Niche
Selecting the right niche is one of the biggest problems facing inexperienced dropshippers. Pick the wrong one, and you might never get a single order. Your business will tank before it even gets off the ground.
There are many ways you can go astray. You might offer the right product but in the wrong place. For instance, some products might never sell in the US but will go like hotcakes in another country.
Or perhaps you specialize in a product that many others are already selling. Here, it’s not the lack of interest that kills; it’s the fierce competition. In the dropshipping business, you’re not only competing with other dropshippers, you are also trying to take on behemoths like Amazon, eBay, and Alibaba.
So, how do you pick the right niche?
The answer is: with plenty of research and testing. You have to study current and projected trends before trying out a product that seems like the right fit. Even then, it’s likely you’ll miss the mark on the first go, so you have to be ready to pivot to other products quickly.
Lack of Patience
Starting a dropshipping company requires plenty of patience. You have to be willing to experiment and fail time and time again as you look for that golden needle in the haystack.
The problem is that most beginners underestimate just how much patience they will need.
To give you an idea, you will have to test, on average, around 20 products before finding the one that sells. Once you discover that winning ticket, you still have to market it heavily and dole out money for advertisements.
So arm yourself with persistence, and don’t be discouraged!
Poor Conversion Rate Optimization
Your advertising needs to be persuasive to entice people to come to your store.
And if you don’t know what you’re doing, you might end up wasting your marketing money on either poorly-written ads or poorly-placed ones.
Let’s say that you’ve managed to bring people to your site. What now?
If your website design is unattractive or clunky, it will put off potential customers. Poor user experience is another common beginner’s mistake. Keep in mind that the look and feel of your website will define how much people trust you.
Once you’ve spruced up your site, you need to make sure that the product listings are compelling enough to convert your potential customers. Don’t forget to put effort into the listings and product descriptions.
Poor Choice of Suppliers
As we saw, drop shippers are competing with the likes of Amazon. The company offers same-day shipping, so anyone who orders something from them today can expect to receive it on the same day.
Unfortunately, you can’t make the same guarantee. You will probably have to partner with a company from China, and your average shipping time will be around 20 days. This means that your waiting period will be 20 times longer than that of Amazon – all the more reason for people to flock to them.
That’s why it’s essential to partner with the right company.
It’s bad enough that you have to make your customers wait for 20 days, but it would be even worse if you forced them to wait even longer because your supplier was careless or slow. This is why around 84 percent of eCommerce retailers assert that their biggest obstacle is finding a good supplier.
Additionally, you want a partner who can give you a tracking number or a link so that your customers can track their products. It is worth noting that not every supplier in China does this.
Poor Business Operations
Even with excellent partners and top-of-the-line marketing, you can still go wrong with your operations.
For instance, bad customer service can be a killer.
After all, your shipping time is already way more than what the giants of this industry are willing to offer. You will probably come across a few irate customers every now and then, and some of them will demand a refund. Good customer service will be crucial for their user experience.
Even after the customer receives their package, it is your responsibility to stay in touch with them until you are certain that they are satisfied with their purchase.
None of this is to mention the crop of problems that pop up with dropshipping, including delivering the wrong product, the product arriving damaged, or not living up to the specifications detailed online.
Another major problem dropshipping businesses face is unnecessary downtime. For example, if a disaster strikes, a company’s entire database could be in jeopardy. Without a solid data recovery plan, a company will flounder and waste time trying to get back on its feet and figure out who ordered what.
Should You Start a Dropshipping Company?
Given everything we’ve said so far, you might feel disheartened about starting a dropshipping company. Yet, you really shouldn’t be.
Even though building and managing a dropshipping business is more challenging than it looks, this entry barrier acts as a moat that protects those who are persistent enough to get to reach their goals.
All you have to do is work as hard as you can to get across it, and you will be able to enjoy all the fruits of your hard work.
Ashley Wilson is a content creator, writing about business and tech. She has been known to reference movies in casual conversation and enjoys baking homemade treats for her husband and their two felines, Lady and Gaga. You can get in touch with Ashley via Twitter.