Now with the popularization of E-commerce, people start buying products online more frequently than shopping at physical stores. Amazon, eBay, AliExpress are some of the popular eCommerce platforms for people to shop online. To take advantage of this trend, many individuals are itching to try and open their first online store.
For most first-time entrepreneurs, dropshipping is not strange to them, they may just set up their first eCommerce business based on the dropshipping model. But if you think you can be as successful as them by using the dropshipping model, you’re wrong. It is a big chance that your first e-commerce business will end up failing.
Why?
You have set up a professional-looking online store, and do good marketing campaigns, you start getting potential customers to your store, but 0 sales. Even though you have sales later on, your business is very hard to go up to a new level. In the long term, your drop shipping business is dead.
Just like every other business model, dropshipping has its own set of pros and cons. There are many articles online that tell you the benefits of dropshipping model and how you can be successful by starting a dropshipping business. In this post we are going to tell you something different, some downsides of it, so you know how to avoid it and do better than the others.
Following are the 9 things you must know before starting your dropshipping business:
1. If It’s Not Special Or Unique Products, the Sales Can be Rather Difficult And Costly.
The products you can find for dropshipping, the other sellers can find it too. Keep in mind that, unless you have a unique or special product to sell, you’re competing with every online store out there selling similar products to you and also famous e-commerce stores like Amazon, eBay, AliExpress, Etsy, etc.
If your products do not have any features or your pricing are not appealing, it’s very hard to attract customer to buy from your stores. Although you can invest in marketing campaigns, such as Facebook Advertising, Instagram influencers, Google Adwords, etc, the feedback may be not positive.
You have drawn traffic to your store, however, there are just no sales yet. These marketing activities are not a small cost for you if you need to drive traffic to your store consistently.
Sometimes it’s not your marketing campaigns don’t work, it’s because your products are too ordinary and normal. In the end, you will be preoccupied with price competition. You need to dig deep and find niche products to sell.
2. You Can Only Find Products that are Supported With Dropshipping, which Means You Miss the Opportunity to Sell Other Hot Products.
For dropshipping business, you start to open your store after you have found ideal products to sell. The question is you have to find the suppliers who are able to support dropshipping for you, who can arrange ePacket delivery services, or you have to rely on 3rd party services like Sellthetrend.
Because these suppliers who support dropshipping can cover the freight cost, so you can offer Free Shipping to your customers. If not, you or your customers need to pay the international shipping fee. Whilst most of the time the shipping cost is far beyond the product price, customers will cancel the deal with no doubt.
This does not give you too much choice to select the good hot products you like and also limits you to rely on their services. As you only focus on the suppliers who can support ePacket delivery for their products, plenty of other good products without the ePacket delivery method will skip from your eyes.
Also, actually, the products you choose for dropshipping are already got too much exposure and the competition is fierce, you have to double the work to gain the desired results.
3. Price is Not Appealing
If you find products from Oberlo suppliers or AliExpress, the price you get will not be the best price for you. Although you can reach out to many suppliers, the truth is many of them are not original factories! They are also one of the store owners like you, just open the store earlier.
You’d have to purchase the product at a higher price from them who also eat into your profit margins. Therefore, if you found products from these resellers, you have no winning from the starting point. Let’s take a watch for example:
Below are the prices for Men’s watches on AliExpress, the price of the second one is $1.12 – $2.27, and the fourth one is $3.19.
Let’s compare two of these watches and find the same products from 1688 to see the prices:
From 1688 we can see that the prices of the second one are ￥12.5, equal to $1.83, and the fourth one is ￥3.2, equal to $0.47. We can find that the prices on AliExpress are around 2 times higher than the prices in 1688.
Let’s find another watch and check further:
Click into it:
The price on AliExpress is $11.86, we find the same product from 1688:
Click into it:
Price￥35 -￥38 equal to $5.12 – $5.56, which is half price cheaper than AliExpress.
From the price differences we can see that, if you can source the product directly from the factory, you gain more profit margins.
4. No Customized Brand and Private Label
Drop shipping does nothing good for your branding. Since the products are without your logo on them and no private label, the packing is also neutral. To the suppliers, they will pack the product with the same package and neutral label to every different customer. Customers cannot distinguish your products from others if they also buy the same products from another store.
Customers who buy your products maybe just one-time behavior, they don’t remember your brand and cannot recognize your products from others. If you want to grow your business and set up your own brand, it’s better to customize the package and stick your private label on it.
5. Packages Cannot be Consolidated
To catch more sales, you’re not just selling only one or two items in your store. If you’re selling many kinds of product categories, from different suppliers, packing type can be a problem. Customers buy several products from your store, but you cannot deliver these products together, it’s not good for your customer services.
As drop shippers are different, sending the package individually also add more cost to customers, such as customs fee. It also has more risk of lost packages.
6. Long Delivery Time, with More Than Three Weeks
Doing dropshipping business, most of the complaints you can hear about is customers complaining about waiting too long to receive their goods and they haven’t received their packages.
Basically, if you send the goods via ePacket, customers have to wait for more than two weeks to receive their goods. If they’re not satisfied with the waiting, you will have to refund their money.
Waiting a long time to receive the goods is not the most severe situation, the other frequently happened problems are the packages lose track and the products arrived with damage or not as per description. It’s very difficult for you to get returned customers with these incidents, and your store brand also left with a bad reputation, like the comments left below for one of the stores:
*Complaints about dropshipping products that either get lost or get damaged.
This could happen a lot for your dropshipping business if you ship your products via ePacket delivery. ePacket delivery is very popular among the dropshipping sellers who are playing the Free Shipping model, as it’s very cheap and with a little faster delivery time. But if you haven’t taken good care of the order delivery status, you will get into lots of trouble.
7. Identical Product Photos And Descriptions
One of the benefits, when you’re dropshipping, is you’ll never need to worry about storing, handling, or shipping your products, which could be also a disadvantage. You “borrow” the same product photos from the suppliers, use the exact product feature details and descriptions, and all of the product materials are identical to the suppliers’.
These identical product photos and descriptions are either useful for your store SEO, website optimization, driving traffic, etc, or to boost your sales. The worse thing is you may help to promote the sales for other stores who also sell the same products.
If you’re finding products from AliExpress, let’s see how many stores are with photos of the same products, we take Bracelets for example:
Store 1 sells the Men’s Leather Bracelets:
Store 2 also sells the Men’s Leather Bracelets, with the same product feature photo:
We found another Store 3 sells the Men’s Leather Bracelets, with same product feature photo as well:
So, if you and your counterparts find this product to sell and import the same product photos to stores unless you come up with a very good marketing strategy, it’s not easy to boost sales.
Try to take different and featured photos, and write distinctive content for your products, these will help you get the sales easier at the start.
8. Poor Customer Services
One of the most time-consuming things about dropshipping is you have to deal with customer support. You may get a lot of questions like:
- The customer might not receive their order.
- The product may arrive damaged.
- The customer received the wrong product.
- The tracking code doesn’t work.
- The product doesn’t match the description.
Etc.
You can receive these questions at any time, it also makes you spend lots of time replying to customers about the questions above. Dealing with a lot of customers can be very stressful, especially when you’re doing it alone.
Not to mention that you also need to check with many suppliers about the package status. If the products did not arrive or it gets damaged, you have to discuss with both sides to make things go on the right track.
9. You’re Not Making 100% Profits From Your Pricing
If you’re doing dropshipping business via Shopify eCommerce platform, there are several expenses you need to consider. The graph below is the pricing you need to pay to Shopify for your store:
On top of the monthly rental feel you need to pay for Shopify for maintaining your online store, there are other costs you also need to bear:
- Credit Card procedure fee 2.9% + 30¢, this is charged by credit card company for every transaction made.
- Transaction fee 2.0%, this will be charged by Shopify if you are using all payment providers other than Shopify Payments.
- Theme cost $140+, if you’re using a special theme rather than a free Theme, the cost is a one-time charge.
- Apps cost: running a store requires some Apps to support you achieve different goals, most of the Apps are not free and it’s with a monthly charge.
- Marketing Campaigns cost: To drive traffic to your store and lure customers to buy your products, you have to implement marketing ads, such as Facebook Advertising, Instagram influencers, Google Adwords, SEO, etc. The costs can be varied, depending on your marketing tactics.
- Others like Refund, Freight costs, Withdraw deposit fees, Exchange loss, etc.
If you’re launching your first online store, these costs as stated need to be taken into consideration before pricing your products.
Conclusion
Dropshipping is a good model for people to learn e-commerce and it’s also a great tool to use to quickly test new product ideas. Dropshipping model allows you to start the eCommerce business on your own, you’ll never need to worry about storing, packaging, or shipping your products, your suppliers will fulfill the order once you’ve made a sale.
However, once revenue comes in you should shift to a traditional model with inventory and change the order fulfillment. And, as the business grows, doing solo will make you feel more and more powerless, you’re unable to do it as well as you wish. In this phase, you will have to build a team or hire a professional sourcing company to help you achieve your next goal.
If you’re in the phase of expanding your business, or you want to have a better start by doing it more efficiently and cost-effectively, feel free to contact us! Penglight can be your best sourcing partner for your eCommerce business. We have helped lots of companies and individuals grow their businesses and make their sales to a new level. Contact us for how we’re able to help you boost your sales, or leave your comments below, we love to answer any of your questions.