Do you know the Common Dropshipping Problems ? If you think so, there are little more to be Known !
Dropshipping is an easy way of doing a full-fledged E-commerce business. A business doesn’t need to maintain supply stocks while following this business model.
The Online store receives orders from its customers. Then the fulfilment is done by a third party seller on behalf of the Store.
This business model is profitable both to suppliers and the business. Just like any other business, dropshipping also comes with its pros and cons.
It has to be approached in a systematic way to run successfully.
Getting crazy rich is possible in dropshipping but this business model is not a “Get Rich Quick” Scheme
It may sound easy to sell someone’s goods via your online store and take your profit at the end of the day.
But when you start a dropshipping store you will know that you have to do a lot more work than average.
For example, maintaining your queries from customers, regular contact with your suppliers etc.
“If your Business model is focused only dropshipping without an existing e-commerce store, it will be difficult to get up and running”
But this is not completely impossible. You have to be ready to dedicate yourself to your business.
Also keep in mind that you have to work hard and also in a smarter way to sky rocket your store to 6 figure monthly income.
We have framed this guide to teach you exactly how to overcome every odd in your path.
We will guide you towards a successful dropshipping store. It is not going to happen in a fortnight, instead follow the guide and fast forward your success.
5 Common Dropshipping Problems
If you planning to start your dropshipping store with all your hard earned money, think twice because of the commitment level that has to be put into your business.
It is not easy just like it is shown in a “Youtube” video. You’ll not bag profits once you establish a dropshipping store.
The reality is you’ll have to put in huge amount of effort and time to make this happen. Also you must learn a lot along the way.
That being said, lets us see few important things that you should be aware of before starting a stand-alonedropshipping store.
It’s not worth to put in all you’re saving before you know about these basic aspects.
1. Less Scope of Profits
As you may think, the supplier receives only a few portion from the products you sell for them. This is completely opposite of the reality.
You’ll have to work much harder in order to make profit from your dropshipping store. The lesser your overhead, so are your returns.
Much of the hard work will be done by you whereas most of the profits will be bagged by the Supplier.
Not alone the hard work will be your input. You have to look after your business expenses such as Marketing and Advertising, Employee salary(if any), Continuous monitoring of your site, Managing your store orders, Handling customer queries to name a few.
It will be a hard truth that you’ll earn hardly enough to cover all these expenses. Again the cycle repeats twice or thrice to generate a profit and keep your business running.
Here is a formula to predict your income from your dropshipping store. But this is not an exact calculation since the factors like your industry and situations will act as variables. You can use this to just have a vague vision on your averages.
Marginal value – 20% (0.2).
Conversion rate – 2% (0.02).
Then you can use this formula to calculate you average income on per month basis.
(Average order value x 0.2) x (Monthly Traffic x 0.02) =Your Estimated Profit
As said this will be a rough estimate of your profits and there few more things you have to reckon with. In most of scenarios, the discounts provided by suppliers will be less than 20% which will toughen the situation even more.
There are high chances that even though there was a good relationship between you and the supplier, due to product costs you’ll have to go along with the supplier’s price for a long term relationship.
Even though this happens, you are in no way of stopping the costs that you have to bear every month which reduces your margin further.
To worsen the situation, you’ll have to make a cut in your profits in order to compete with your competitors. Your competitors may have large traffic which makes them viable to cut even more to compete with any of their rivals.
If you hold on to you 20%, it will be effortless for other establishments to easily kick you out of business sooner or later.
Next problem comes in form of traffic. The lesser you have, the more you’ll suffer. Just like any other online website, your dropshipping store needs traffic to make business.
If you start from scratch, it is not going to be that easy for you to scale your clients. Even though you can manage with store, it is harder to manage your clients and handle their queries and complaints.
So it will take time to build a strong clientele and even more effort to keep them happy.
It will be best to start a dropshipping store after you build a regular source of traffic which will take you to the half way of the journey.
2. Low Entry Barrier = High Competition
The dropshipping business is overly saturated just like any other online business due to the availability of half –served information out there. This is one of themajor common dropshipping problems. The barrier to entry was overly high before few years which gave chances only to few key players to flourish in the business.
This is ultimately opposite in today’s scenario. Since the entry barrier is utterly low, everyone flooded into the dropshipping business. The low overhead is used as a marketing term to profit from wantrepreneurs and they succeed in doing so.
Again, this makes dropshipping stores a highly competitive business.
The more the stores, the less your profit. You have to keep cutting down the profits yourselves to keep your small business alive. The same will be done by other small business which makes times even harder to survive.
The Scene gets even worse, when it comes to the supplier side. The suppliers are less likely to offer an exclusive deal if they can sell their products without offering one.
Mostly every supplier will be busy with their regular store owners who will give those tons of sales. It will be less likely that you can offer competitive prices without a cut from your profits.
On the other hand, your competitors who are already in business, will easily undercut your prices by negotiating on either side of their business.
Why would anyone buy from your store, if they can get the same product at a much lower price from somewhere else?
3. Zero Dominance in supply-chain management
E-commerce model of business takes care of everything from filling up the inventory to make the products reach the hands of customer. This model has complete control in every phase of the order processing.
Whereas in dropshipping, your will never have access to supply chain management since your supplier takes care of all the handling and shipping of the products.
How much ever hard you try, you’ll have to be answerable to your customers every now and then. This sole factor leaves you at the mercy of your supplier.
It will be a nightmare situation when answering these customer queries, when you yourselves are unaware of the happenings on supplier’s end.
The assurance you provide your customers will be based on your supplier’s response be it a truth or just a hope.
Now the real problem arises when there is a serious issue with the order or the product. You’ll be the one hoping from customer to the supplier and back. This will naturally create a communication delay which is unavoidable.
Also you’ll not have much time to fix or give a solution to your customer’s queries.
The First and Foremost in Ecommerce is the customer service which makes the difference between you and your rivals. If the customer feels bad about this, they will be a piece of cake for your competitors to acquire.
If the problem is not solved or solving it frustrated the customer, they’ll end up on forums and complaint sites which will give you a hard time to proceed with your business.
You’ll not be aware of those negative reviews before they grow bigger and bigger behind your back and this will be sufficient to push you out of the business.
4. The Accountability lies on your Head too
You must have a deep knowledge on kinds of products you ship through your sellers. There are vast range of problems from Low quality to Copy merchandise of Intellectual properties.
This is a major problem in today’s ecommerce businesses. These kinds of products not only affect the suppliers if caught, as a vendor of their product, you’ll also be held accountable up to a certain level.
So, you have to carefully choose your suppliers before you even sell a product for them. Keep in mind that you should sign adropshipping Agreement Contract with every supplier you choose.
This has to be done to stay on the safer side of legal issues.
Also copy products are easily identified by people now a days. So it’s better to choose all your suppliers after an in-depth research.
It is also mandatory, that you must order the products yourself to monitor its quality every by checking it regularly.
5. Brand Building is a Challenge
Lastly, this is most not spoken by anyone yet one of the very common dropshipping problems.
Every one following this business model must have in mind that the credit for their hard work never reaches them.
No matter how fancy will be your advertising or how awesome the product you are dropshipping, at the end of the day, it’s someone or their brand is going to be established.
People tend to forget their shipping experience a short while after they get their hands on the products they have purchased.
Eventually, the product’s brand will get the credit and not your fast shipping. Although this goes hand in hand for the next order to your store, you’ll not be the one receiving credits.
Branding is everything when it comes to a business. Eventually, it will be the backbone in ecommerce business.
Brand is responsible for loyalty and regular orders. It will be best to choose White-label suppliers, brand your store on the product and establish your brand in every order of your store.
Have a note of all these Common dropshipping problems and analyse throughly before steping into this business.
Have a look at our Custom Stores and eliminate the risk of failure. We are industry experts and we guide you in your Venture to Success.