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It may be a harsh fact to face, but 90 percent of new eCommerce businesses fail within the first four months. The 10 percent that survive are proof that determination and adaptability can overcome the obstacles facing an eCommerce business today.
The typical struggles of a new dropshipping business range from pricing issues to weak website design and lack of marketing . Without the right solutions, these obstacles can be overwhelming to new online business owners, especially dropshippers.
Luckily, with a little trial and error, access to resources, and perseverance, you can be part of the 10 percent.
Before we dive into the most common reasons dropshippers fail, let’s address some of the questions that have been buzzing around dropshipping.
Is Dropshipping Dead?
Not at all. If anything, dropshipping has grown exponentially over the past few years leading to more successful entrepreneurs and dropshipping businesses. There are no signs of eCommerce going away; it has become a new-norm and it’s expected to double by 2023!
That means the demand for online stores and products won’t be going away either.
Need more proof that dropshipping is alive and well? Take a look at this google trend graph showing the trajectory of interest in dropshipping over time.
Dropshipping began emerging when China became a manufacturing epicentre, and was aided by the UN with subsidized shipping.
In the last five years alone, the demand and interest in the space has quadrupled. This is certainly due in part to the low barriers to entry and the skyrocketing growth of eCommerce.
More consumers than ever before are relying on eCommerce to buy their necessities, luxury items and everything in between. In fact, revenue from online sales is expected to increase from $25.4 billion to $33 billion by 2024.
Furthemore, Dropshipping is a long way from dead, it is simply changing. Consumers are interacting with stores in different ways, some of changed include:
- 73 per cent of projected 2021 online sales will come from a mobile device.
- 62 per cent of online shoppers will watch video reviews of products before they buy.
- 43 per cent of online shoppers research products on social media before buying.
Millennials make up the largest generation of adults and they are the first generation of “digital natives,” a group that hasn’t had to adapt to digital era technologies. They are accustomed to using the internet for shopping.
The eCommerce world is where entrepreneurs in every industry need to be focusing their efforts. With eCommerce’s 17% growth rate, dropshippers need to prepare for the influx of business as the demand for online shopping skyrockets.
“The dropshipping market is too saturated.”
Some people claim that dropshipping is dead because the market is simply too saturated. All the available business for dropshippers has been taken. That is simply not true. For those looking to be innovative and adapt, the opportunities are endless.
Dropshipping businesses are attractive to entrepreneurs because of the low startup costs and massive potential profits. But, running this type of business isn’t easy nor is it passive. Its still a business, and it takes hard work and dedication.
It requires extensive dedication to building trust with your customers and constant evolution to meet their needs. Without intense dedication and innovation, the competition will certainly overtake you.
The dropshipping model is brilliant for businesses looking to save time and money, and for entrepreneurs looking to create a sustainable business. However, as we’ll discuss below, many dropshippers don’t have what it takes to make this lucrative business model work.
If you are dedicated to the possible growth in this field, you will outlast the competition and reap the rewards. The opportunities for dropshippers are there; how badly do you want them?
Is Dropshipping Legal?
Yes, dropshipping is a legal order fulfillment model used around the world. However, if aspects of the dropshipping model aren’t handled correctly, there can be legal consequences.
Like any other type of online business, there are liabilities that owners need to be aware of.
One liability is the risk of selling defected or counterfeit products. It’s shocking to learn that 3.3% of world trade in 2016 was counterfeit goods! If the products you sell in your store are proven to be counterfeit, the liability is on you. Since dropshippers aren’t physically checking or handling their products, this is a serious risk.
Another potential risk occurs when dropshippers don’t treat their business as a taxable source of income. You may not be required to get a business license in your location, but doing so makes it much easier to abide by taxation rules and be transparent about where your money is coming from.
Lastly, the types of products you sell can get you in hot water. Let’s say you want to sell phone cases with celebrities’ faces on them. These images are likely trademarked and copyrighted which makes you profiting off them illegal and grounds for getting sued.
With Spocket, everything is vetted and screened before being placed on our platform. Making these risks miniscule, and leaves you with more time for marketing and building your customer base. Check it out now for free!
So, Why Do So Many Dropshippers Fail?
So, why do 90 percent of new eCommerce businesses fail? Here are the top 5 reasons so many dropshippers fail and how to avoid their mistakes.
1. They Don’t Vet Their Suppliers
The anonymity of running an online business is a double edged sword. On one hand you can make money without leaving your house, but on the other, you don’t get to qualify partners face to face.
One of the biggest mistakes dropshippers make is not vetting their suppliers and manufacturers.
They see the products and prices online and then place their first order. Suddenly, their orders aren’t being fulfilled, the supplier is prioritizing other retailers, the products are arriving damaged or not at all, or worse, the supplier isn’t responding to their emails.
These disasters can be avoided by making an effort to interview and vet different suppliers before choosing one. Schedule a phone call with them; even better, make it a video call. See how fast they respond to your messages. Get to know the person on the other end of the phone. Ask them lots of questions. Ask for reviews or references.
Better yet, save your time and energy by using a secure and reliable drop shipping platform like Spocket to connect with credible suppliers. There’s also a test option that allows you to test products out before making your final decision.
If you want your dropshipping business to survive, start by ensuring you have an excellent product from a trustworthy supplier. And use your time for the areas that matter most: marketing, customer service, and website design.
2. They Don’t Market Their Store
Dropshipping isn’t a source of 100 percent passive income, at least, not if you want to be successful. The dropshippers who are killing the game are constantly marketing their stores. How?
First, they create a user-friendly, appealing, and enticing online store. They use secure payment options, a riveting web design, and a website that is optimized for mobile searches. Afterall, 79% of smartphone users make purchases on them.
You may be wondering if you really need to use social media to market your store. Is a website enough?
The answer is no, not anymore. Plus, social media marketing has the power to drive 71% more sales on your eCommerce website, so why wouldn’t you take advantage of it?
Successful dropshippers create content frequently and regularly, and spend money on ads. They engage with their followers on social media and respond to website inquiries ASAP.
Marketing an eCommerce business is a full-time job. The ones who don’t treat it as such aren’t successful.
3. They Don’t Put Their Customers First
When a customer emails you saying your product doesn’t function the way they expected it to, how do you respond? Do you believe it was the customer’s mistake and not your problem?
Top dropshippers take accountability for their customers’ experiences whether they are good or bad. If they receive a concern or complaint, addressing it is at the top of their to-do list.
Why? Because without customers, you don’t have a business.
And, because you simply have to expect returns if you run an eCommerce business. 41% of consumers purchase multiple variations of one product with the intention of returning the ones they don’t want. Furthermore, eCommerce stores have twice the return rate of brick and mortar stores!
You can put your customers first by having a reasonable and fair refund policy, accepting exchanges when possible, and adapting your shipping options to be more convenient. Although this can be tricky with foreign suppliers. US suppliers usually make returns and reimbursements easy and simple.
That could mean finding a US supplier or Canadian supplier to decrease the shipping time for your North American consumers.
If you want to succeed at dropshipping, your goal should be to have the best customer service on the internet. And that doesn’t end once the customer has made the purchase.
Another way to put your customers first is to build trust. Make payments secure, have trust badges and customer reviews to help people see you as a legitimate business.
4. They Aren’t Adaptable
The most popular kids’ toys in 1987 are not the most popular kids’ toys today.
Do you think the retailers of 1987 are still surviving by only selling those toys? It’s not likely. If they’re still around, it’s because they adapted to the market.
As an example, look at the most popular toys over the last couple decades and notice any trends:
- 1987: Jenga
- 1989: The Game Boy
- 1995: Beanie Babies
- 1999: Pokemon Cards
- 2002: Beyblades
- 2005: Xbox 360
- 2007: iPod Touch
- 2010: the iPad
- 2016: Hatchimals
Each year, toys get more technologically advanced and more digital. Many sync to corresponding mobile apps and have virtual gameplay. Smart toys are growing in popularity each year.
So, what does this mean for dropshippers?
It means every dropshipper needs to be aware of the trends and innovations in their industries. If they want to exist for many years to come, they must adapt to these innovations.
This doesn’t mean you should switch niches everytime a new trend emerges. You absolutely should narrow in on one niche. However, it’s important to adapt to the trends in your niche.
Almost every industry has game-changing innovations.
To succeed at dropshipping, you always need a finger on the pulse of your market. You must be agile and adaptable, and willing to adapt to your customers’ evolving wants and needs.
5. They Don’t Do Their Research
It’s incredibly important to research pricing strategies when creating your product listings.
Undercharge and you don’t cover the cost of your expenses, you turn away high-quality customers, and you miss out on profits.
Overcharge and you decrease your sales, deter new customers, and prevent your business from growing.
You must research your competitors’ strategies, consumer behavior, and your market positioning. Then, use A/B testing to see which strategies are most effective for your unique slice of the consumer base.
Research is key for pricing and many other aspects of your online business.
The most successful dropshippers understand that their success is not based on luck. There is strategy in every aspect from pricing to brand colours to listing copy and customer service.
If you want to thrive as a dropshipper, don’t leave anything up to chance.
What Should I NOT Dropship?
Before you decide what to sell online, keep in mind that some products are less suitable for dropshipping. Consider the quality, marketability, and ship-ability of your products.
Here are some items to stay away from if you want to be a successful dropshipper.
Products That Lack Quality
This specifically refers to counterfeit products or low quality materials. Even Amazon is battling its share of counterfeit goods in circulation. They appear cheaper for the retailer to acquire and they seem to come from a trending or well-known brand. However, they can cause serious liabilities for the retailer.
In the beauty industry, counterfeit or low quality products have caused skin injuries and potentially-fatal conditions. As an online seller, you are liable for the products you sell. Selling counterfeit or low quality products can lead to a mass of angry customers and potential lawsuits.
The same goes for low quality items. Cheaper products may last only a few weeks before falling apart, leading to upset customers and a bad reputation. Choose wisely and test your products before selling them to your customers.
Although this is easily avoidable by having vetted many suppliers and inspected the products, it takes time, effort, energy and a few headaches to get there.
Products That Aren’t Marketable
As we pointed out above, social media drives 71 per cent of sales on eCommerce websites. However, you can’t market on social media if the products you’re selling aren’t allowed on the platforms or are completely oversaturated and un-unique.
If you aren’t going to be able to market it properly, don’t bother selling it.
You should also avoid products that customers can get at their local shopping mall. Why would a customer wait 4 or more days for an item they could get from a physical store today? Why waste your marketing budget advertising products your customers won’t buy online?
Unless there’s something amazingly unique about your everyday product, don’t waste your time, money and energy.
Products That Aren’t Shippable
The heavier and larger a product is, the more expensive it is to ship. This can be especially tricky for overseas suppliers. IN this case, the best way to go about it is to have these items shipped from a US or Canadian Supplier to ensure safe and fast delivery.
The reason for this is a word all dropshippers dread “Cart Abandonment”. If your customer pays for shipping, they might get to the final checkout page, see the shipping charge, and abandon their cart altogether.
The cart abandonment rate across all industries is nearly 70%. Over half of all cart abandoners cite unexpected costs, like shipping fees, to be the number one reason.
So if the product cant be shipped safely and from a short distance, don’t put yourself through the agony and stress of dealing with it. But if your mind’s made up, make sure you test it out first before making a decision.
Is Dropshipping Worth It in 2020?
Dropshipping is a lucrative and exciting business option for those who are willing to put in the time and effort. But it’s not a get-rich-quick-scheme and it’s not fully passive income.
As eCommerce continues to grow exponentially, there is a massive demand for dropshippers that doesn’t seem to be dying anytime soon. Consumers want to shop online and from stores outside their geographical location.
So, yes. Dropshipping is worthwhile in 2020 if you have the dedication and diligence to succeed at it.
If you’re ready to start your dropshipping business, use a reliable, secure, and thriving platform to host your store and meet suppliers. With Spocket You have access to US and EU suppliers that have been approved and vetted so that you don’t have to worry about it. Try it now for free!