Why do Some People Lose Money on Dropshipping?
I may be conservative when it comes to spending money, but as an entrepreneur, I thrive on taking calculated risks and experimenting with new business ideas. With my limited capital, I carefully weigh each opportunity and consult with industry experts before making any moves. I’m always on the lookout for the next big thing and never shy away from a challenge.
The concept of Dropshipping was one of those interesting business models I really wanted to explore. When I researched the concept of Dropshipping, I decided to do some practical experimentation too. For this reason, I created a seller account on eBay’s online store. I looked for a suitable source for importing and selling goods. Interestingly, when you search for the word “Dropshipping” on the net, the first ten results of this search end up in Alibaba or Ali Express. (A popular platform for dropshipping products from China. It has a vast range of products available at competitive prices. You can also use their platform to find suppliers for your dropshipping business). But are these resources can make your online business successful? The answer is no.
Dropshipping is a business model in which an online store sells products without actually holding any inventory. Instead, the store acts as a middleman, taking orders from customers and then placing those orders with a supplier or manufacturer. The supplier then ships the products directly to the customer. This can be a low-cost way to start an online store, as the store owner does not need to invest in inventory or warehouse space. However, there are some drawbacks to Dropshipping. The store owner has no control over the quality or quantity of the products being sold and may have limited control over the shipping and delivery process. In addition, there may be conflicts between the store’s policies and those of the supplier, which can impact on the store’s reputation. Finally, profit margins may be very low, making it difficult for the store to stay competitive in the market.
In other words, Dropshipping means offering other people’s goods online to customers without having a warehouse. You sell other people’s products mainly online, and the main companies ship those items to the final buyers or consumers. BigCommerce, one of the famous eCommerce platforms, explains it this way:
“Dropshipping is an order fulfillment method that does not require a business to keep products in stock. Instead, the store sells the product and passes on the sales order to a third-party supplier, who then ships the order to the customer.” Isn’t it sweet?
The delightful point of this business is:
You do not have to buy and store the goods you sell in advance. This means your initial cost will be much lower. The cost of warehousing and shipping is not part of your expenses.
But there is more to it. Here I explained some of them.
First, you have no control over the products you sell: either in terms of quality or quantity, also -and this is even worse- you have no control over handling, shipping, and delivery.
One of the drawbacks of Dropshipping is the lack of control over the products being sold. As a store owner, you may not be able to ensure the quality or quantity of the products you offer, and you may have limited influence over the handling, shipping, and delivery process. Additionally, the rules and regulations of your store may not align with those of your supplier, which can impact your reputation as a business. For example, if a customer orders a watch strap with a promised delivery time of 10 days and a return policy of 30 days, but the supplier experiences delay in shipping and handling, this can cause issues for your store. If you have multiple customers waiting for their orders, this delay can significantly impact your small business. Additionally, low-profit margins can make it difficult to maintain competitiveness in the market, as even small price increases may cause customers to look elsewhere.
Weaknesses of Dropshipping from Other Countries
- The goods’ origin may differ from the actual origin on sites such as eBay or Wish. This transmits all the risk of shipping and delivery to you, not the goods’ original seller.
- Return policy and its effect on your business are important. Just imagine you sell Apple iPhone cases on eBay with a 30 days return policy. On the other side is a supplier from AliExpress who supposedly needs to ship those cases from China to your customers and has 14 days return policy. In most cases, if your customer wants to return an item for any reason, you have to refund them all they paid. Still, it would be almost impossible for you to receive your money back.
- The goods you buy from China (Ali Express) must be returned to China if your buyer will return the goods to your address. The cost of shipping to China is often higher than the cost of the goods themselves.
- Suppose the seller of Ali Express delays selling the goods to you. In that case, you may face severe dissatisfaction from your customers, which will eventually lead to the cancellation of orders or the return of the goods. In most cases, you will have to pay your customers in full, but you may not be able to reimburse your costs from Ali Express.
Here are some resources for dropshipping:
- Shopify: Shopify is one of the most popular e-commerce platforms for dropshipping. It provides a range of features that make it easy to create and manage an online store. They also have a range of resources available on their website, including articles, tutorials, and a help center.
- Oberlo: Oberlo is a dropshipping app that integrates with Shopify. It makes it easy to find products and suppliers, and it also automates the order fulfillment process. They also have a range of educational resources available on their website.
- SaleHoo: SaleHoo is a directory of wholesale suppliers and dropshippers. They have a range of verified suppliers in various niches, making it easy to find reliable suppliers for your dropshipping business. They also provide educational resources, including a blog and a members’ forum.
- Dropship Lifestyle: Dropship Lifestyle is an online course that teaches you how to start a successful dropshipping business. The course covers topics such as niche selection, product sourcing, website design, and marketing. They also provide ongoing support and resources for their members.
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