Dropshipping is a fantastic way for anyone looking to start their own business with a very low start-up cost. It has offered a lot of entrepreneurs the income that they would otherwise not get from working a regular 9-5 job and many people live the life they have always desired on the money that they make from their dropshipping business. Dropshipping seems to be a very straightforward and simple business where you can sell stuff directly from a manufacturer to customers in different parts of the world from your comfort. However simple it is, a lot of people still make critical mistakes that have left them with financial losses to add to the time wasted. In this article, we are going to highlight these common mistakes that people make in dropshipping as well as how to avoid them.
It is easier to start a profitable business today compared to what it was some 25 years ago before the internet became pervasive. The days when starting a retail business will demand a lot of money to build or rent a physical store and spend even more for warehouse space and logistics are now behind us. The big retail business still going by this model have also invested in ecommerce models that let them sell online out of their warehouses and fulfillment centers, moving the focus away from traditional retail stores to virtual stores online.
Knowing the mistakes is important!
For dropshipping the need for a retail business, the retailer is able to eliminate a lot of the processes in their supply chain and only deal with the aspect of business that helps them attract more customers to their online store and the process that lets them serve their customers better.
Dropshipping in its simplest form basically involves setting up an online store, finding a product that you wish to sell in your target market, sourcing it through a dropshipping supplier, marketing and promoting the product, and of course selling the product through your online store where you have your dropshipping supplier of factory handle the shipping of the product to your customer.
With everything on the logistics side handled by your dropshipping supplier or the factory that makes your product, you are free from the burden of managing inventory and warehousing stocks that would otherwise require staff and demand much of your time.
How best can you manage this sort of operation so that there are no issues along the way and to ensure that you continue to run profitably. This is just what we will highlight here, important tips that will help you avoid costly mistakes and stay on top of your dropshipping venture.
Dropshipping Mistakes 1 #
Not carrying out sufficient product research before going to market
Your product is a key determinant of the success or failure of your dropshipping business. You must know your product well enough before you make a decision to go to market with it and by that, I mean you must carry out ample research on the overall performance of the product before investing time and money to dropship it.
The first area you want to score your product is on the product’s ability to sell. A lot of people jump into dropshipping with a product they think it’s a great product without researching if the product actually sells. The truth is a lot of good products don’t actually attract the sales you would assume they should.
Before you list any product do your due diligence to verify the sale volume and frequency on popular marketplaces like Amazon or AliExpress. Check for products that have received a lot of reviews and read what is said about such products.
The second area you need to score a product on before dropshipping is the profit margin that the product can deliver for you. A product can have high sales volume and guarantee to sell in your store but may also not be able to sell for enough that gives you the profit you’ll need to stay profitable.
Before you decide to dropship a product do your calculation on the total cost to sell the product including ads cost and fulfillment cost, then confirm how much it is sold for by competitors if you can’t have a 15% profit margin on the product, it is better to steer clear of such a product.
The third aspect comes down to competition in the market for your product. You don’t want to get into dropshipping with a product that is already too popular with competitors who have been in the market long before you as you will be at odds that are not in your favor. Instead, you want to start with a relatively new product in the market so you stay ahead of the competition.
Dropshipping Mistakes 2 #
Having expectations that are not feasible
We have seen ecommerce entrepreneurs who come into dropshipping having heard or seen videos of so-called gurus claiming to have made millions of dollars from dropshipping overnight, only to invest time and money and lose everything within their first two or three months of starting their dropshipping business. If you are not well informed you are very likely to make the mistake of assuming that because you can sell items from the comfort of your home without necessarily having to hold stock, you are in an easy-to-make-money business. This is a very false assumption. Success in dropshipping demands some work, patience and persistence, strategic thinking, and marketing skills to mention a few.
It is not all just building an online store, sitting back, and letting your dropshipping supplier fulfill orders as they come. And if you do everything right, you still have to be patient and wait for things to mature over time. While dropshipping is definitely a sure way of making a very good income with low investment, you must think of it on a long-term basis and not as a quick way to make a money venture otherwise you will lose motivation and quit before things even go green for you.
Have a long-term goal and strategy for your dropshipping business. Make plans that are robust and work out your success with patience and perseverance.
Dropshipping Mistakes 3 #
Assumption of a zero-inventory retail model
The dropshipping model as defined many times on the internet and other places assume that your seller does not need to hold any sort of stock and can just sell directly from a supplier or a factory to customers looking to buy from their store. This definition can be misleading for newcomers but experienced dropshippers know better that not holding inventory or stock will leave you underperforming with your dropshipping business. As a matter of fact, not holding stock is a sure way to underserve your customers and consequently bring your business to ruin through the bad reviews that will follow.
As a dropshipper that has your customer at heart, or say as a dropshipper that really wants to do well, you will need to hold a certain amount of stock with your dropshipping supplier. Yes, this is where your dropshipping supplier becomes a really valuable asset. What the dropshipping supplier does is to ensure that at all times you have a certain amount of stock in their fulfillment center or warehouse so that as soon as an order is received, the item is picked, packaged accordingly, and shipped out to the customer.
This is done in a just-in-time system where the inventory is replenished before it runs out and this helps to reduce fulfillment time so that you don’t have customers waiting too long for their orders to arrive.
To achieve this, you will need to invest in stock with your dropshipping supplier, this could be anything from $500 to $1000 USD in stock depending on your product and the number of product categories you host. There is no way around this if you really want to perform well with your dropshipping business.
Dropshipping Mistakes 4 #
Spending too much time with your market and product research
We promote investing ample time in your product research as well as your market research which is a very good thing, however, we have seen a lot of entry-level dropshippers too scared to get their legs in the water as they are undecisive with the product they have researched on or are not sure how the market they target will welcome their business and product. This is definitely a sure way not to get anything started. This fear syndrome can keep your business in the dark until there are only crumbs left in your target market for your researched product.
The dropshipping space is a fast-moving one as everyday people are trying to sell new and exciting products that come to market places and your product is one of them. By the time you have taken so much time to research and decision to sell, twenty other dropshippers are already promoting and selling the product and another twenty will be doing so the week following.
The best way to do this is to test your research as soon as market data suggest there is a slight chance of an opportunity. Now there is a safe way to do this so you don’t lose a lot of money as we know that this is where the fear to launch is rooted.
This is where ecommerce marketplaces like AliExpress become very important for entry-level dropshippers. You can do your product research using stats on products from AliExpress and when you have a good feeling about a performing product given what the data says, you can order a sample to try for yourself or request the seller to send you more images and videos of the product you can make educated guesses based on what you can see from the image and videos, this will save a lot of time although we will strongly recommend that you get a physical sample of the product and test it yourself and if it delivers as promised you can make your own better videos and product photos with the sample you ordered.
You should then list the product on your store and fulfill orders from AliExpress when you receive orders which will usually take longer than when you are fulfilling using a dropshipping supplier and you must state on your store the expected delivery time as a recommended best practice in dropshipping. Keep this going for two months as you invest in your marketing and when you begin to see stable traffic of say 3 to 5 orders, seek out a dropshipping supplier to help improve your sores efficiency.
Dropshipping Mistakes 5 #
Working with the wrong dropshipping supplier
If you are just starting out, most likely you must have started with AliExpress, and very likely you have already got some complaints from your customers with long delivery as the traffic and sales begin to increase in your store. Or if you have found yourself a supplier from AliExpress but they have just been performing just as it were when you were dropshipping from AliExpress thereby leaving you with no advantage to serve your customers better than the competition, here’s what you will need to get things in place quickly; Have a review of your business plan and reach out to a dropshipping supplier to request a meeting where you will explain your business and your strategy, what you have and where you want to be.
Make sure it’s a dropshipping supplier that speaks your language and takes their time to listen to you. If you are sure they have understood your challenges then you can request and consider their offer for whatever service that you will be needing from them. You might not have need for all of their services but for whatever service that is vital to your business. However, as an entry-level dropshipper there’s a chance you will need to be onboarded all of their services.
With most pro dropshippers, the preference is with stores that are already having 30 and above orders a day. However, you can some pro dropshipping suppliers still welcome dropshippers with as low as 5 orders a day in sales or better still you can convince them to work with you by making a commitment with a few stock orders to be held under your account with them while you work to grow your dropshipping business.
Dropshipping is a very profitable and exciting business model for ecommerce entrepreneurs, and we are confident that it will remain so in the future. Hope you won’t make the dropshipping mistakes that we’ve told you about above. We enjoy working with new and experienced dropshippers by providing solutions to help them reach their goals with their dropshipping business. But more than that, we also provide guides on various aspects of dropshipping and blog posts on the latest concepts in dropshipping that will benefit you as a dropshipper especially if you are dropshipping from China.