Why Most Dropshipping Stores Fail? Everything you know about dropshipping in 2020
If you were searching for an answer to this question in google before you found this blog, you would have already asked yourself that.
How successful is dropshipping?
90% of the dropshipping Stores fail because of various reasons, 29/30 stores fail in the first 6 months, 8/10 stores fail in the first 3 years. But out of this 90%, 99% of the stores fail because of the false hype that has been circulating on the internet. You can call them Shopify Gurus, Dropshipping gurus, they don’t give you the mindset of a business person. They only teach you how to use a platform, plugin, create ads, do on-page SEO. But, To run a successful business, it takes a lot more than just those and they know it as well.
Is Drop Shipping worth it?
Guess what, here is a real shocker, the term “drop shipping” is the only new thing here. But the business model of this so-called “dropshipping” has been around since forever. The only difference between a dropshipping and regular business is, you don’t have to invest in inventory. But, it takes immense business skills to make money off of it. In fact, much more than you require to run any traditional business. most of them drop shippers fail because of the lack of these skills and basic knowledge over things.
Here are a few of the top reasons why most dropshipping stores fail.
Increased Hype in Entrepreneurship/Dropshipping
Mainly the false hype from this youtube community made dropshipping and E-commerce business look so easy. They tell you they only work 2 hours a day and from their chariots in the sky overlooking a beach in the Carribean and most of them show off about their 100k$ month stores, but they don’t tell you how much is their gross profit and how much is the net profits are. How much they had to struggle to make it happen. How much they had to learn from various sources before they even start.
You know most of them don’t make more than 10-15% of the net profits. Although, that percentage is considered a great business. It’s no different from any other business there is. They only make it look easy so you would buy their 1000$ courses.
Lack of Skills
I know it hurts but lack of skills is one of the main reasons why people fail in dropshipping. Here is a list of skills you need, to start dropshipping or any other business over the internet.
- Product sourcing
- Image, Video Editing
- Content Writing
- Ability to write a sales copy that works
- Facebook and Google Ads
- Analytical skills
- Web development
- Ability to spend hours on phones enquiring or negotiating with suppliers
- Managing orders and returns
- Customer support
- Make sure to comply with local laws in every country
- Handling shipping
- Competition analysis
- Preparing a rock-solid business plan
- Ability to pay attention to minute details
- Conflict resolution
- CTR optimization
- A/B Testing
- Email Marketing and setting up email triggers
If you are going to start this business yourself, you need to pursue every single one of those skills and work on those every single day. Managing the tasks that require these skills every single day is almost impossible for any human. Though, it is recommended to pursue all the above skills, even if you are going to hire people for your business.
I know what I said above. You do need all those skills to start a business but you need a small team so that you can distribute these daily tasks. If you don’t have enough budget to hire people, find a co-founder for your company, in return for an equal amount of work that you put in.
Choosing Low-quality products
All drop shippers do the same thing. They choose trending products in aliexpress or any other Chinese websites, without even testing the quality of the product. How can you expect a customer to return to your store when the quality of the product is so poor? When you have a low returning customer rate, you will be always struggling to generate sales. I recommend to test out the quality and delivery time yourself. Even better, if you can find a supplier in your own country.
Also, there are no such things as “Winning products”. You cannot just sell random and unique items for a while, then move on to other products all your life. Instead,
- Build a brand.
- Improve the quality of delivery, customer support over time.
- Create a customer base.
- Improve their return rate.
- Reduce the cost of Customer Acquisition.
- Focus on free traffic.
- Give them unbeatable value while still maintaining good profit margins.
Let me tell you this again, you cannot earn $25k by the end of this week if you start today. You cannot just run a bunch of ads on facebook and expect sales. You need to take it slow to build it from scratch and with a goal to create a long term brand.
People cannot trust a random website that showed up in their feed. They need to see your brand here and there in their life to create a lifelong trust. Instead of starting with facebook ads, Focus on SEO first. Also on guest blogging, Press releases, social media optimization ETC. Even if it takes time, free traffic from google always gets you the best CTR. Also run, Shopping ads and display video ads on google. And focus on retargeting the whole traffic with various tactics and discounts. It takes around 5 to 9 months to make it profitable and establish trust in your targetted audience. Once you start to make a profit, Focus on scaling.
Unattractive Website Design
Ask Yourself this question while developing the UI of your website
“Would I trust this site? Would I buy anything from a website that looks like this?”
If the answer is no, Redo the design until the answer is, yes.
Website design is one of the key factors that play a role in generating sales. People cannot just buy something on a website that looks shady and expect a hassle-free delivery of the product. Most people would like to test out a product or two before they decide to have a long term relationship with the brand. So, impress each and every person that visits your website.
In the days of amazon’s same-day delivery, your 14-21 days shipping from china is way off your competition. Most customers turn down when they see the delivery date is next month. Nobody got time to wait that long when they can get the same product from amazon with a single search. You gotta convince them, that your product is better than amazon’s. If you fail, you lose a customer. This affects a great deal of your conversion rate.
Bad Customer Support
With all these flaws your store got, you gotta provide a better customer service than your fairly successful competitor. If you don’t respond to your customers “Where is my package? It’s been 15 days already!” questions, you are gonna lose a lot of them. They won’t even bother to visit your site if your customer support is poor. You gotta treat each and every customer of yours with the utmost respect. And help them through the issues they are having because of you.
Is dropshipping still profitable in 2019?
Of course, it is. No business wears out with time. Its the way of doing it that wears out. You can still start dropshipping or any other business online right this day. But, You need to prepare yourself first and get that business mindset before you even start. Not everyone can succeed in business. If you think you are not good enough to start a legit business, chances are, you are most likely are not good enough.
Here is a list of things you need to do to gain confidence and experience.
Study Various Business models
You gotta learn how a business works first. so, studying various business models is the best way to do it. Find case studies of various businesses, not just dropshipping. Learn the highs and lows of every business. Learn about scaling, profitability, marketing, creating a brand, creating a product, etc.
- Zero to One by Peter Thiel (co-founder of PayPal)
- Do Cool Sh*t: Quit Your Day Job, Start Your Own Business, and Live Happily Ever After By Miki Agrawal (Founder of Creative brands like HelloTushy, THINX)
Gain Experience from working
I know it sounds odd, but gaining experience in the particular field you’d like to start a business in will actually help you gain experience over various tasks that require to run a business. At least, a few of them. You can also save money from this job for your dream business. So that you would have enough budget to start with.
Learn Skills Online
Learn skills that require to start a business online. Like SEO, Facebook and Google ads, Copywriting, Web design, Email Marketing, Creating sales funnels, Photo Editing, Video Editing, etc. There are many trustworthy learning platforms online for you to learn all these.
Udemy, Shaw academy, Surfside PPC, Niel Patel, Backlinko, Searchengine Land, Canva, etc.
Sign up to stock websites like Envato elements or Promo.com
You Need various graphical elements, stock pictures, videos, promos, mockups, Templates for your e-commerce store. Don’t run around people in Fiverr or work for these every time. Sign up to websites like Envato elements and promo and use their vast collection of the library to make your website top-notch.
Hire or Team up
You need to hire people or find yourself a partner to start with. You just cannot succeed alone with so many tasks to do every single day.
Have a Decent working capital
Have a decent budget beforehand you start the business. Just know that you are risking it all and you need to work hard to win it all back. Dropshipping is a legit business too, you need to start it like any other business.
Find Local Suppliers
The main issue of dropshipping stores is sourcing products from China which are low quality and longer shipping time. The best way to overcome this issue is to find a dropshipper in your country or a neighboring country. Do not rely on random Chinese products all the time. Of course, your profit margins would be in a tight squeeze but it’s worth it for the quality you are delivering with the best shipping time. You can dropship branded items as well if you have a brand authorization.
If you are interested in sourcing new or unique products, buy them in bulk from Alibaba and Fulfill orders yourself or from a fulfillment center in the country, you do business.
Get a Grip on Tools
You need to use various tools to run a successful business Such as CRM, Competitor analysis tools, Accounting tools, content writing, Graphic Designing, Video Editing, Content writing, Keyword analysis, Analytics and many more. You need to know which tool to use to solve certain issue.
Research about taxes that you are going to pay for the products you are going to sell. Running a business requires to get a grip on all tax-related things. From VAT or GST, Import Taxes, Company taxes, VAT Filing, Person Income Tax, you need to know about it all. You can just spend a day on google to learn these though.
Most dropshipping stores fail because of the lack of skills, lack of patience, lack of willingness, lack of knowledge. If you see it like any other business and have the will to put in 14-hour workdays, 7 days a week, You are most likely to succeed in any business.