Dropshipping is a type of retail ecommerce in which you sell products online and have them shipped directly to your customer. Instead of keeping inventory or managing orders, you can hand off these tasks to a supplier, who then handles all the logistics.
It is a great way to grow your ecommerce business, but you should be aware of some of the pitfalls and challenges. Here are some of the top things you should avoid:
Lack of control over the supply chain
When it comes to dropshipping, there’s a lot less you can do about product quality and fulfillment speed. You can only hope that your supplier addresses these issues as quickly as possible — but this is often a challenge when you’re also dealing with customers who are frustrated by product quality, shipping times or returns policies.
A poor supplier can cost your business a lot of money. It can cause missing items or botched drops, damage the reputation of your company and hurt your customer’s experience. You should always do your research when choosing a supplier.
Markdown from MSRP (manufacturer’s suggested retail price)
The best dropshippers use markdowns to offer a lower starting point for their products. For example, a $200 item might be available at a 15% discount. This method helps customers see the price tag as a bargain, while still making a profit on their purchase.
Pricing is an important consideration when deciding how to run your online store. Understanding how pricing affects your profit margin will help you create a profitable business that can scale.
You should also take into account the cost of storage and packaging, as well as shipping costs. A lot of dropshippers are reliant on suppliers for these services, so it’s crucial to find one that can offer these at an affordable rate.
No control over the stock on your website
A major issue for many dropshippers is that they have no idea how much inventory they have on their site. Because they are sourcing their products from multiple suppliers, it can be difficult to keep track of how much inventory is in stock and what’s on backorder.
It’s best to check your inventory regularly using an app that syncs with suppliers. This will allow you to know in real time how much inventory your suppliers have, so you can pass the right orders on to them.
Creating user-friendly web pages
As you build your website, make sure that it is easy to navigate and provides a great customer experience. This will attract potential customers and improve conversion rates. It’s also vital to include an FAQ page, so your customers can get in touch with you for any questions or concerns they might have.
Refund policy
A good refund policy will help you earn trust from your customers and build loyalty. This will also let them know that your business is serious about its products and commitment to their satisfaction.
Legality and regulation
The first step in establishing your dropshipping business is to determine whether you need to be licensed in your jurisdiction or not. This will depend on the regulations in your area, but you can usually find out what you need by doing some research.