Why Do Businesses Fail?
I want to emphasize that this blog post on why businesses fail is not focused on those who quickly created a Shopify account with no action taken, and then declared that they failed as a result.
That doesn’t count, this advice isn’t for you.
This one is intended to shed light on any potential obstacles which may be preventing those setting up dropshipping stores from finding the success they aim for.
I frequently come across a variety of justifications in emails I receive, and I have to admit, I’ve done some of these myself.
Selecting a Bad Niche
You Don’t Find the RIGHT Suppliers
Unprofessional Websites
Not Having Excellent Customer Service
Fixed Mindset
BONUS
Reason #1 Selecting a Bad Niche
So why do businesses fail? The initial basis for this is that someone kicks off selling the incorrect kind of product.
A plethora of qualities can create an ideal environment for dropshipping. Here are a few easy wins for bad ones to stay away from:
Restricted Products
I’m referring to items that are either illegal or skirting the line of legality. Certain items could be permissible to purchase via the internet in certain states, yet it may not be viable to publicize them in a conventional fashion.
It is definitely not possible to use Google Ads, and it seems unlikely that it would be easy to do so on Facebook or any of the other major traffic-driving websites.
I have seen countless examples of CBD oil being used in the last few years. This is referring to a product made from the cannabis plant known as hemp, which is claimed to help improve joint health.
Lots of people want to engage in dropshipping for some unexplained reason. It’s alright if you want to give it a go. But guess what? You will not be able to promote it utilizing usual Google shopping ads.
You won’t be able to use customary Facebook Ads. This type of product just limits you so much.
Copyrighted Products
Now, there’s another thing that people do that leads to their downfall, which someone was apparently advocating a few years ago. I mean, they must’ve been. People seem to believe they can deliver copies of copyrighted and trademarked items by dropshipping.
I have brought up this topic previously, but have you noticed all the websites which are offering Game of Thrones-themed items such as sweaters and pillows? I would like to say to those people, “You do not have permission to sell that item, it is not a good idea, and can you guess what else?”
If you attempt to market something that is copyrighted or has a trademark that you are not authorized to promote, you are doomed to fail.
Starting off in niche areas can be a cause of failure for some people. The two I notice the most often are the most obvious examples.
Reason #2 You Don’t Find the RIGHT Supplier
Businesses can crash if they have poor vendors or can’t find the appropriate providers.
Take for example the arbitrage model. Attempt to purchase items at a low cost and resell them at a higher price.
Imagine that you’re selling digital pens on Shopify. Your supplier is someone who you observed offering digital pens at a lower price on either Amazon or eBay.
Now that would be a reason to fail. Those are not true suppliers. You are attempting to locate discounts without any real plan in mind. It is not a wise strategy to continue on in this way for the long run. This is a significant cause of the downfall of dropshipping firms.
Does Dropshipping From China Work?
Using only Chinese dropshipping services to ship goods to the United States would be considered a bad supplier. It might take three weeks for a package to reach another country and when it arrives, it will have a lot of unfamiliar characters written on it.
It may be feasible to be successful with a Chinese dropshipping venture, but numerous people come up short in their endeavors.
If your suppliers are located overseas, particularly in China, you shouldn’t be surprised if there is a three-week delay in receiving an order. They won’t be satisfied unless it is something that truly merits the wait.
Due to the abundance of bad publicity that has come with Chinese dropshipping over the last few years, it is obvious that this type of shipping is becoming increasingly viewed negatively not just in our circles but across the media in general.
Having suppliers located in China that deliver directly to customers in the US is not a sensible plan.
I have nothing against having products made in China. We’ve accomplished a lot already, however, it would be best if we kept our goods in a warehouse nearer to the customer.
They should be able to arrive at the destination quickly enough to enable the repacking process to give the customer a satisfactory experience. To ensure a lasting, successful dropshipping business.
Bad Supplier Relations
Negative interactions with vendors would also be considered bad suppliers.
Take the digital pen example from earlier. If you’re in the market for these digital pens, you can locate a few sources in the United States. You receive the go ahead to offer their products and begin to do so.
You may come to the realization that one or two of your new providers have awful client care! (In this situation, you’re the customer!)
It seems that some unreliable vendors fail to respond to correspondence and take a while to mail out orders. It could be that they continually send the merchandise to the incorrect address of the purchaser, or they may be charging additional expenses for direct delivery.
Reason #3 Unprofessional Websites
People fail at dropshipping due to their lack of an attractive, professional website.
What do I mean by that?
In other words, a dropshipping site that appears to be a joke. Something that was thrown together in a few hours.
These websites may be recognizable by errors in spelling and grammar, faulty connections, a difficult checkout process, and a lack of contact information.
The key to having a flourishing dropshipping venture is to be reliable. By taking that approach, you can create a sense of assurance with your customers so they are more probable to make a purchase. There are many ways you can do this.
If you assemble a site without a plan or any understanding of what you hope it will be, you’re likely to end up with something that looks amateurish. Once you begin sending people to your website and nobody makes a purchase, there is no need to be puzzled. That’s a big reason why okay?
If you are a part of Drop Ship Lifestyle, please take the time to go through Modules Three and Five in the Drop Ship Blueprint. This is when I demonstrate to you all of the techniques we employ to create dropshipping websites that are created to generate conversions.
5 Hard Truths About Dropshipping
As a business owner, you may find dropshipping a useful solution for you if you want to ship products for your online store (e.g. a conventional retail outlet that sells t-shirts) but don’t want to keep the inventory yourself or add new product lines. Dropshipping can be a major benefit to an e-commerce store.
Once someone has placed an order via the internet, a drop shipping business will send the item directly to them. It is a good solution for big and small businesses to acquire their goods, plus make some profit and free up storage space.
This is easier said than done, of course, so before you put all of your savings into a dropshipping store, here are some things you need to know on why it can be difficult:
1. Low-profit margins.
Since you don’t have to worry about controlling or saving your stock, the running cost is minimal – however, the profits are also minimal.
You put in fewer funds, but you receive fewer returns. That implies it takes a lot of work to simply remain viable, much less achieve a financial surplus, especially considering the majority of the money goes to the distributor.
These margins are too limited to be able to cover your costs such as advertising, sustaining your website, search engine optimization, arranging sales orders, and producing operational hours.
You can predict your income using these variables (they’re averages, so they’ll change depending on your industry and situation):
You can then calculate a working estimate using this equation:
The total Profit can be calculated by multiplying Traffic by 0.02 and then multiplying the result by Average Order Value multiplied by 0.2.
While this is fine for a quick starting estimate, there are a few problems you also have to consider:
- Your discount on buying from manufacturers and wholesalers could be less than 20%.
- This doesn’t account for any of the additional expenses mentioned above that you have to pay from your end. It’s not the final profit.
- For most products, you’ll have to cut into your profits to keep your sales prices competitive. If you stubbornly hold on to your 20% margin, other companies can undercut you.
In addition to this, it is obvious that your profit mainly depends on the amount of traffic you have. As a consequence, if you are trying to launch an e-commerce business on platforms such as BigCommerce and Shopify, you may face difficulties for a long period as you assemble your customer base.
Although it appears to require minimal effort, those who use the dropshipping business model still need to handle communication with their wholesale suppliers, take care of any order placement, handle returns, and provide customer service.
It is more prudent to engage in dropshipping when you already have a consistent influx of visitors.
2. Highly competitive.
There will always be entrepreneurs who are overly confident and think only about how little overhead costs they will have, disregarding any data that may prove them wrong.
Given the small amount of investment required to initiate a dropshipping business, there is considerable competition from others due to the low bar for entry, particularly in the most popular commercial sectors.
Generally, larger businesses have the ability to lessen their markup to offer the cheapest costs.
It could be worse, likely there is no arrangement of exclusivity with your manufacturers.
This implies that multiple competitors could be selling the same merchandise as you. If you’re a new, small business, your competitors who have been around for a long time will have the finances to lower their prices below yours.
That implies that possible customers may obtain the identical product from another source for a reduced cost – what would motivate them to purchase from you?
3. No control over the supply chain.
In standard e-commerce, if customers express dissatisfaction with product quality, delivery speed, or return procedures, you can take care of the issues yourself.
In dropshipping, the retailer has limited control over their supplier, yet they’re the ones who must communicate with customers directly.
Dropshippers find themselves in a difficult situation, unable to do much except wish that the supplier fixes any issues and assure the customer that it’s something beyond their power.
In addition, there is an additional lag in transmission as the drop shipper toggles back and forth between the customer and the provider. If a response is provided slowly, it causes all interaction to cease, which would mean the issues take an extended period of time to be resolved.
If people are vocal in expressing their dissatisfaction, especially on social networking sites, it could lead to the downfall of your business before it has even begun.
4. Legal liability issues.
It’s worth bringing up, even though it isn’t something that drop shippers usually encounter. Some suppliers may not be as honest as they profess, and the origin of the products may not be certain.
Deception can be even more rampant when suppliers use someone else’s trademarked logo or other intellectual property without authorization, which occurs more frequently than one might think.
It is possible to solve this potential issue by making use of a reliable Dropshipping Agreement Contract, although not all newcomers to the dropshipping industry are aware of this.
Take into consideration when selecting suppliers.
5. Difficult to build a brand.
Drop shippers must be aware that the recognition for their effort will be ascribed to someone else, similar to ghostwriters or composers who make music in the background.
If whatever item you are selling is outstanding, shoppers are most likely to center their attention on its manufacturer and not pay attention to the buying experience.
After all, it’s not your logo on the box.
That’s yet another explanation of why it would be more advantageous for well-known companies than for fresh ones to utilize drop shipping.
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