While no one knows how many dropship stores there are, some companies vouch that more than 20% of all online retail sales come from the dropshipping business model—small compared to the full amount of retail sales globally.
This, of course, does not account for dropshipping stores that never made a sale or those that never grew to become sustainable.
But why did they fail? Why is the dropshipping success rate so low? How could it possibly happen when the business model itself is so simple? Today, I will explore the reasons why most dropshipping businesses fail.
These reasons are:
- Bad niche selection
- Incompetent suppliers
- Ineffective website design
- Poor marketing strategy
- Unreasonable expectations
- Poor customer service
- Lack of capital
- No value proposition
- Lack of sweet deals
- Few payment options
We will go through each one of these. By the end of this tutorial, I am hoping that I have shared enough information to give you a solid foundation of the things that you need to avoid.
Problem 1: Bad niche selection
The first and most important aspect of dropshipping is choosing a niche. But what is a niche, and why is this important?
A niche is an industry. It is a group or a category. We can also call it a specialization. For example, a sports clothing store is a niche. A remote-control toy store is a niche.
Now, there are two types of niches—general and specific. An example of a general niche is clothing—you can sell clothing for men, women, and children. A specific niche is a gothic-style fashion clothing.
Why is this important?
It is important because your niche is what defines who you will sell to. Many dropshippers fail because they build general stores. Their mindset is that if Amazon got big, so could they. So they build a general niche store.
This couldn’t be farther from the truth.
Amazon got big because it pumped money. It was unprofitable for so many years. Dropshippers do not have that kind of money.
Another cause of failure from this aspect is choosing a niche that you do not understand. Many dropshippers just go ahead and open a clothing store based on the premise that everybody needs clothing. However, they do not know anything about the fashion industry.
Choose a niche that you understand, a niche where you can clearly define who your customers are. If you know who wants your product, you could find them and offer your products to them.
Problem 2: Incompetent suppliers
The next common reason for a failed dropshipping store is incompetent suppliers. Why? You see, the success of your business relies on several things:
- Speed of shipping
- Accuracy of shipping
- Quality of product
The one thing that many dropshippers do is they head on to AliExpress and then fill their stores with products. They do not even bother checking the feedback of the supplier.
Then, if a customer orders, the supplier takes a long time to ship, or ships the wrong item. This is horrible not just for the customer but for you, too.
If you are going to use AliExpress, only choose products that come from vetted suppliers—you can only do this if you integrate a dropship directory tool like Oberlo or Spocket, or if you check the supplier’s feedback and history manually.
If you don’t want to pay others to do the vetting for you, come up with your own robust set of rules that you can follow to weed out bad suppliers yourself 🙂
A bad supplier causes failure because you end up dealing with returns—you get flustered with complaints, and you lose money because you issue refunds. You may even have to compensate your buyers with freebies just to appease them.
Do not limit yourself with AliExpress. There are many suppliers found on dropship supplier directories like Oberlo and Spocket—make sure you order the product yourself so you can touch it, feel it, and experience how fast the supplier ships the item.
Problem 3: Ineffective website design
Large companies spend millions in designing their websites. They want to make sure that they have the perfect user experience (UX) and that the website’s user interface (UI) works.
Many dropshippers have never even blogged in their lives, much less build a fully functional online store. But because platforms like Wix or Shopify made it easy, they went ahead and chose a theme and built a store.
And then what?
They build an ugly website—mismatching colors with blurry images. There is no branding whatsoever, and there is no consistency in the website’s style. They build an online store that has no personality.
Worse, they build stores that are clunky. They keep on adding apps and plug-ins like bundling, upselling, rotating wheels with discounts—their websites become a pile of junk, and potential customers who visit the site are annoyed.
An unprofessional website does not convert. An online store works in the same way as a physical one. The façade, décor, and the overall ambience of the store affect how a customer perceives it. Professional online stores are more credible than amateur ones.
Simple things like the uniformity of fonts tell so much about the store’s credibility. Do not make the same mistake—take the time to study what makes a website possess great UX and UI, and then build it the right way.
Problem 4: Poor marketing strategy
A lot of dropshippers know nothing about marketing. They think that just because they can upload images on Facebook they can get a sale. They think that if they launch an ad, they will make a sale.
There is a reason why ads are expensive. Large corporations pay advertising companies millions of dollars. Even movie trailers are done by marketing companies, not by the movie director.
Because marketers are professionals. The problem with many dropshippers is that they do not bother learning how effective marketing works.
The two mistakes that dropshippers do are:
- Launch images and ads on social media without any thought process
- Subscribe to “spy” tools and copy the ads
This does not work.
Even if you are selling the same product with the original advertiser, it is not going to work. Why?
Because you do not know your customers. So, somebody launched a dog collar ad on Facebook. You visit his store, and he is making a ton of cash.
You copy the ad and launch it. You make no sale.
First off, the advertisers know who their target market is. They purchase the ads and select the right audience on specific platforms. That is information you can never have. Second, successful advertisers have spent the time, money, and effort to build followers and a loyal customer base. You have not.
You see, marketing is more than about ads—it heavily leans on knowing your customer, understanding their pain, and solving their problems.
Problem 5: Unreasonable expectations
This reason for failure is, I can say with a guarantee, the most deeply embedded cause of failure: wrong expectations.
Dropshipping is always purported to be an easy way to make money. A lot of dropship gurus show people screenshots of how they earned millions. Their three-step programs make everything sound so easy. If it really was, we would all be rich 🙂
Some even say that you do not need money to start dropshipping—that you can leave your 9 to 5 job in a matter of three months!
As such, a lot of people begin to have false expectations. They jump into the business with dollar signs in their eyes. And when they meet real business problems, they quit.
They thought that all it takes is to build a store, upload a product, and then money will start pouring in.
This does not happen all the time. I am not saying that the gurus are fake. All I am saying is that despite them sharing all they know with you, you are not them. There simply is no magic formula for success. There is no such thing as an automated way to make money.
These successful gurus have years of experience—they have had their fair share of failures, and they decided to rise above these failures. Their persistence and skills are the two things that made them successful, not a magic formula.
Problem 6: Poor customer service
Dropshippers fail because of poor customer service. A common example is that when customers have an inquiry, they do not know what to say. Sometimes they make up answers, but customers are not stupid. Customers can smell a slimy entrepreneur from their screen! Ha Ha! Don’t be one of them.
Customer service is a big aspect of success. To give you an idea, here are some things to ponder about:
- Product knowledge – how much do you know about your product? Can you answer inquiries about its material, longevity, and dependability?
- Shipping – can you give a solid answer about the length of time it takes to process the item and how long it takes to ship?
- Quality – do you know the quality of the product you are selling? Have you seen it yourself?
Customer service has something to do with everything that makes a customer satisfied. Any part of your business that affects customer happiness is crucial to your success.
To succeed in dropshipping, you need to ask yourself all the time how your decisions, actions, and execution could affect customer satisfaction. If a customer is unhappy, do not expect this customer to come back, much less share his good experience with his friends.
Problem 7: Lack of capital
I mentioned earlier that Amazon was not a profitable business when it started. It took many years for the company to become what it is today.
And that is because Amazon has money to pump into its business—it has the backing of investors who can pay for the company’s expenses even if it is not earning.
As such, it was able to ride the storm of the economy, build a brand, build facilities, and conquer the world of online retail.
Dropshippers do not have this money. Many dropshippers can barely afford to pay $29 to Shopify per month, let alone spend money on advertising. I have seen many dropshippers who have spent money on Facebook advertising, and then complain that they did not make a sale.
And then, if they run out of funds. They shut the business down. You need to have at least one year’s worth of “rent” to make dropshipping work. There are dropshippers who never made a single sale despite having their website up for six months.
They had no money to advertise, not money to pay a writer to blog, and no money to pay for tools necessary to drive traffic and conversion.
Problem 8: No value proposition
What is a value proposition?
Dropshippers are dime-a-dozen. If you can build a dropshipping store that sells dog collars, another person is going to do the same.
But what difference does your store make?
This is why dropshippers fail—they thought that posting good-looking products are enough to entice customers to buy. Sales and marketing are more than that. You need to add value.
An example is knowledge – successful dropshipping stores have blogs that share content; their buyers have a dependable source of information for things they want to learn. For example, a dropshipper in the aquarium niche has a series of blog posts for a newbie hobbyist to learn what kinds of fish to take care of, how to prevent water from turning yellow, etc.
Another example is entertainment. There are dropshippers that provide stories and lovable photos of cats. They share videos about cats that are funny—then they lead the prospects to their store. And because these people who saw the video got entertained, they buy a catnip or a cat toy from the dropshipper.
Problem 9: Lack of sweet deals
I will not ponder too long on this, but the lack of discounts and other forms of sweet deals can cause failure.
Your customers can easily look for your products elsewhere. If you do not give them more value for their money, you will not be able to sell your items. Be proactive in creating coupons, discounts, and bundles.
If a customer can buy two items for the price of one, he has more reason to buy it from you than from someone else.
There are many ways to offer sweet deals. If you are out of ideas, visit your competitors. Search for products that are the same as yours. Find out what your competitors are doing—be it free shipping or buy-one-take-one, do the same for your store.
Problem 10: Few payment options
The last of the reasons why most dropshipping businesses fail is the lack of payment options. Most dropshippers only offer PayPal. The problem with this is that some customers cringe when they see PayPal.
Many people are now using Apple Pay, Google Pay, Amazon Pay, and AliPay. If you can, you have to offer as many payment options as you can, especially so if you are dropshipping globally.
Why do you need to do this?
Because the names of these payment options spell “TRUST.” A person who uses Google Pay knows that you are a legit seller—how else will you be able to charge via Google if you were not verified? As such, he or she would feel more comfortable giving you their money—they know that Google can protect him. Or at least it feels that way to them 🙂
Lack of payment option makes a customer not want to pay up. Just imagine if the only payment you accept is PayPal, and a customer does not like to pay through that channel. That customer is going to leave your website forever!
You lost a sale, and all because of lack of payment options that you could have fixed at the outset.
Failure in business does not only happen in dropshipping. In fact, we are all too familiar with the saying that 90% of all businesses fail within the first year. This nugget of truth applies to both online and brick-and-mortar businesses.
What makes dropshipping look like a scam is that it is so easy to get started. And once a business takes no serious knowledge to start, especially if you can start one for as little as $29, what could you expect?
You could expect that thousands of people will go with it, thinking that they have found an easy way to make money online. What they do not realize is that despite dropshipping being an easy business to set-up, it has the same fundamental problems as any online business—traffic and sales.
Overall, I can say that many people fail in dropshipping because they are ill-prepared. Do not let this happen to you—study your business and put in the time to learn. Invest in your business education—take online courses about dropshipping and inline marketing, and you will have better chances at succeeding.
And most of all, don’t give up at the first sign of trouble! When someone opens a physical store they don’t give up so easily, so I don’t know why it is the case for a lot of online business owners!!