5 Hard Truths You Need To Know About Dropshipping

Source: DHgate, Tag: E-Commerce Tips

Dropshipping brings with it many perks to online entrepreneurs, however, it's also important to know that dropshipping isn't for everyone.

Contrary to popular belief, dropshipping is not a get-rich-quick scheme. Those thinking of starting a dropshipping business need to have both the long-term commitment and drive to ensure a successful online business.
While dropshipping has certainly made it easier for the average person to kick-start an e-commerce trade, approaching it the right way and realizing that it also comes with both perks and problems is vital in getting to grips with the realities of the dropshipping model.

Low-profit dropshipping margins and a lot of hard work
While not having to manage or store your inventory is certainly an attractive prospect when deciding whether to dropship or not, one aspect that you should consider is the possibility of low-profit margins. While you do end up investing less money when dropshipping, you should also prepare to receive less money as a result. A low return means a lot of work, and while many business-savvy entrepreneurs will see this as an opportunity, many may be put off by the possibility of having to do a lot of business just to stay afloat, let alone turn a profit.
Dropshipping competition is everywhere
With little capital needed to invest in a dropshipping business, it is realistic to expect a low barrier to entry, which means a lot of competition. And while business rivalry should never be something to shy away from, it can be a concern when your business is barely staying afloat and hardly making a dent in profit. With dropshipping being such a popular model, don't be surprised to discover several competitors selling the same products as you, and worse, at a cheaper rate.
With customers able to buy the same product from a rival store for half the price, knowing how to effectively market your brand is crucial in ensuring its long-term financial success.
Supply-chain middleman
Dropshippers are at the mercy of their suppliers. If a product is faulty it is down to the supplier to ensure that quality control is effectively managed and improvements are carried out. However, if a customer is not satisfied with a product, it isn't the supplier who will receive the complaint, but the dropshipper in question that will face the brunt of a bad review.
When faced with a bad review from a faulty product, dropshippers can do little more than hope that the supplier addresses the problems while simultaneously reassuring the customer about something that’s totally out of their control.
This is why dropshippers must have a good relationship with suppliers and be able to have an open dialogue with them when such issues arise (and they will).
Bad suppliers
Speaking of which, another reason why it is crucial in having a good relationship with your dropshipping supplier is the issue of potential legal liability issues. While uncommon, with so many suppliers out there to choose from, it is sometimes inevitable that you may come across some who aren’t as legitimate as they claim to be. For instance, you may come across a supplier who illegally uses a trademarked logo or another company’s intellectual property. Not only will this prove a huge (and costly) legal issue, but may also result in your business instantly gaining a bad reputation.
Research your dropshipping supplier and thoroughly vet their previous contracts to ensure that the goods that you are getting are legitimate and above all else, legal.
Difficult to build a brand
With so many dropshipping businesses currently in the market, starting from scratch can be difficult. But therein lies the problem, because with so many established brands already successfully trading, knowing how to stand out in such an overcrowded industry can be tough. The fact of the matter is that without customer loyalty, you’ll never get the repeated traffic needed to sustain a profitable dropshipping business.