Why Do Most Dropshippers Fail?

By David Oakes

Why Do Most Dropshippers Fail?

Why Do So Many Dropshipping Businesses Fail?


Dropshipping may seem like a get rich quick business, but it is not.


There is a risk starting a business, and a retail dropshipping business is no different. You risk your time, money and online reputation to start the business. Official figures for dropshipping success are not available. However, anecdotal evidence suggests that only 10 percent of dropshippers who start a business are still in business after the first year. That is a show stopper, right? That means that one in ten people who start a retail dropshipping business succeed. There are several factors that contribute to a dropshipping business’ success, as well as its failure.



Buying Into the Hype of Dropshipping


Oftentimes, people are excited about starting a dropshipping business. But the reality is, it is not easy. A successful dropshippper in the U.S. focuses on operating their business. If you are currently employed, be prepared to spend nights and weekend researching and understanding the dropshipping business before starting. Research the online platforms that are available from various e-commerce providers for creating dropshipping storefronts. Understand how they function and how merchandise is posted, ordered, sold, shipped and payment is received. Know all the costs and processes; diagram them if you need to so that you visually understand the flow before committing to a platform.



Understanding the Financial Risks of Dropshipping


Although starting a dropshipping company does not require thousands of dollars, there are expenses, such as online advertising, cost to purchase a platform, monthly fees for inventory access, credit card processing and shipping services. Budget for the base costs – advertising and platform expenses. While some dropshippers may start making money the first day they launch their store, for others it can take weeks. And even though you are making sales, the profit from the sales (cost of goods less expenses) need to cover the operational expenses. You may sell an item for $50, and have a profit margin of $15. How many items do you need to sell to cover you monthly expenses?



Profitable Pricing


You need to keep your prices high enough to earn a profit to cover your expenses. Understand the difference between margin and mark-up. Unlike other platforms, TopDawg provides a transparent understanding of both the suggested margins (43-46 percent) and mark-ups (55-85 percent) that you can achieve by buying from our dropshipping suppliers based on your subscription. Understanding the difference between margin and mark-up is essential to establishing your pricing model and overall e-commerce site profitability.



Having Patience and Being Persistent


As a dropshipper, you must be patient and persistent about building your business. Sales result from people searching the Internet for a product that they are interested in purchasing. If you have that product, your site needs to be finetuned to make that product attractive and interesting for the consumer. This means patiently taking the time to optimize the appearance of your site, as well as such features as advertising tracking to remind them of the site and your product after they have left, or a form that encourages them to share information about themselves so they can receive future discounts. Persistence means you’ll fine tune your site so that it is attractive to not only shop, but revisit.



Providing Good Customer Support


Dropshipping stores must feel good and provide an exceptional experience. If not, visitors, who have shopped online stores with a comfortable look and feel, or have experienced the ease of buying on large sites, will not return to your site. In addition to a seamless and clean user interface, you must understand and resolve customer problems, such as the wrong or defective merchandise shipped, and shipping delays. Understand how this process will work before starting your business.



Niche Products or Not to Niche


There are millions of products that can be sold through your e-commerce site. Being all things to all people is something that the large e-commerce sites do well and spend millions of dollars accomplishing. But for a smaller business, it is best to specialize in products that are needed and interesting. That is TopDawg’s business model, too. We have selected high-value, high volume product segments to help our customers be successful. You can do the same by specializing in a particular product area or areas, and intensely marketing those products through online advertising, a referral system, email marketing, search engine optimization, in-store shopping incentives, and other methods to attract and retain customers.

At TopDawg, we want you to be a successful e-commerce merchant. We provide the dripshipping products to sell online and support services to assist you with selling. But, at the end of the day, it is up to you to determine what products and website platform works best for your business, how much effort you want to put into building the business, and what it will cost to attract and retain customers, and to be successful.



Interested in Starting a Dropshipping Business?


If you are interested in starting a dropshipping business, please read TopDawg’s “Ultimate Guide to Launching a Successful Dropshipping Business.” This comprehensive guide aims to equip new dropshippers with the knowledge and tools to start and scale their business effectively. By incorporating a range of e-commerce platforms and emphasizing the selection of a dependable dropshipping partner like TopDawg, the guide provides a solid foundation to start a dropshipping business and build a profitable online store.