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Dropshipping is basically an alternative retail service. But in dropshipping, the retailer doesn’t actually keep the products it sells in stock. Instead, they buy products as and when needed to fulfill an order a customer makes through their store. And the company we buy products to fulfill these orders are our dropshipping supplier. Most dropshipping suppliers are either wholesalers or manufacturers and it is them who ship the purchased items directly to your customer.
The primary difference between the dropshipping model and traditional retailing is that dropshippers don't actually stock or even own any of the products they sell. Instead, they act as the middleman between the customer and the wholesaler or manufacturer.
But while dropshipping is considered a very low-risk business model thanks to it’s low overheads and lower up-front costs, it does have it’s own series of challenges you’ll need to be able to identify and address when they arise.
And so, we created this guide. Here we’ll outline the common challenges dropshippers face, and how to overcome them successfully. Here, we’ll lay out realistic expectations for dropshipping entrepreneurs.
The first issue dropshippers are likely to face is the challenge of inventory management. In traditional stores, keeping track of how much inventory you actually have is a simple task of stocktaking. But, for those relying on dropshipping partners, keeping tabs on their dropshipping partner’s supplies is essential. You’ll need to know exactly how many of a specific product you can actually sell before it’s out of stock.
And that leads us on to dealing with stockouts and backorders. But again, these are quite simple to navigate with a little know-how. Here are our top tips for navigating stockouts and backorders:
In dropshipping, you’re relying on your supplier to be good at balancing inventory levels for seasonal demand. Given that you won’t need to hold any of the stock, this responsibility is out of your hands. But the control is also out of your hands. By establishing a good working relationship with your dropshipping supplier, it is possible to get regular stock level updates. These updates should help you understand how the stock levels are changing over time.
So, now that we’ve established that having an open line of communication with your dropshipping supplier is a good thing, let’s look at some strategies for efficient supplier communication:
Host Regular Performance Reviews. A great way to monitor the success rate of your dropshipping partner is through regular performance reviews. Remember to define KPIs (Key Performance Indicators) and then keep records of their progress in those KPIs. These could relate to average shipping time, average dispatch time, whether any products were broken during transit, or anything else that is important for your business.
As you’re not holding or handling the stock, shipping and fulfillment issues can also arise. But, issues of stockouts and backorders are also manageable with a little inside advice.
To avoid these potential shipping delays having a negative impact on your dropshipping business, it’s really important to communicate any issues to your customers with transparency. This can be done in several ways:
No matter how much you try to communicate the impact of shipping delays to your customer, there will always be customers that get in touch to query the whereabouts of their items. Just reiterate the info displayed on your site politely. Remember, excellent customer service is a USP that can stand you out from the crowd, so disappoint them gently while directing them to the sections of your site that explain the cause and extent of the delays in full.
As well as delays, dropshippers will have to navigate a hands-off handling of returns and refunds, and rely on their suppliers to establish reliable shipping partnerships. Again, these can be included and monitored in your dropshipping supplier’s KPIs. Plus, Spocket partners with reliable suppliers that have been thoroughly vetted prior to being approved as a supplier.
Given that you won’t actually be handling the products being shipped to your customers, product quality issues can arise. And if you want your dropshipping brand to grow and retain it’s good reputation, ensuring product quality from suppliers is as expected is essential. With Spocket, all of the suppliers you access through our app have passed rigorous product tests and proven their products to be high-quality and meet both EU and US standards
When it comes to dealing with defective or subpar products, dropshipping can be a bit of a muddle. Your dropshipping supplier will need to handle the physical aspects while you have to handle the customer side of the scenario. If it doesn’t make you feel like a yoyo by the end of it, we’re not sure anything will!
Some suppliers also won’t accept returns full stop. This leaves you either bearing the brunt of the customer’s negative reviews or being left out of pocket because your dropshipping supplier sent your customer a defective product. Neither sounds great. Luckily, dropshipping suppliers found through Spocket have all agreed to adhere to a minimum refund policy to replace or refund broken, incorrect, or missing items.
But, you’ll also want to think about implementing quality assurance protocols. Again, Sprocket has made this process easier as the suppliers found through our platform have all proven their products to be of high-quality. They also meet US and EU expected standards too so you won’t have to worry about your customers receiving unsafe products either.
When it comes to choosing a dropshipping supplier, evaluating supplier trustworthiness is essential. Here are some of the things you’ll want to assess ahead of committing to a partnership and entrusting your dropshipping supplier to fulfill your customers’ orders reliably:
Dealing with unreliable suppliers isn’t the most pleasant of tasks. But for many dropshipping suppliers, it’s an essential process that helps to secure the continued or future success of their business. As such, regular performance reviews and monitoring of KPIs is an actionable process which will allow you to continually keep an eye on there. Order success rates, shipping times and customer satisfaction rates are all worthwhile KPIs to start tracking.
Another good idea in dropshipping is establishing backup suppliers for contingencies. In the ecommerce world (and in the traditional retail business model too), having back up suppliers is always a good idea. That way, if and when unavoidable delays in the supply chain occur, or your primary supplier faces issues of stockouts, you’ll have your backup supplier to fall back on.
At Spocket, we can help with all of the above. We’ve made it our mission to connect dropshipping entrepreneurs with reliable suppliers they can entrust to help them grow their business. Here are a list of the different requirements a supplier must prove themselves capable of before they are approved as a supplier for dropshippers using Spocket:
If you’re looking for reliable dropshipping suppliers to help you launch a successful ecommerce store, partner with us.
Staying competitive and standing out in saturated niches has become one of the most common difficulties a dropshipper faces. But, Identifying your competitors and carrying out SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of those competitors will give you the insights needed to stay competitive.
Don’t forget the importance of USPs (Unique Selling Propositions) - this is key if you want your brand to stand out in saturated niches. By dedicating time to ensuring you always deliver high quality customer service, staying ahead of your competitors shouldn’t be too tough a task.
Adapting marketing strategies to overcome competition is also something you’ll need to consider. As product trends are ever-changing, so too are marketing trends. Keep an eye on what your competitors are up to, keep up to date with the latest Google Trends insights, and implement changes wherever necessary to maintain brand relevance.
Identifying and capitalizing on niche opportunities is a good way to secure your dropshipping platform as a go-to for the latest trends. If a new product is suddenly trending upwards, and that product aligns with your existing catalog, add it to your offering. And let your customers know that your new product has landed with effective marketing techniques such as trend-lead social media posts or through email marketing.
As a dropshipper, you’ll be responsible for handling and managing customer inquiries and complaints. And doing so effectively could set you apart from your competitors and make your dropshipping store a go-to for customers.
The most important aspect of customer service is providing transparent communication. This means maintaining an open and honest line of communication between your dropshipping store and your customer base. So, if and when shipping delays occur, communicate them effectively and honestly.
Building and maintaining customer trust is the very best way to build brand awareness and attract more customers. It’s a crucial part of building a successful dropshipping business. Key takeaways? Honesty is always the best policy!
Understanding dropshipping regulations is vital for avoiding legal and compliance issues. Complying with consumer protection laws should be at the forefront of your business plan if you want to succeed long-term. And with this being a mandatory requirement for dropshippers, we’ve ensured that all of our suppliers are able to provide products that are in line with both EU and US regulations.
Addressing customs and import challenges is equally as important if you want to eradicate shipping delays due to customs too. Those importing goods from one country to another (as most dropshippers do on a daily basis) need to understand the different ways in which customs can have a negative effect on shipping times and customer experience.
When importing goods, they’ll need to clear customs before being delivered to your customers. Customs clearance basically refers to the act of goods being authorized to enter the country. Essentially it’s a process whereby products shipped from another are vetted before being authorized to enter their destination country.
Every country has its own rules and regulations on imported goods. And in some cases import duties and taxes apply. The best advice for dropshippers is to prep the right documentation ahead of time. This will ensure that everything runs smoothly. But another obstacle in the road for dropshippers is that we’ll need to rely on our suppliers to do this for us. And failure to provide the correct paperwork can lead to lengthy customer wait times, and even additional charges.
To avoid this having a negative impact on your dropshipping business, it’s best to know the ins and outs of the customs processes in your destination shipping country. Once you’re aware of the rules, restrictions, and any custom fees related to the goods you’re selling, the whole process will be much easier to understand.
Generally, the paperwork needs to be accessible, clearly laid out, and feature everything needed to clear customs efficiently. As such, partnering with a reputable and reliable dropshipping supplier is key.
Balancing profit margins and pricing strategies is another issue that dropshippers face. In dropshipping, you miss out on the bulk buy prices that are so favorable with traditional retailers. As such, profit margins tend to be lower in dropshipping.
Given that pricing is essential to the success of your dropshipping business, we’ve rounded up some of the best strategies to help you balance profit margins:
It’s also important to understand that not every pricing strategy is relevant for every dropshipping business. So much will depend on the context within your market as well as your business strategy and your own limitations.
Periodically reviewing your pricing strategy options with a SWOT analysis can be helpful in coming up with new ideas on how to approach pricing.
The next thing you’ll have to consider is handling currency exchange and transaction fees. You’ve no doubt come across this issue as a customer at some point, but now you’ll have to address the issue of currency exchange and transaction fees from a retailer’s perspective. It’s easy enough once you get your head around it, especially if you’re operating in a single country. But you will need to dedicate some time and research to the subject so that you can work these costs into your pricing strategy.
Implementing effective budget strategies is . Common processes include communication within executive management, establishing objectives and targets, developing a detailed budget, compilation and revision of budget model, budget committee review, and approval.
Another of the major challenges dropshippers face is that posed by technology. But what you need to remember is that you don’t have to be a coding wizard to be able to set up a dropshipping site. Instead, utilizing e-commerce platforms effectively is a much better idea.
Many content management systems have pre-designed website themes you can use to get your dropshipping site up and running in next to no time. Use technology to your advantage and look to start integrating and managing dropshipping tools like Spocket that can automate order processing and streamline your workload.
Staying updated with technological advancements can really help you not only provide a unique and enjoyable customer journey but can also streamline business processes, expand the number of payment methods you are able to accept, automate email notifications, and more. If you have a query with your site, usually you can benefit from a quick fix with a simple plug in.
Building a unique brand identity will go a long way towards building a successful dropshipping store. Here are our top tips for ideating and creating a brand identity for your business:
Being able to develop effective marketing strategies helps to ensure you are targeting the correct audience. This is a key part of dropshipping planning, especially if you want marketing campaigns to have the effect you desire. Here are some of the main things you should try to work into your dropshipping marketing strategies:
When it comes to hosting a successful marketing campaign, ATV (Average Transaction Value) is integral. Generally, the higher your ATV, the more profitable your dropshipping business will be. So, come up with different ways in which you might be able to tempt customers to spend a bit more. Offers such as buy one, get one half price are a tried and tested way to incentivize your customers to spend more. But always complete an in depth pricing analysis to ensure your business will continue to be viable when considering flash deals of this nature.
Another effective way to incentivize your customers to bump up their ATV is by offering free shipping over a specified minimum threshold.
Social media is a leading tool when it comes to marketing. So, use it well! Share your latest dropshipping products on major social media platforms in engaging posts that are aligned with your brand’s TOV. This will attract new customers to your store while encouraging past customers to return.
If your budget extends to ad campaigns, targeted advertising is a great investment. Campaign tools that you can use include Google Ads, Facebook Ads, and Instagram. Targeted ads help you reach a higher volume of potential customers that are specifically looking for the products your dropshipping store sells.
When it comes to customer retention, your customer email list is integral. Email marketing helps to build a lasting relationship between your brand and your customers. By actively staying in touch with your customers, you can boost your dropshipping sales totals year-round.
There are plenty of dropshipping entrepreneurs who have launched successful businesses by partnering with Spocket. One example that stands out is Marc Chapon. Marc launched his online dropshipping store with Spocket. Through partnering with us Marc was able to source high-quality products from European suppliers, facilitate faster shipping times, and improve customer satisfaction. On one single day, Marc made over $10,000 in sales.
There are many challenges that dropshippers face and will need to overcome. But by partnering with Spocket, you’ll be best-placed to succeed as you’ll have access to reliable, local suppliers that can consistently offer fast and timely shipping services at competitive prices.
If you’re new to the world of dropshipping, our tips and tricks are sure to help.
There are a number of proactive steps to avoid common pitfalls you can take. These include:
And remember the value in learning from experienced dropshipping entrepreneurs. These are people who were once just like you. Look at different case studies and discover the challenges they’ve faced and had to overcome to achieve success.
Being open to continuous adaptation and improvement strategies is also a key part of the process. As we’ve said before, at the beginning it’s about learning what works and what doesn’t. Change the things that don’t work but stick with those that do. Implement strategies for improvement as and when needed and let the trends guide you.
A successful dropshipping store is one that is built for the right target audience, has a relatable brand ethos, and is consistent in it’s TOV. But a big part of succeeding is based on finding the right dropshipping suppliers. You need to be able to trust that your dropshipping provider can communicate effectively, deliver high-quality products that are shipped on time and adhere to the customs requirements of your destination country.
All of this sounds like a lot. But, by partnering with Spocket, overcoming those common dropshipping challenges will become much easier. With time, dedication, and a little help from us, you could have a successful dropshipping business up and running in little to no time.
What Are the Most Common Dropshipping Mistakes?
The most common dropshipping mistakes include:
By partnering with Spocket, you can overcome the majority of these common dropshipping mistakes. Our platform will even make pricing suggestions which you can choose to use or ignore.
To overcome these common dropshipping mistakes, remember the importance of research and brand. You’ll also need to be able to adapt to changes in both marketing and product trends too. It’s all a case of mind over matter. If you really want to succeed in the world of dropshipping, a little bit of dedication, planning, and contingency planning goes a long way.
How Can I Mitigate Shipping and Fulfillment Challenges?
Mitigating shipping and fulfillment challenges is easier with Spocket. Our dropshipping suppliers have proven themselves to be able to consistently provide fast shipping and high-quality products. But it’s also a good idea not to put all your eggs in one basket. Instead, partner with multiple suppliers so that you have a back up plan ready to be put into place as soon as it’s needed.
What Legal Documents Do I Need for a Dropshipping Business?
The list of legal documents needed for a dropshipping business might seem lengthy. But once you get to grips with those necessary documents and which ones are actually required in your country of operations, it’s not quite as daunting as you might think. Here are some of the legal documentation you might need to provide:
Providing you have all of these documents in place, you’ll be best placed to tackle any legal hurdles that come your way.
How to Stay Competitive Amidst Market Saturation?
Staying competitive amidst market saturation has become a recurring issue in the world of dropshipping. But, knowing who your main competitors are and carrying out intermittent SWOT assessments of those primary competitors gives you the insight your need to maintain your competitive edge.
And remember the impotence of USPs (Unique Selling Propositions) - these help to stand your brand apart from the rest.
Dedicating time to delivering consistently excellent customer service is also another great way to stay ahead of your competitors during times of market saturation.
Gemma has a passion for writing, an enthusiasm for eCommerce, and a flair for creating informative content that drives others to follow their dreams. Her work foundations are built on thorough research to allow you to find all the need-to-know info in one place.
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