Posted by Shivali Anand
December 28, 2021 | 4-minute read (674 words)
Many businesses claim that dropshipping has helped them make a lot of money, but is it worth it?
Basics: Some entrepreneurs choose a dropshipping business strategy, in which they operate as a middleman, selling things to customers but allowing the manufacturer to ship directly to the customer. In this approach, the business owners don't have any inventory.
Although dropshipping has numerous advantages, it also has some drawbacks. Before launching a dropshipping business, consider some of its disadvantages.
1. Dropshipping isn't simple
Dropshipping isn't always as straightforward as it looks. When you begin pursuing this business strategy, be mindful that shipping costs can rapidly pile up. Suppliers, order processing, returns and customer support are all issues that drop-shippers must deal with. They must also maintain their websites, attract online traffic and keep track of inventory changes and shipping prices with the manufacturer, all of which take time.
2. No command over the supply chain
The availability of your suppliers' stock will affect your capacity to fulfill client orders. You may have to temporarily stop selling your suppliers' items if they run out of stock. Longer lead times and lost clients might be the outcome. Even if you do everything right, the business can be in jeopardy if the supplier doesn’t fulfill their half of the bargain.
3. Maintaining quality is difficult
Dropshipping prevents you from inspecting items to ensure they match with their descriptions. Meeting customers’ expectations may be a challenge if quality control is lacking. Customers will come back to you when it comes to concerns about late delivery, broken products, incorrect or missing items and more, rather than contacting the supplier. A single defective batch of items might result in dissatisfied consumers, lost revenue and possible negative customer feedback for reasons beyond your control.
4. Building a brand can be challenging
Dropshipping gives you a restricted number of branding options for your company. All of the items and services you offer to consumers will be credited to your suppliers and distributors.
5. Customer service issues could occur
If clients complain about product quality, delivery timeliness or return policies while dropshipping, you'll have to work with your suppliers to resolve their issues. If a supplier doesn’t process the order promptly, it will take longer to ship the product to the customer. In these instances, you’ll need to track the order with the supplier, or you may have to refer customers to the supplier for support.
When a customer calls with a question, the resolution process can be protracted as you might not have the required information on hand. Communication may be delayed as you move back and forth between the client and the supplier. Because it takes longer to remedy the problem, customers may seek out competitors.
6. It's a competitive market
Dropshipping is enticing to many businesses since it requires minimal cash to get started, but that has resulted in fierce competition. You will likely come across different companies offering the same items from the same producers. That means customers may be able to save money by purchasing a product from someone else.
The larger a firm is, the more it can reduce costs to attract customers. But smaller enterprises have to tap into their profits to sell products at a lower price. This could leave such businesses struggling to find customers.
7. Low profit margins
The success of a dropshipping business is based largely on the amount of traffic your website receives. If you're starting from zero with an e-commerce business, you may find yourself struggling for a while to build a client base.
With dropshipping, you probably will be buying products one at a time rather than in bulk, and that means your profit margins will be less favorable. You may also have to pay the wholesaler additional fees for selecting, packing and shipping each customer order. That means you won’t be able to realize significant financial gains until you’ve scaled up your business and built a big enough customer base that you can increase prices.