Dropshipping is an incredibly hot business model for online entrepreneurs. It offers a low cost of entry and removes many of the duties that a business owner would have to handle in traditional business, such as inventory management or shipping.
However, dropshipping isn’t foolproof. You’ll have to overcome some unique dropshipping challenges posed by the business model, but with the right information and tools, you can make it easy.
Whether you’re a new dropshipper or someone who hasn’t been seeing the results they want, you’ll want to know the risks and how to navigate them so your business can thrive.
With great risk comes great reward
The 4 Main Risks of Dropshipping Challenges
Overspending on Advertising in Dropshiping Challenges
They say you need to spend money to make money, and when it comes to dropshipping, much of that spending will be on advertising. Dropshipping itself does not have a high barrier of entry. You don’t need to pay upfront costs for storing products and once you build a website and coordinate with suppliers, you can begin selling. In fact, with Shop1 you can create a store and get ready to sell in just minutes rather than days. But, just because your store CAN sell doesn’t mean it WILL sell right away. You still need to drive traffic to your store (especially if you’re a new site). Advertising online can get very expensive extremely quickly. Pay-per-click (PPC) ads are the main method of driving traffic for new sites. These ads can be targeted to Google searchers, Facebook users, or any other social media audience that you want. However, each time someone clicks on your ad, you pay. Unsurprisingly, if you’re not careful, those clicks can hurt your marketing budget quickly – especially if the clicks aren’t becoming sales.
How to Avoid Overspending
To preserve your marketing budget, you will want to set a limit on your campaigns to ensure you don’t spend too much on once. Creating multiple ads (especially on different platforms) can also help to save money so that you can see which campaign is providing the best return. Finally, implementing the best conversion rate optimization (CRO) practices on your site to help convert traffic to customers can help boost the return on investment (ROI) of your advertising.
Supplier Problems in Dropshipping Challenges
The best part of dropshipping can also be a headache if done incorrectly. When you dropship, suppliers handle much of the behind-the-scenes work. They will process orders, package products, and ship themdirectly to your customer, saving you the time and effort. However, not every business-supplier relationship works how you want it to. Finding suppliers is easy, but finding high-quality suppliers is not. Suppliers control your business’s success, and this position of power leads to shadysuppliers taking advantage of new dropshippers. Suppliers may require entry fees upfront and then underdeliver, or not deliver at all. You may also run into suppliers selling fake or knock off versions of the products they claim to offer, which can lead to angry customers and a dent in your wallet. Or, they may add a processing fee to each order that cuts into your margins.
How to Avoid Supplier Headaches
Shop1 offers a simple solution to supplier problems. With it, you gain access to a directory of American suppliers that have been proven to provide high-quality service, fast shipping, and transparent pricing policies. Otherwise, you will want to do thorough research on any supplier you consider working with. This can include searching for reviews, contacting them directly, asking for product samples, reviewing legal documentation of business, requesting an outline of their policy, and more. You should also run test orders with them directly to see how they manage orders before deciding to work with them finally.
Keeping Track of Inventory and Orders In Dropshipping Challenges
In many cases, dropshipping involves working with multiple suppliers to create a comprehensive catalog for your customers. As a result of this, it can get complicated to keep track of inventory through communication with suppliers. Not all systems provide automatic stock updates, which means if your supplier isn’t in constant contact about available inventory, you can run into stock issues that lead to unhappy customers. This is especially true for high-turnover stores that sell a lot of stock at once. Additionally, if an order includes products from multiple suppliers, that is another organizational problem because you need to ensure the order goes to the right supplier for fulfillment. Manual order placement with suppliers requires you to be able to identify which orders belong to which supplier, and if they have the same product, which should fulfill it. You will need to be in constant communication with suppliers to stay up to date on available inventory. It will also help to implement a SKU system for your products when it comes time to process orders from multiple suppliers so that you can place the order with each supplier sooner.
How to Simplify Stock and Order Management
Shop1 makes it easy to manage inventory and process orders because the system handles both for you. Orders will be instantly forwarded to the appropriate supplier based on the order made, ensuring there is no overlap or confusion in fulfilment.
The supplier can also update stock availability based on the orders that come in, lessening the need for constant communication between supplier and store.
Low Profit Margins in Dropshipping Challenges
Dropshipping is a competitive business. There are often multiple shops within the same or a similar niche as your store, which means you are going to be fighting over market share. You may even share similar suppliers or wholesale costs, which means that pricing will be competitive, leading to lower profitmargins.
How to Raise Profit Margins
For those who simply want to improve profit potential with dropshipping suppliers (aside from asking for a discount), your approach to pricing can make a difference. It can be beneficial to price yourself higher than competition instead of undercutting or matching them. Plus,higher prices can actually increase the perceived value of a product when done correctly. However, it will still help to increase your level of service to match your pricing. While the product you are offering may be the same in the end, there is more to sales than the price. Your business’s selling point should be the quality of service you provide. Aspects like customer service, shipping speed, return policies, promotions, American supplierreliability (with Shop1) and other ways to make yourself standout can help to justify customers spending a little more with you.
Minimize Risk and Simplify Dropshipping with Shop1
There are a few valid concerns for new dropshippers looking to get started. When you don’t have experience with marketing campaigns, suppliers, and the other parts of running a dropshipping store, it’s a bit intimidating to jump in. With Shop1, you can take much of the work out of dropshipping. With access to Shop1’s directory of pre-approved American dropshippers, you can cut down on the time it would take to find your own, and save the headache that unreliable suppliers cause. You’ll also be able to get a responsive and beautiful website setup in just a few minutes that will handle order and inventory management so that you can spend more time on making advertising work and optimizing your pricing strategies. If you want the simplest start in the world of dropshipping, get started with Shop1 today.