Ecommerce
Table of Contents
In one of our previous articles, we have covered the dropshipping model as a notion and as a business model as well as overviewed some of its most viable benefits. In addition, as a custom software development company, we have also suggested a simple way to start a dropshipping ecommerce activity.
In this article, we will focus on the not-so-common risks of dropshipping to get you well-prepared if this is the type of ecommerce activity you want to start.
If you’re pressed for time to read the full version of our previous article on the dropshipping business model, here are the main points:
Running a dropshipping store looks attractive to many as there is no need for bulk purchases, renting a warehouse, and dealing with couriers. According to the stat data, in 2020 almost 27% of online retailers have been using dropshipping as their order fulfillment model.
However, there are still risks just as with any business model. We want to help you become aware of them.
With quarantine keeping everyone in and putting a major halt on jobs back at the start of 2020, it wasn’t surprising to see the major lean toward dropshipping. With social distancing just beginning and physical stores closing down, it was inevitable that people would look online for solutions.
We’ve managed to reach out to Jes Grimm (https://www.linkedin.com/in/jes-grimm-4776351a1/) who is a Director of eCommerce Operations at Stealth Agents which is a US-based company offering on-demand virtual assistants.
Jes told us that dropshipping is often made out to be much easier than it actually is and explained why it can often lead to frustration and disappointment.
“Dropshipping is often glamorized as a quick income. Not taking the time to really research ecommerce is the first mistake people make who are in a hurry to get the process started.
Learning about suppliers and fulfillment is an essential part of the process as that is what everything revolves around.
Do the research, take the time to really read about dropshipping and the current trends, the services available, the product demand, and options available. Doing all of this will help you plan for possible problems even if you go into it not knowing anything about the customer service side. Knowing about the possible problems will better assist you in ways so you can prevent them from occurring in the first place.
Is dropshipping worth it? It’s totally worth it if done right.”
– Jes Grimm, a Director of eCommerce Operations at Stealth Agents
Below, we revise the dropshipping challenges that specialists at NEKLO consider to be “not on the surface”. More, in each paragraph we also suggest ideas to overcome them.
Stay tuned.
First thing, we suggest you to revise what the basic scheme of dropshipping looks like.
Running a dropshipping website, you do not need to hire personnel for store keeping and logistics. In some cases, you do not even need to deal with accounting systems and a CRM.
Our software development teams have been working on custom app development for ecommerce for more than a decade to be able to identify the vivid and hidden downsides of dropshipping that are rather tricky.
What to be aware of? See the list of dropshipping challenges below.
It often happens that merchants purchase the no-name Chinese goods for a resell. Naturally, they stock the popular products only, those that are in high demand. And that’s it. By following this strategy, there’s no opportunity to widen the range of goods to provide to your customers.
How to overcome and prevent it
If you want to sell products of more or less renowned brands, you should start dealing with international suppliers. Also, we suggest you take a closer look at your domestic suppliers that operate within the area of a convenient reach for you. Through collaborating with your domestic suppliers, you will expand your product range, become able to offer a wider assortment line to your customers.
As a rule, dropshipping websites don’t provide a varied list of options for order delivery to customers. In many cases, the “cash on delivery” option becomes the commonly selected. It’s rather slow. Customers from remote areas become unlikely to wait for their orders to be delivered. In big cities, the thing is that customers are less patient.
How to overcome and prevent it
While selecting the suppliers for your dropshipping stores, pay special attention to the delivery services you want to collaborate with. Make sure your trusted delivery services stay in contact with the suppliers, receive updates timely.
With dropshipping, it becomes not so easy to increase the average check because the main and additional products often come suggested by different suppliers. Customers will hardly wish to pay for each item delivery separately and are unlikely to accept that they will have to receive the items on different days.
How to overcome and prevent it
Through your ecommerce website that you use to showcase products for and its analytics feature, you can see the products that your customers like, heart, or star in advance. This brings you a chance to think it over. For example, you can make a special offer containing items from customer wishlists. Contact the supplier immediately to find out if the products are in stock.
If you wonder how to increase the number of orders and return customers in your web store, study our article that has to do with cross-selling promotions.
Of course, you can save it on your devices. However, the dropshipping scheme itself implies that you share your customer base with the suppliers and there is no guarantee that there will not appear issues.
How to overcome and prevent it
Keep it in mind that normally 20% of regular customers make 80% of a store’s profit. Dropshipping as an ecommerce model, as a rule, only focuses on new customers, leaving those returning ones without attention.
We advise to take special care of your regular customers through providing them with special offers and good deals. This way, even in the case of your customer base being taken advantage of, you will still have your dedicated audience to sell for.
From NEKLO’s experience working with ecommerce clients, the UX of your ecommerce website is also critical for attracting and retaining customers. Study the useful tips on UX improvement in our article.
Yes, the dropshipping model presupposes that the supplier delivers on your behalf. However, you still want to have the promotional materials for your ecommerce store attached to the order.
Think if there is not your store logo on a branded bag or other packaging provided by the supplier but the supplier’s one? A customer who might appreciate this product would become confused by this information, misled by the wrong store name, etc.
How to overcome and prevent it
Be careful when selecting a supplier. Discuss all the details of your concern with the supplier in advance, at the initial stages of cooperation. The clearer the rules you agree on and document, the easier it will be to work together.
If you are new to ecommerce, then dropshipping is a good start.
One of the main challenges of online stores is the inability to create a stable demand for the products. With dropshipping, suppliers can shift this task on the shoulders of a dropshipper, while dropshippers can fully focus on promoting the website and products, leaving the delivery and storage tasks for their partners.
With the deep expertise in web app development services for ecommerce, NEKLO team is ready to help newbies in ecommerce have a great start.
Contact us through the form on our website or directly.
Together we will work out the strategy for your exact ecommerce activity.
US-based and operating globally, NEKLO spearheads digital transformation initiatives for businesses worldwide. We deliver software solutions complying with your market and legislation.
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