Why Dropshipping Isn’t As Easy And Simple As You Think

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Many of the questions that I receive in my inbox at MyWifeQuitHerJob.com are related to opening a dropshipping store and I can certainly understand the appeal.

When you run an online store that only offers dropshipped products, you don’t have to worry about inventory and you don’t have to worry about product fulfillment.

All you have to do is sell the product, take orders and make a decent profit. Alas, if only it were that easy…. As with everything that sounds too good to be true, there are always gotchas.

Photo By Suzanna

In theory, dropshipping sounds like a great idea because it’s inherently scalable without you having to do a lot of work up front. But when you dig down a bit further, it becomes obvious why dropshipping isn’t so great.

Most people try to open up a dropshipped shop expecting it to be easy, but in reality it’s much harder to operate a dropshipped shop than a traditional online store and I will explain the reasons why below.

You Won’t Be Getting The Lowest Price

Most people open up a dropshipped online store with the misconception that they will be receiving the same wholesale pricing as everyone else for their products.

In reality however, dropship distributors often charge extra fees and/or tack these fees onto the quoted wholesale price.

Put yourself in your distributor’s shoes for a moment. Would you prefer to sell a large bulk quantity of products all at once to a store or would you rather sell onesy, twosy amounts to individual customers and be forced to individually ship and pack each item?

The distributor is doing all of the work here and this will be certainly be reflected in your wholesale price.

Because your wholesale prices are higher than a traditional store, you will not be able to compete as effectively on price unless you take a good sized profit hit. All of the convenience of not having to do any of the fulfillment work comes at a cost.

You Will Need To Charge Higher Shipping Costs

Often times, you will require the use of several dropship distributors to fully flesh out the product selection for your store. Using 2 or more different dropshippers means that 2 or more companies will be making separate shipments to your customers, which means that 2 or more companies will be charging you their own separate shipping costs.

If I’m a customer and I buy products from you across 3 different distributors, you will have to charge me a much higher shipping cost just so you can break even.

The only way around this is to only use one dropship distributor which may not carry the breadth of products that you need. The result is that you will have to pass these extra costs onto the consumer which reduces your price competitiveness.

Dropshipping Can Be A Logistical Nightmare

You might think that since the dropship distributor is doing all the work that you can sit back and relax. Unfortunately, you have to deal with your customer base.

You have to be the one that answers all of the questions. You have to be the one to apologize when an order doesn’t arrive on time.

The main problem is that when you use several different dropship distributors, getting the entire order to the end customer can be a logistical nightmare.

All distributors will have different shipping times and will be shipping from completely different locations. If a customer orders products across 3 different distributors, they will end up receiving 3 different packages at varying times.

If an order is particularly time sensitive and needs to be rushed, you will have to make sure that all of your distributors can deliver the product on time.

In effect, you are staking the reputation of your online store and linking yourself to all of your dropship distributors in a single chain. If even a single distributor is unreliable, then it will reflect negatively on your online store.

Your Customer Service Will Be Out Of Your Hands

These days, customer service and reputation are extremely important. With the world wide web, social media and Twitter, news of a botched transaction can spread extremely fast so it is absolutely crucial that you maintain a great image for your online store.

Whenever I receive a call for our online wedding linens store, I always take the time to ask how they found us. And the majority of the time, the people who find us do so because they were referred to us by one of their friends.

Word travels fast. Our customer service is one of the main reasons why we have grown over 3x in the past 3 years.

With dropshipping, you unfortunately have very little control over your customer service. Since you are not in charge of product fulfillment, you can’t control when a customer will receive their product.

If a customer wants to make a return, it’s a major pain because you have to make sure that you get your money back before you can provide a refund.

Sure, there are always ways to mitigate these problems but the solution inevitably involves either raising prices or taking a profit hit at the expense of customer satisfaction. Dealing with credit card chargebacks is also much more common with dropshipped stores as well.

Is It Really Less Work?

It really depends. Arguably, the time that you save in not having to deal with inventory and fulfillment will be spent dealing with customers unless you have a reliable core of dropship distributors.

One thing that I forgot to mention is that many drop shippers don’t have up to date automated supply chain technology with a real time API. What this means is that you may not be alerted in real time whether a particular product is available for sale or not.

Therefore if an item is out of stock, you will have to interface with the customer to let them know when they can have their items. Unless your shopping cart is closely tied with your dropshipper’s database, it will be difficult to maintain an accurate inventory count.

With dropshipping, you are in effect trading off not having to deal with fulfillment logistics with having to deal with more customer headaches. And depending on your personality, this may or may not be a wise tradeoff.

While the tone of this article has been anti-dropshipping in general, don’t get me wrong. Many people have been successful with dropshipping as it works very well with small niche stores but my personal opinion is to avoid it if you can.

If you are considering opening a store composed solely of dropshipped products, you might want to consider affiliate marketing instead. With affiliate marketing, you simply have to refer a customer to a store and you make money whenever your referral makes a purchase.

There is no customer support, no product fulfillment….nada. The only drawback is that the profits aren’t as high but at least you don’t have to deal with customer headaches that you can’t control.

But if you insist on going the dropshipping route, I suggest that you give Worldwide Brands a try.

Worldwide Brands vets and pre-verifies dropship vendors so you don’t get scammed or ripped off. Good luck with your shop!

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33 thoughts on “Why Dropshipping Isn’t As Easy And Simple As You Think”

  1. Thanks for this information. In the world of location independence, dropshipping is often touted as a great way to set up an online business so that you can travel. It’s very helpful to have information on some of the realities of this choice so that people can have a clearer picture of what it means.

  2. Thanks, Steve, and nicely put. You reinforced my concerns.

    For any of the readers who have had dropshipping success, would be great to hear what works for you. My guess would be, as Steve mentioned, a narrow niche with few SKUs….

  3. Though I do a lot of my own order fulfillment, some of my vendors are drop shippers. They are all small businesses and I have closer relationships with all who I work with. Its rarely left up to chance because of the close relationships I have, but I do understand how it can be a disaster.

    In terms of the costs of shipping, you are absolutely right. Unless a customer only orders one brand that drop ships, I’m left paying more for the shipping myself.

    After a year and a half, I haven’t really found a better solution. My capital isn’t large enough to carry inventory of ALL the products I sell – no way.

    For me, the appeal of drop shipping is more of the upfront COST not necessary the perceived ease and convenience.

  4. Interesting article with a number of robust things to consider when determining if drop-shipping is the most appropriate means to deliver product to customers.

    We have found there are many instances where the benefits of drop-shipping (someone else deals with logistics of fulfillment) can be combined with the benefits of handling it yourself (lower costs, increased customer service, better information control, increased profits) by using a fulfillment company.
    There are fulfillment companies that focus on small to medium size businesses, particularly those ready to make the step away from a drop-shipping model.

  5. Thanks for this great information on drop shipping Steve. I learned a lot!!!! ;)

  6. I meant to mention that I agree with you Steve. It is a lot of hard work and you definitely have to find the right drop shipping company.

    Thanks again for this great post!

  7. Nice article. I found your blog some days, and most of your articles are great. I always avoid an affiliate business model (making money for a product owner and getting peanuts). Now after reading this article i understood why my good business wasn’t happy when i offered him started as a dropshipping store.
    Good luck to you and i’ll visit your blog often.

  8. sorry, i misstyping a few words in my last post.

  9. Thanks for the dose of reality. My husband and I had a dropshipping business on eBay back in 2004-06. Back then, everyone only talked about the pros of dropshipping. But from personal experience, I can agree with all the downsides you mentioned. Glad you’re one of the honest ones who tell it like it is.

    1. Thanks Tiare,
      Dropshipping is good way to create a lifestyle ecommerce business but the profit margins aren’t nearly as high as carrying inventory.

  10. Jasmine B says:

    Very great information! Im curious, you mention that the time you save with drop shipping is replaced dealing with customers. If you we’re selling your own inventory would you have to spend equal amount of time dealing with customers as well.

  11. Great article. Let the truth be told Amen.

  12. Dropshipping is not easy. As a first time entreprenuer who doesn’t want to hold inventory its a lot of work, if ecommerce were that easy everyone would be doing it. It’s like running a marathon with no finishing line in sight. There are e-tailers who make billions who use this method of fulfilment like net stores aka hay needle, don’t know if they still do this and have started holding stock.

  13. Just to add to Jasmines comment – I like dealing with customers as it lets me stay connected with the truth and understanding from the people who pay the bills what they actually want. Lets face it Drop shipping is a great way to leverage and scale a business however comes with the traps listed in this article. Great read about drop shipping.

  14. Hello,

    You bring up a lot of good points. Though drop shipping can be tough if done right can certainly be worth while. Finding a quality wholesaler is a key player in success. One downfall many have is trying to create a website built upon too many products from several drop shippers without any niche in mind.

    – Roger

  15. Great article about dropshipping…finally someone reveals the truths. I was a dropshipper for over 5 years (pretty profitable after about 2 years) until my main supplier went out of business, leaving me no choice but to close my business. All points in this article are very relevant and anyone considering dropshipping should take them to heart. I started out dropshipping from too many suppliers, getting mixed orders for “this product and that product” and ended up losing too much in profits to shipping costs (products shipped from different suppliers). I finally decided to just go with one of my most profitable products and was successful, however the “logistics nightmare” is on point. I was the only customer service and while I liked having the interaction with my customers, it mainly came down to not having control over shipping that created so many headaches. I had to get into contact with my suppliers about missing orders, damaged orders, etc. then appease my customers. One time in particular almost sent me out of my mind. The Today Show did a televised segment on a Saturday for one of the products I was selling and the orders began streaming in faster than ever before. I thought it was an error until I realized the orders were legit. The warehouse couldn’t keep up in fulfilling all my orders (let alone the other dropshippers that had hundreds of orders as well) and for weeks (yes, weeks!) I was constantly dealing with customers wanting to know where their orders were. It was a true nightmare (although in the end the profits were exceptional :). In addition, if you don’t have any ecommerce experience it will be a challenge to get your website (product) found, set up merchant accounts for accepting payments, integrating the payment method into your website, you’ll have to pay more money to have security for payment processing (a must!) etc. There are all-in-one websites out there (i.e. Volusion) that you can start with, but I found after being with them for about a year, the cost was cutting into my profits too much and I decided to design my own sites, I have experience with this, but that is not an option for many. In addition, your shipping options will be limited, for example, you can’t offer expedited shipping or various shippers (i.e. USPS, FedEx) as you don’t know when your supplier will actually get to shipping your order. And if you have more than one supplier, you will more than likely have more than one shipping company. I have to say at this point (after my business has been closed for about 1 year) I have been looking into products that I can stock and ship myself, knowing that having control will offer me the ability to offer my customers exceptional customer service from start to finish.

  16. Thanks so much for this great post. I think drop shipping business is relatively new and innovative type of eCommerce. it is actually similar to selling as usual online except for the shipping which done via third party companies. so I think the most important good effect is that by implementing drop shipping business you will save more time and money. on the other hand you must learn drop shipping business from an expert so that you will not fall in many holes along your way.

    If you would read more, I did this post that shows you the drop shipping business process in action

    http://www.2dropshipping.com/drop-shipping-business-process/

  17. Rich Hohd says:

    Hi Steve,

    You’re obviously against dropshipping – but only because of your circumstances. You obviously live in one location and don’t move around and can carry inventory.

    I on the other hand am nomadic, which means I live in a different country every 3 months (by choice as well as necessity). So it means I don’t have a home base anywhere to store inventory (and I’m not interested in renting storage space, because I move around).

    I’m thinking about starting an online store (and even doing your course) but this post of yours is made me question that. In fact, this post has put me off your entire blog because it’s so negative and one-sided!

    I don’t see any other post in your blog to counteract this negative post – for people who have had great success with dropshipping (and who prefer it to carrying inventory). Shame on you for that.

  18. Rich Hohd says:

    Steve,

    I’ve just posted here at http://mywifequitherjob.com/why-dropshipping-isnt-as-easy-and-simple-as-you-think/ – you obviously have a bias against dropshopping without actually letting us know why you have this bias. You offer nothing that is pro-dropshipping. You’re obviously pro-inventory only because it’s worked for you.

    But just because dropshipping hasn’t worked for you doesn’t mean it’s wrong.

    The lack of balanced views in your blog is shocking.

    I was thinking about dropshopping, to suit my nomadic lifestyle, and doing your course to set up my shop. I won’t be doing your course now, since it’s clear you won’t be supporting my choice to dropship.

  19. Kenesha thomas says:

    Hi Steve,
    I live in Jamaica I want to start an online store but shipping costs and time for me would be crazy. Jamaicans are not into online shopping yet. My main Markets would be USA And Europe.

    My Mother makes sandal on a small scale and we want to turn that into a online business and supplement it with other shoes while building her Brand.

    I had considered drop shipping as a method of meeting my customers needs but this post has me really concerned.

    Do you have any other suggestions?

  20. That’s quite a strong opinion about dropshipping!

    I think a lot of the issues you’ve mentioned can be resolved by choosing one dropshipping partner to fulfil all of your orders. That would mean only one supplier/contact point for issues, that means stable and foreseeable shipping expenses. Not to mention with the most popular ecommerce plaftorms like Shopify or Woocommerce, if you’ve got a technologically advanced fulfilment partner, then they can automatically push the shipping and tracking number notifications to the end buyer without you having to do any of the work.

    I look at Printful, and see that if you had gone the on-demand print product route, you wouldn’t have any of the problems you’re outlining.

    I sincerely urge you to open your mind and give it a try, despite your previous experience with dropshipping.

    1. Hey Julia,

      I wrote this post during a time when dropshipping was all the rage so I decided to take on a contrarian point of view. Dropshipping can definitely work but the ramp up takes longer.

      1. Julia Gifford says:

        How clever :D Cheers to that, Steve!

  21. NewEra says:

    Great article about dropshipping…finally someone reveals the truths. I’ve been a dropshipper for over 5 years now and i love it… I do it full time now and I make way more money now than before working a 9pm to 5pm job.

    Check this Out, this is how I started. My little Secret to you, It’s Great for any Droppshipper..
    http://24e85vcmjpf0hm4mbcu8-k5l3k.hop.clickbank.net/?tid=SALEHO

  22. John says:

    Here in the states there is a store called designer shoe warehouse (aka DSW) and they sell shoes for up to 80% off. Because of my (free) membership discounts I was able to get a pair of winter boots that are worth $200 original price for free. I didn’t even have to pay a penny. I use my member rewards and the fact that the boots were already priced 80% off I was able to get them for free because my member rewards covered the remaining 20% I was supposed to pay.

    So my question is instead of just droppshipping would you recommend going to a place like DSW (or any outlet store for that matter) and buying expensive brand name stuff at outlet store prices and then selling them full price online? Have you had any sort of good experience with this? I actually looked up my boots on ebay and found they sell like hotcakes so I figured why not? But I wasn’t sure I know this is a little different than drop shipping itself but this could be a goldmine for money if you can keep buying shoes for 50- 80% off and just turn around and sell them for full price but I just don’t know if you had any experience with this method.

  23. Alex says:

    I’m from the UK and i’ve just started an e-bay shop selling men’s accessories.

    I have looked into drop shipping so i can increase the range of my products, mainly small kitchen appliances and other consumer electronics.

    In my research i have found the profit margins to be non existent or extremely small ie: 3-6% my biggest concern is losing that grip on customer service and as you put it ‘logistical nightmares’. if you hold stock you can say to your customer ‘no problem i’ll ship you out a replacement and it will be tracked and with you on x date’ but with a drop shipper you have less control over the process. Also you may not have an integrated order system with them so you could sell 5 of one product and the drop shipper only has 2 left, leaving you with 3 orders to fulfill and 3 disgruntled customers.

    You also have to wade through the vast amount of scam artists out there, and really do your research on the prices, i have often found products cheaper on amazon and ebay 10 and even 20% cheaper than the price a dropshipper offers at supposedly wholesale prices! and don’t forget to add VAT as almost all drop shippers charge inflated delivery costs and don’t advertise the price with VAT included. You also have the monthly or yearly fees to pay many of them too, so if you find you sell less than 10 products it could really eat into your profits.

    The old sayings still hold true today in my opinion, buy low sell high, and stack em high and sell em cheap. People want things too quickly in this day and age, they want to put little work in for big profit, but like any business it takes long hours, plenty of effort and hard work, and sweat, tears, pulling your hair out and banging your head against a wall. There are NO shortcuts to success whatever people tell you at the end of it all it’s down to how much you want to succeed and how much you are willing to learn and how much work you are willing to put in.

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