If I ask you- Do you know everything about dropshipping?
Then you might come up with the answer that dropshipping is really an easy to start order fulfilment method where you do not need to keep products in stock. Once a customer a purchase products from your store then the order will be forwarded to your supplier and he will ship the order to the customers. You also may add that here the overhead cost is really low. Well, is it all about dropshipping?
Unfortunately, the answer is no. You may know many success stories but it doesn't mean dropshipping is always a beneficial business. Dropshipping has also some limitation which often remains unsaid. It is obvious that dropshipping will not make you rich overnight. If you are looking for a quick-rich scheme then let me tell you dropshipping is not the scheme.
Besides all the attractive advertisements about dropshipping there are also some hidden truths and unveiled things that the internet won’t tell you. But you should be aware of those things.
Although it seems dropshipping is a profitable business model but with all the obstacles, drawbacks and day-to-day management, you will realize it’s far from easy.
However, if you obtain it the right way and use the right strategies, you can build a successful business with dropshipping. Just may not be as quick as you calculated.
Are you thinking to start a UK dropshipping business?
Then you can visit Getshop Today. Well, Getshop Today is a UK based eCommerce platform that can help you to build your online shop uniquely and easily. They provide a total dropshipping solution which includes local (UK based) dropshipping product sourcing options, eCommerce website design, logo design, as well as basic marketing solutions using eBay dropshipping. With Getshop Today you will get your shop ready within just 3-5 days.
Now let's have a look at the hard truth about dropshipping below.
1. Low profit margins.
In dropshipping as you do not have to handle or store your own inventor the overhead is definitely going to be low. Most of people start dropshipping business due to its low overhead cost. It is really one of the best advantages of doing dropshipping business. Right? But what is about the profit? Well, one unsaid hard truth is your profit will be low too.
As you have invested less money in, so you also get less money out. So, what is the solution then?
You have to do a lot of business just to stay afloat and to make a good amount of profit.
Let’s think for a moment in this way. Whenever you make a sale, most of the part of your profit goes straight to your supplier and you cannot change it.
Whatever you have earned is basically skimmed off the top.
With the left amount of profit, it is really hard to cover your expenses for marketing, maintaining your site, managing sales orders, and covering your office hours.
Now, question may hit your mind that how to calculate my income?
Well, to predict your income let’s calculate it with a 20% margin and a 2% conversion rate. (These variables can change depending on your industry and situation):
Now you can use the equation to calculate your working estimate-
(Traffic x 0.02) x (Average order value x 0.2) = Profit
Well, this calculation is perfect for a quick estimate.
But this equation does end here. Still there are a few problems that you also have to keep in mind-
- There are chances that you get less than 20% discount on buying from manufacturers and wholesalers.
- To keep your sales prices competitive, you will have to reduce your profit scale for most of the products. But if you deny to do so and stubbornly stick to your 20% margin then other companies will easily undercut you.
In addition to this, profit is largely depended on your traffic. So, if you are establishing an ecommerce brand from scratch, you will have to wait for a long time before you form a client base.
Moreover, dropshipping seems hands off but it requires a lot of hardwork no matter how you plan it. If you really want to be successful you have to take a lot of responsibilities. For example, you always have to deal with your suppliers, order processing, returns, and most importantly customer service. Are you looking for perfect UK Dropshipping suppliers? Then visit https://getshop.today/dropshipping-suppliers-uk/
2. Highly competitive:
Due to low overhead and other facilities dropshipping has become an extremely popular business model. But Have you ever realized that more popularity means high competition?
More and more entrepreneurs are starting dropshipping business as very little capital is required to start. That means you have to face a lot of competition in the most popular market.
Once you start dropshipping, you will find that all the stores sell more or less same kind of products. So the biggest challenge is how to make your products different from your competitors?
The answer is by offering products at the lowest price.
Well for bigger a company it is easier to reduce markups and to offer products at the lowest prices.
But for smaller businesses, it can cause a serious problem. To stay competitive, they have to cut their profit margin. At one point, they might find that they are not making profit at all.
To make matters worse, the possibilities are that you do not have any exclusive deal with your suppliers.
In Getshop Today you can find dropshipping suppliers UK who offers unique products and exclusive deals.
That means if you are just starting out and if your business is small your rivals have years of experience and resources to sell the exact same product at a lower price. Now think for a moment why the customer would buy products from you at a higher price?
So you have to invest more to expand your company.
3. No control over supply-chain.
In standard eCommerce, you can handle all the sensitive issues like product quality, fulfilment speed, or return policies yourself to keep your customers satisfied. But still, if customers complain about anything you can make quick steps to solve the problems.
But what if someone takes this freedom away from you?
You will feel helpless! Right?
The same thing happens in dropshipping as you have to rely on your supplier for everything. Starting from product quality to packaging to shipping- you have to depend on your supplier for almost everything. But the irony is that you will be held responsible to your customer if your supplier delivers low quality or wrong products in poor packaging. So basically your suppliers can either make you or break you. Your customer’s satisfaction and your shop’s reputation is fully dependent on your supplier. So you need responsible suppliers for you business. Are you looking for UK based dropshipping suppliers?
Whenever customers complain about something Dropshippers become trapped in an uncontrollable situation. On one end they hope that supplier will address the problem and on the other end, they have to assure the customer that their problem will be solved soon.
In addition to this, there is a chance of delayed communication as the dropshipper have to contact both the customer and the supplier. If one responds slowly, all communication processes come to a halt. Because of this communication gap, problems might take a longer time to fix which ultimately make the customers unsatisfied.
In dropshipping, customer service and their satisfaction should be your first priority.
Even because of your slightest mistake such as a delay in communication customers will not hesitate to leave your store and buy the same product from your competitors.
And the worst part is that if any customer gives bad reviews about your store your business will end before it even starts.
4. Legal liability issues
The next problem is about legal liability issue which often remains unsaid. Although dropshippers do not face this problem all the time, still it is worth mentioning. Do you know why legal liability issues occur? This issue occurs if your suppliers are not as legitimate as they claim.
Do you know what is more deceitful?
When your suppliers illegally use a trademarked logo or another company’s intellectual property.
The worst part is if your supplier is involved in any illegal activities it will drag you into a serious problem as well.
But the good news is you can avoid this problem with a solid Dropshipping Agreement Contract.
So you have to be very careful when choosing suppliers.
5. Difficult to build a brand:
Another unsaid hard truth about dropshipping is the difficulty in building a brand. As a dropshipper, you must have to accept the fact that the credit of your work goes to someone else.
If you are selling an amazing product your customers are going to focus mainly on the product’s brand. But they do not care much about their shopping experience. You have to keep in mind that it is not your logo on the box and customers give more priority to the brand.
As Branding is crucial dropshipping you should always go for an already established brand than new ones.
Always keep in mind that without customer loyalty, you’ll never get the usual traffic that is needed to be successful in a dropshipping business.