In this article, we talk about the reasons for the low success rate of dropshipping businesses. One of the most popular ventures that people engage in nowadays is dropshipping. For those who are new to the term, dropshipping involves creating an online store where you sell goods to people through a third-party supplier.
With this business model, when a customer places an order on your online store, you buy the product from your supplier at a lower price and keep the difference. This third-party supplier will handle the delivery of the product to your customer, so you don’t have to handle the logistics yourself.
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Now, as when the concept of dropshipping started, a lot of people are skeptical about it. however, many people tried it despite the skepticism. And as with most businesses, those who tried it early out saw the profits, and now, a lot of people are going into dropshipping, seeking to make a lot of money.
However, the reality that many people have discovered is that dropshipping is challenging. This reality has made many people ask questions about the success rate of dropshipping, and this article seeks to provide answers to these questions.
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What is Dropshipping Business Success Rate?
The truth is that there are no specific figures for describing the success rate of dropshipping. This is because dropshipping is an e-commerce business, regarded as low to medium-risk, as a large percentage of the capital is spent on advertising and creating awareness about the products you sell.
However, people who have excelled in the dropshipping business have made bold to state that the success rate of dropshipping within the first year of operation is about 10%.
Before you ask why the success rate is this low, you need to understand the nature of most people venturing into dropshipping.
Most dropshippers, at the beginning of the business, have little or no idea about the business they are going into. While they may understand the modus operandi of the business, they usually do not consider the risk factors or conduct feasibility studies before starting the business.
They probably have seen a friend or read about someone making a sizable profit in the dropshipping business and figured they could also delve into the business without making all the necessary inquiries.
This is the first and most important reason why the dropshipping industry has a low success rate.
In the succeeding section, we will discuss other reasons for the failure or low success rate of the dropshipping business.
Reasons for the Low Dropshipping Success Rate
The following are other contributing factors to the low success rate of the dropshipping business;
Selecting the Wrong Product or Niche
You need to understand that dropshipping revolves around two major things; products and adverts. If you get these two factors right, there is a greater probability to have a successful dropshipping business. Thus, you must get the products you choose to sell right.
Often, there are no ‘bad’ products. It all depends on who you are selling to and other circumstances surrounding the sale of the product. The following are circumstances that might make a product ‘bad ‘for your dropshipping business.
Some goods or products are restricted. By restricted, we mean that these goods are illegal or have unresolved legal issues. These products may be allowed in some states or countries and illegal in others. You don’t want to have this type of product on sale for your dropshipping business.
Apart from the obvious reason, which is the limited number of buyers, you will not be able to use the traditional Google and Facebook advert channels to advertise this kind of product. An example that quickly comes to mind is products made from Cannabidiol (CBD).
As much as many benefits are attributed to these products, the fact remains that there are issues regarding their legality in many states in the US and other countries.
This is the reason why Google Shopping Ads and Facebook Ads would rarely run adverts on CBD Oils or other products.
Copyright or Trademark
When you see copyrighted products or items with a trademark, you can as well excuse yourself from them. This is because you are not authorized to sell these products. Apart from the legal issues that could arise from selling copyrighted products that you have no authorization to sell, you may not be able to run the ads you need.
If you can manage to stay off these two categories of goods, you are on your way to recording an impressive success rate for dropshipping.
Choosing Bad Suppliers
In the dropshipping business, the supplier is also very important to the business. You need to ensure that you have a good supplier, especially if you are running an arbitrage model (where you buy low and sell high) for your business.
A lot of dropshippers have their suppliers in China. While this is not a problem in itself, it contributed to the low success rate of dropshipping. Here is why.
When you get your goods delivered to you from China, that means you have to wait for a long time, which could be as long as three weeks. While you may be content with waiting that long, what about your buyers and customers?
Nobody wants to wait three weeks or more for a product, except if the product is worth it. Also, apart from waiting for long periods, the goods may come with foreign lettering or languages, making it difficult for people to use or learn about the product (especially first-timers).
Finally, the recent bad press regarding China’s dropshipping model is another reason you may want to consider getting another supplier apart from those in China.
Websites or Online Stores
You should remember that you do not have a physical store in a dropshipping business. The only medium of interaction between you and your buyers is your website. This underlines the reason why you should ensure that your website or online store is professionally done.
As much as you don’t need something elaborate or bogus, you also need to ensure that it is smart, functional, and easy to use.
Dropshipping can be a profitable business. While it is a bit difficult to lay hands on a definitive number for its success rate, experts have shown that the business has the potential to make a lot of profits for dropshippers.
However, some mistakes made by many dropshippers have affected the success rate of dropshipping and failed many dropshipping businesses.