Dropshipping trends: risks and mistakes
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Technologies similar to Cookies
Similar technologies are technics or tools, using certain characteristics to identify devices so that visits to a website can be analyzed. It includes, for example, HTML5 local storage, local Shared objects, fingerprinting techniques, tracking pixels and plugins.
For ease of reference, cookies and similar technologies are referred as "Cookies".
Usage of Cookies
Cookies enable us to provide users with certain features and supply us with information about website visits.
We also make use of cookies to make our site more user-friendly, to better understand our existing and prospective customers, including associating a user with different devices and browsers that they may use for online targeting and advertising purposes.
In business, as in life, we are constantly having to correct obvious mistakes. And it's all because of the "turkey syndrome": when assessing risk, many people believe that past trends determine the likelihood of future trends. By basing predictions on the past, we are more likely to be wrong, with serious consequences. Trends can change, increasing risk.
Although dropshipping has very few financial barriers, the risks need to be assessed in a balanced way. And not just at the start of a business. A successful dropshipper knows its customers, focuses on them and pays attention to detail. This is the only way to stay at least a quarter of a step ahead of the competition.
Let's forget about all the marketing gurus promising dropshippers six-figure profits and get straight to the point. Let's face the problems and list the main risks of this business model.
Making a profit
The average profit margin for a dropshipping business is currently around 20%, but only if the dropshipper has good control of overheads. Pricing is directly related to the product or service the business is promoting. A dropshipper's biggest overheads are promotion and advertising costs. And these are likely to increase with competition. Unfortunately, advertising costs are rising and the only thing you can do is control the price per conversion.
Competition
Competitors are a pain; they drive up your cost per click, reduce your profits and, most importantly, drive away customers. So how do you deal with them? The answer is simpler than you think: search, not copy. How do you stand out, what do you offer? Faster delivery. An easier checkout. An unusual product range. Cumulative discounts. Build your customers' habits: 40% of an online store's profits come from repeat customers.
Quality control
A PwC study found that 32% of customers will leave a retailer after just one negative experience, even if they were previously happy. If you've never held a product in your hands, it's hard to guarantee that it will be as advertised.
Although dropshipping has very few financial barriers, the risks need to be assessed in a balanced way. And not just at the start of a business. A successful dropshipper knows its customers, focuses on them and pays attention to detail. This is the only way to stay at least a quarter of a step ahead of the competition.
Let's forget about all the marketing gurus promising dropshippers six-figure profits and get straight to the point. Let's face the problems and list the main risks of this business model.
Making a profit
The average profit margin for a dropshipping business is currently around 20%, but only if the dropshipper has good control of overheads. Pricing is directly related to the product or service the business is promoting. A dropshipper's biggest overheads are promotion and advertising costs. And these are likely to increase with competition. Unfortunately, advertising costs are rising and the only thing you can do is control the price per conversion.
Competition
Competitors are a pain; they drive up your cost per click, reduce your profits and, most importantly, drive away customers. So how do you deal with them? The answer is simpler than you think: search, not copy. How do you stand out, what do you offer? Faster delivery. An easier checkout. An unusual product range. Cumulative discounts. Build your customers' habits: 40% of an online store's profits come from repeat customers.
Quality control
A PwC study found that 32% of customers will leave a retailer after just one negative experience, even if they were previously happy. If you've never held a product in your hands, it's hard to guarantee that it will be as advertised.
Delivery time and cost
Shipping costs are often overlooked and can vary as much as the cost of the product. The following should be discussed with suppliers in advance: delivery times to certain countries and tracking technologies. This will reduce the number of complaints and avoid unnecessary chargebacks.
Returns
Returns play an increasingly important role in purchasing decisions. To retain customers and keep up with the competition, you need to modernise or change your returns system. The average percentage of returns in online shops is 20%. The reason for a return can be a poor quality product, the wrong size or simply a poor choice and hesitation on the part of the customer. The longer the return cycle, the bigger the discount, especially if it is a seasonal item.
Scammers!
In dropshipping, fraudsters can come in the form of direct delivery retailers, suppliers, marketing agencies or even customers.
Avoiding fraudulent schemes is helped by having verified partners and the right suppliers. You can easily find them on Fincraft Capital's website. Fincraft Capital conducts a quality analysis of contractors. It checks the reality and legality of their business. Conducts market research, analyses consumer demand.
Stock availability
A customer has bought a product from a dropshipper's website, but the supplier's stock is already sold out. There is an urgent need to find another supplier. It may be necessary to close the deal "in the negative". To avoid this, you need to agree in advance with the supplier on a system of notification of stock levels in their warehouse. Consider the possibility of blocking the order of such goods even before payment has been made.
Taxes
Taxes will have to be paid, depending on the country in which your business and your customers are located. This is a huge topic to discuss. Do not ignore it, try to take into account all the pitfalls - consult Fincraft Capital s.r.o. specialists.
Shipping costs are often overlooked and can vary as much as the cost of the product. The following should be discussed with suppliers in advance: delivery times to certain countries and tracking technologies. This will reduce the number of complaints and avoid unnecessary chargebacks.
Returns
Returns play an increasingly important role in purchasing decisions. To retain customers and keep up with the competition, you need to modernise or change your returns system. The average percentage of returns in online shops is 20%. The reason for a return can be a poor quality product, the wrong size or simply a poor choice and hesitation on the part of the customer. The longer the return cycle, the bigger the discount, especially if it is a seasonal item.
Scammers!
In dropshipping, fraudsters can come in the form of direct delivery retailers, suppliers, marketing agencies or even customers.
Avoiding fraudulent schemes is helped by having verified partners and the right suppliers. You can easily find them on Fincraft Capital's website. Fincraft Capital conducts a quality analysis of contractors. It checks the reality and legality of their business. Conducts market research, analyses consumer demand.
Stock availability
A customer has bought a product from a dropshipper's website, but the supplier's stock is already sold out. There is an urgent need to find another supplier. It may be necessary to close the deal "in the negative". To avoid this, you need to agree in advance with the supplier on a system of notification of stock levels in their warehouse. Consider the possibility of blocking the order of such goods even before payment has been made.
Taxes
Taxes will have to be paid, depending on the country in which your business and your customers are located. This is a huge topic to discuss. Do not ignore it, try to take into account all the pitfalls - consult Fincraft Capital s.r.o. specialists.
Payment Systems
Payment systems allow you to make cashless payments on the Site. The interest rate charged by the acquiring bank for processing payment transactions can be up to 4% of the transaction amount. This is significant for a dropshipping business. So you need to take this into account when choosing a payment gateway. It is also important to find out about the service's chargeback penalty policy. The most popular payment gateways today are Shopify Payments and Paypal.
Website and content
38% of visitors will abandon an unattractive website or quickly leave an online store with complicated navigation. A big problem: if your website takes too long to load. You can lose money by using poor quality images and poor product descriptions. The site should have product guides and size charts. What kind of websites attract customers?
Force majeure and random events
Many events that seem predictable have in fact been caused by random factors. But those who rely on chance are unlucky in the long run. Read about the role of luck in business successes and failures in Nassim Taleb's book Fooled by Randomness.
There are risks that a dropshipper cannot control or predict. What has happened once will not necessarily happen again. Making decisions without taking this into account is risky. But by analysing potential problems, you can prepare for them. You're not the only one at risk, your competitors are too! Look for new ideas, try them out and test them. And remember the "turkey syndrome": experience gained in the past may be useless or, worse, lead you down the wrong path. Don't be afraid to try new things. It is important to find and analyse the hidden factors that can influence the situation and the business as a whole.
Payment systems allow you to make cashless payments on the Site. The interest rate charged by the acquiring bank for processing payment transactions can be up to 4% of the transaction amount. This is significant for a dropshipping business. So you need to take this into account when choosing a payment gateway. It is also important to find out about the service's chargeback penalty policy. The most popular payment gateways today are Shopify Payments and Paypal.
Website and content
38% of visitors will abandon an unattractive website or quickly leave an online store with complicated navigation. A big problem: if your website takes too long to load. You can lose money by using poor quality images and poor product descriptions. The site should have product guides and size charts. What kind of websites attract customers?
Force majeure and random events
Many events that seem predictable have in fact been caused by random factors. But those who rely on chance are unlucky in the long run. Read about the role of luck in business successes and failures in Nassim Taleb's book Fooled by Randomness.
There are risks that a dropshipper cannot control or predict. What has happened once will not necessarily happen again. Making decisions without taking this into account is risky. But by analysing potential problems, you can prepare for them. You're not the only one at risk, your competitors are too! Look for new ideas, try them out and test them. And remember the "turkey syndrome": experience gained in the past may be useless or, worse, lead you down the wrong path. Don't be afraid to try new things. It is important to find and analyse the hidden factors that can influence the situation and the business as a whole.