Although dropshipping is one of the best eCommerce business models, there are still a lot of challenges you may encounter, especially if you’re a complete beginner. It can be complicated for people without any experience, specifically in handling a business or building an online store, resulting in many startup failure stories.
But don’t worry! To increase your chances of success and avoid startup failure, we’ll share and discuss the 8 main reasons why dropshippers fail in the first place. We’ll also tackle how you can avoid and learn from these mistakes so you can make sure that your dropshipping business will work.
Dropshipping Start Up Failure
With the eCommerce market’s revenue projected to reach about $4.11 trillion this 2023, it’s no surprise that many people are diving into online entrepreneurship and starting their own dropshipping businesses.
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But, it’s estimated that 90% of dropshipping businesses fail within their first 120 days. At the same time, according to the Small Business Administration (SBA), about 80% of all small businesses last at least a year. This shows that despite the business venture, online or not, there’s quite a high startup business failure rate.
The good news is that we know the reasons behind this startup failure rate. We know why many dropshipping businesses fail and we can learn from these mistakes.
Below are our top 8 reasons why startup dropshippers fail.
1. Choosing a Bad Niche
This is one of the most common mistakes that dropshippers make – choosing a niche that they don’t fully understand. Wrong niche selection can lead to zero sales and startup failure later on.
Choosing a bad niche also means choosing the wrong products to sell. For example, you picked a niche that you’re not interested in. This can result in difficulty in making relevant content and customer sales copy, like blog posts, that would have helped you get traffic and convert.
On the other hand, some dropshippers choose niches or products that are too fragile or low-quality. Remember that dropshippers can’t do anything about the actual inventory, packing, and shipment of orders. So, when customers receive these kinds of products, there are high chances of getting bad reviews, returns, and other customer complaints, which can drag down any business.
For example, you want to sell futons for $150. Your average customers will likely be college students or people with not much money. With customers like these, there’s a high chance of getting loads of customer service, returns, and less profit.
In Drop Ship Lifestyle, we recommend not choosing niches with products that are less than $200, or low-ticket items. One major reason why we consider this as a bad niche is that they are low-profit. Low-ticket items have low-profit margins because you only get a few bucks in every order or sale. For your business to be profitable, you’d need lots of orders for that, but what if you don’t get lots of orders?
Always remember that in dropshipping, the product and niche you choose to drop ship will greatly influence your store’s success. To avoid this mistake, here are some tips:
2. Working With Bad Suppliers
Finding reliable dropshipping suppliers is a must to avoid a startup failure. This is because working with the wrong suppliers is one of the most costly mistakes you can make. Finding a supplier is relatively easy but it’s making sure that you’re working with a good one that is not.
Many dropshippers make the mistake of choosing suppliers based on the lowest pricing, which is not the best way to do it. Here are many ways that you can make the mistake of working with bad suppliers:
Remember to find reliable suppliers and communicate with them about your needs as a dropshipper. Look for the ones with good reviews from other entrepreneurs or dropshippers and those with pricing and return policies. It would also be best and easier to work with domestic suppliers.
Having a good supplier means protecting your reputation as a dropshipping business.
3. Bad Store Design
There are many dropshippers who don’t put any effort into building their dropshipping stores. This means they have a poor and unprofessional website design, which is a huge turn-off for almost all online shoppers. A bad store design leads to a poor user experience for your visitors and customers.
Many business owners don’t focus on their website’s design and optimization, which is a common mistake that often leads to startup failure. They just set up and open a store, add some products, and start advertising. These aren't enough to convince your customers to buy from your store.
Remember that there are also some other dropshippers who are selling the same products as yours. Some may even work with the same suppliers and have the same product information.
If you simply add that information to your store, without optimizing it or tweaking it, you’re gonna have the same copies and content as your competitors. This wouldn’t help your dropshipping business at all.
Here are some bad store design mistakes and tips on how you can avoid them:
These are just a few of the mistakes you should avoid when designing your store. Ultimately, you want to put on a good first impression so you need to put in quality work when designing your store. You want customers to keep coming back.
Here are some tips that can help you build a good store design:
4. Bad Traffic
This means getting the wrong traffic or visitors in your store. Who are you sending to your store?
There are many ways this happens:
All of these are very common as many dropshippers simply promote their stores to everyone. This results in lots of time, money, and effort going into attracting the wrong people. There are no significant results you can get from this traffic because you’re not sure that they’re interested in your product or niche the slightest bit.
One of the biggest examples of this mistake is when new dropshippers go all in with Facebook Ads. Although Facebook Ads are good, they have their own time and place limitations, and their own purpose.
Google Ads attracts people who are searching for products that you have and drives them into your store. You capture this traffic of visitors using Google and bring them in. They’re already interested in your product so it’s good traffic.
But with Facebook Ads, your campaigns randomly appear on people’s feeds as they scroll through so you’re not getting people who are interested to buy your products. This is why you shouldn’t go too heavy with Facebook Ads in the beginning. If you want to dive deeper into how we use these ads, you can check out Module 6 in our blueprint.
Another aspect of bad traffic is not optimizing your traffic. You should determine what keywords your ads are showing for, add negative keywords, and segment your best-performing products into their own ad campaigns. Ultimately, you should pour more effort and money into what’s working and cut back on what’s not.
5. Bad Customer Service
The key to long-term success in a business is having happy customers. You should always ensure the best customer experience, which means you have to provide the best customer support before they buy, after they place an order, and after they receive their items.
Many dropshippers start out and make these mistakes:
All of these are important matters. Yes, you can get sales but if your customers aren’t happy with your business, they’re not going to stay, resulting in an increased startup failure rate.
With poor customer service, you will surely receive bad customer reviews. Keep in mind that reviews or feedback can make or break your business. They can even lead to them getting chargebacks. You don’t want that because it will just result in you losing more customers in the long run.
As a dropshipper, you need to develop a strong customer service strategy to keep your customers happy and your business thriving. Here are some quick tips to help with that:
Again, keeping your customers happy is something you should be actively and continuously working on. Customers drive sales and unhappy customers can ultimately lead to a startup failure.
6. Bad Tracking
This means not knowing why things work and why they don’t. For example, with your return on ad spend. You should know how much money you’re getting back from what you spend on your ads, as well as which ads are converting sales and which aren’t.
There are many dropshippers who don’t pay attention to these things. So when you ask them about their return on ad spend, they’ll have zero ideas about it. This contributes to the many reasons for startup failure stories.
As a dropshipper, and the main investor in your business, you must know how you will improve your business based on these details:
One major tip I have is to keep a change log of your business. Record your suppliers, what promotions or ads you launched, in what month or dates, what are the other details, how much revenue you got from it, and what changes did you make. This is very useful in tracking and looking back on what’s happening and working in your business.
For example, let’s say you run a promotion for the 4th of July through email and it did great. Record these details and how much you made out of it. Continue that and let’s say six months have passed and you noticed that sales were better in that month.
You’re going to wonder what happened in July, and without a change log, you won’t have the exact details of what helped you make good sales that month. But with one, you can gain insights on how you will improve your existing strategies or campaigns so you can achieve the same, or better, results.
7. Having a Fixed Mindset
Many dropshippers, and business owners, have a fixed mindset. They settle in and don't try to grow.
For example, you start dropshipping and set a goal of earning $3,000 per month by following the Drop Ship Lifestyle’s blueprint. Let’s say six months pass by and you’re now earning $5,000 monthly net profit. Good job, yes, but say you’re satisfied with that already since you’ve achieved and made it past your goal. You keep everything and maintain the same, including the ads, the website design, and everything else.
This is a bad idea. You should never settle for what you have and should aim for more. That’s why I suggest setting aside 10 to 20% of your time and money for something new, like new traffic sources or hiring people to help you with customer support or email marketing.
Always put something into growth because if you stay with a fixed mindset, your business will not grow and will slowly drop off.
8. Not Treating It Like a Real Business
This is a big mistake and is another driving force for an increased startup business failure rate.
While it’s true that dropshipping isn’t like other business models where you need to sign a lease or hire a bunch of employees so you can start, it doesn’t mean that you can just launch a store and spend the rest of your life checking your phone once a week to check in on your business. This is not how it works.
Dropshipping is a very simple business model but the early months can be challenging. You’re required to put in the work upfront so when you do it right, your work will pay off in the long run. Treat it just like how you’ll treat any other kind of business so you can reap its benefits later on.
Why First Time Dropshippers Fail: Recap
Dropshipping is a simple business model and is a great option for aspiring entrepreneurs. However, many people still make these mistakes:
1. Choosing a bad niche
2. Working with bad suppliers
3. Having a bad store design
4. Getting bad traffic
5. Implementing bad customer service
6. Poor tracking strategies
7. Having a fixed mindset
8. Not treating dropshipping like a real business
If you’re interested in starting your own store, make sure to take note and learn from these mistakes. As long as you know what to do and what not to do, you can avoid startup failure and build a successful business.