The dropshipping model seems too good to be true when you're first starting out in e-commerce. The truth is, it is not as easy as it sounds.
It's true that you never have to worry about coming up with funds to buy inventory, or about not having enough to fulfill your orders, or being overstocked. And having no inventory does take a lot off your mind. The essence of dropshipping is that you “drop” the “shipping” problems on your suppliers' laps!
However, your biggest advantage over traditional online retailers also presents your biggest problem: your dropshipping suppliers. We're presuming at this point that you've already vetted your suppliers and found them legitimate and reliable, since you're already on this blog, and well aware of the SaleHoo dropshipping supplier directory.
"I think choosing the right supplier is hyper important," says Alex Fedotoff, an eCommerce entrepreneur who does multiple 8 figures a year with his eCommerce businesses. "We use apps that integrate directly with our CRM (Shopify for example) and each order has specific notes, statuses, etc. Utilizing automation and working with great people and using automation tools is very important."
That being the case, it's assumed that you're in a partnership with multiple dropshipping companies, and that you handle the sales while they handle the supply. Unfortunately, that's why you can get into trouble with your customers.
The most common problems arise when there's a hitch in fulfillment and you're alone to face the music. Remember, a successful dropshipper is one whose customers have no idea they're dropshipping. They should believe that you're a regular retailer. You can't turn around and blame the supplier when your buyers start complaining.
Instead, you need to know how to avoid common problems with your dropshipping suppliers before they start to affect your bottom line.
This is perhaps the most common problem you'll encounter in your dropshipping business. The best way to avoid this is two-fold: keep track of your supplier's inventory and have more than one supplier for the same items.
Ask your suppliers to provide you with a daily inventory report. If they're overseas, then make sure you get reports for the end of their workday, because this reflects inventory for the start of the next workday. It's important to know what you're dealing with before orders come in.
An even better solution is to get access to their inventory in real time. This way you'll know what is available at any given time. This knowledge will give you enough lead time to adjust your own offerings. You can pull items that have been discontinued, as well as those dipping below your comfort level.
If you offer a very fast-selling item, you don't want to miss out on opportunities to sell just because your main supplier runs out. Chances are, more than one supplier will have the exact same, or similar enough, item. Keeping this in mind, it's smart to have one or two alternate suppliers waiting in the wings, just in case your main supplier fails you.
Not all dropshipping companies will give you the same deal; you are more likely to get bigger discounts or better standing with a regular supplier, so you may have to pay more if you end up relying on your alternates. However, the smaller profit is the price you have to pay to keep your customer happy. To avoid this, you might consider keeping running orders with your alternates as well, so you build relationships with multiple suppliers and can get a deal cut when you're in a pinch.
If by some evil chance you run out of an item that's already been ordered anyway, make sure that you inform your customer immediately and apologize. Offer a refund and a discount coupon for your customer's next purchase. If possible, call them instead of sending an email.
"One of the Christmas periods a few years back, we had an influx of sales," recalls Fedotoff, "and our supplier wasn't able to fulfill the orders because he wouldn't hire enough people for a warehouse and fulfillment. As a result, we had delay in orders and it cost us about $100,000 in refunds and chargebacks. Since then we always have a backup supplier."
This only happens if you fail to do your prep work properly, and forget to have a sample of the item you're dropshipping sent to you first. There is no excuse for this. Make sure you know what you're selling. That way you can make an accurate product description to avoid returns and negative feedback.
If the deed is already done, you can always apologize for it, and rectifying the situation. Offer a refund and discount, or if the customer is willing, send them an item that fits your product description. Again, you will have to absorb any loss that you incur as part of your customer service costs.
If your supplier is reputable, however, they should be able to resent the order if the mistakes happened on their fault, advises Fedotoff. That's where having a good, trustworthy supplier comes in handy.
You may occasionally get a complaint like this, but you shouldn't be fazed if you know your supplier's return policies, just as long as they're also reflected in your own return policies. If your policies differ from your suppliers', then you're again at fault.
If a customer returns the item as per both policies, the supplier should send a replacement with no extra cost to you. Make sure you're on top of the process and provide customers with regular status updates to avoid making them antsy.
Before you send the tracking code given to you by your supplier, check first if it's valid and for the correct order before you even pass it on to your customer. It's not a big deal if you're proactive and do some simple quality assurance before it becomes a problem. It'd be nice if we could all trust folks to do their jobs, but a little suspicion might just save you a lot of trouble later on.
As a dropshipper, you'll have little opportunity to reinforce your brand outside of your website and any social media marketing you do, which can be problematic. Some suppliers will pack your orders with branded marketing materials to emphasize the idea that you're the one actually sending items to the customer. "Having great visual identity, branding, and strong message is crucial for success of the stores these days," says Fedotoff.
Some dropshipping suppliers do this to be more competitive. You can make brand building a lot easier on yourself if you look for suppliers who offer this service.
Dropshipping is a great business model, but it isn't a magic carpet. You still have to do a lot of work before, during, and after the conversion to make sure each transaction goes off without a hitch. You can avoid most of the common problems if you keep in mind that your lack of inventory can work both for and against you.
Coordination with your dropshipping suppliers is the key to your success. If you want to continue being competitive in e-commerce, you have to keep customers happy by giving them the kind of service that they deserve and have come to expect.
What problems have you come across in your dealings with dropshipping suppliers? Let us know in the comments.