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Why Do Dropshipping Stores Fail? Here Are the Reasons!

Blog, eCommerce Insights | October 6, 2020

With nearly $3 billion turned over in eCommerce so far in 2020, it’s easy to see why many are joining the ranks of these digital entrepreneurs in order to create their own dropshipping enterprise.

 

However, according to experts, around 20% of new businesses fail during their first two years. 90% dropshipping stores fail during the first year. What can you do to ensure your dropshipping store is successful? Let’s hit the takeaway answer first before we get into the details.

 

Why do dropshipping stores fail?

  • Little understanding of the risks involved
  • Inadequate preparation
  • Lack of research
  • Poor choice of niche or products
  • Lengthy shipping timescales
  • Poor customer experience
  • Unreliable suppliers
  • Financial errors

 

So to start with, let’s delve into the reasons your new dropshipping venture may have hit a wall and what you can do to make sure you not only survive, but build a successful store and more importantly, avoid costly dropshipping mistakes.

 

1. Little understanding of the risks involved

According to those in the know, around only 10% of entrepreneurs starting an eCommerce store have high levels of success during their first year.

 

So why is that figure so low?

 

One of the biggest reasons for the early failure of a dropshipping business is because many new store owners have most likely gone ahead too quickly without looking closely at, or understanding the risks involved in running a successful dropshipping business.

 

This can also lead to another peril of speed when getting a dropshipping business up and running, which is a lack of proper preparation.

 

It’s important to make sure you have a good handle on your finances, cash projections, and break-even points to give your dropshipping business the best chance of success.

 

2. Inadequate preparation

Many new dropshippers launch straight into a store by shadowing others and selling exactly the same products. It might be they have lifted information from other dropshipping sites and even maybe working with the same suppliers.

 

This means that your store will not have a unique offering which could lead to fewer sales.

 

Although selling identical products is not necessarily a bad thing, displaying the same product images and descriptions mean your store will lack uniqueness and could lead to customers shopping elsewhere

 

This brings us neatly on to another factor of being unprepared which is lack of research.

 

3. Lack of research

Anyone starting a dropshipping store needs to make sure they research adequately before launching.

 

It is, of course, tempting to get your store doors open as quickly as possible, but spending some time actively working on these factors will make sure you have the best chance of success.

 

  • Research the niche or product area adequately
  • Fully research the products within that niche
  • Conduct research manually and also use software to help you find the best selling products

 

If you don’t research fully you may find yourself with the wrong kind of products or niche and a dropshipping store failure in your hands.

 

Let’s look below at some of the problems you might encounter if you fail to research properly.

 

4. Poor choice of products or niche

Another feature of the lack of preparation is not spending enough time choosing your niche or product.

 

For instance, picking a niche that you may not have an interest in can lead to difficulty in writing product descriptions and blog posts and other necessary customer sales copy.

 

Another reason some dropshippers choose products easily lead to disputes.  For example, if you sell fragile or low-quality products, you could be in for a world of returns, bad reviews, and customer issues.

 

Choosing a product with a specific USP (unique selling point) which can’t be guaranteed will lead to bad customer experience.

 

The holy grail of dropshipping is finding a product with uniqueness. If your product can be found at local supermarket or Walmart, don’t dropship it – you could find yourself competing against these giants in page rankings.

 

5. Lengthy shipping timescales

Due to the ever-shorter amazon delivery experience, online buyers are just not willing to wait days and weeks for products.

 

Many dropshippers are still working on a 20 day turn around which in these modern times is just too long for busy customers.

 

Too long delivery timescales are not only lengthy in terms of getting products out, but can also lead to your purchasers losing patience which can result in claim disputes and negative reviews.

 

If possible use the best dropshipping agents who will work with you to deliver in a maximum of 10 days.

 

6.Poor customer experience

As in every business, the “customer is king”, and probably more so in any kind of retail type venture.

 

Your customers’ experience starts with a professional-looking website, regular and relevant social posting, and all aspects of their journey from order to delivery.

 

The competition for creating ‘engaging customer stories’ via video and other media-rich platforms such as Pinterest and Instagram is becoming more intense, so by working on a complete customer experience strategy you will get ahead of the competition and future proof your store.

 

7. Unreliable suppliers

Finding awesome dropshipping agents and other suppliers is crucial to the success of your store.

 

No matter how engaging your social media presence or your ability to generate sales, if you are constantly being let down by unreliable suppliers, your customers will be disappointed and you will end up with returns.

 

The sales funnel you have sweat blood over trying to build, could come crashing down around you if you don’t thoroughly research your suppliers and make sure they can deliver the service they advertise.

 

8. Lack of a robust social media strategy

Building up your social media platforms is important for a dropshipping business as any marketeer understands, however failure to scale your offerings with little or no paid Facebook or Instagram ads, for instance, will leave the door open for your competitors.

 

It’s great that you are building followers, but if none of them is converting then it can lead to failure of your store.

 

Consistent posting is how you need to make sure you convert all that interest into paying customers

To make sure you are seeing substantial ROI.

 

9. Financial errors

Many issues with stores that are struggling are linked to finance.

 

It could be you didn’t take into account the cost of overseas shipping or simply you aren’t correctly managing your finances. It’s very likely that failing dropshipping stores have no idea of their sales revenue, or how much they are paying out in business costs, such as advertising, purchasing their products, and more. The reserve percentage and rolling cycle with PayPal could be another reason that sellers failing to make both ends meet.

 

Dropship store owners who don’t know how to calculate profit margins, for instance, are likely to hit a wall and may potentially feel like giving up.

 

Make sure you understand the simple rules of business to give yourself the best chance of success.

 

And finally…

Make sure that you are one of the thriving eCommerce stores enjoying repeat business, happy customers willing to tell the world how good your service and product is, alongside choosing top-rated products, will give you that competitive edge.

 

Although dropshipping is the choice of many and a low-cost barrier to entry, creating some competition, you can make sure your eCommerce store not only stands the test of time but goes from strength to strength.