ith the emergence of dropshipping as a viable source of income, people from all different walks of life are getting started. Everyone has a chance to make it, but some are starting with more skills and knowledge than others. While all dropshippers are sure to make mistakes, some of them can be avoided from the beginning with a bit of research. In order to help make things easier for you to get started, we have compiled this list of the most common dropshipping mistakes, as well as some ideas for how to avoid them.
Note: This list is not necessarily in any specific order since the severity of these dropshipping mistakes will vary with each person's circumstances.
#1 - Not Vetting Your Suppliers Or Ordering Samples
When you agree to drop ship for another company, you are entering a business arrangement. You are outsourcing your supply chain, and asking another business to take care of your warehousing and fulfillment. Even though the nature of dropshipping seems casual for the most part, this arrangement is still binding and has implications that come with it.
One of the most common dropshipping mistakes that beginners make is to not vet their suppliers. They find suppliers online and assume everything will work out. No messages are exchanged. No samples are ordered, and you have no idea what the product looks or feels like in person. You don't know what your customers are going to experience.
This is how most beginner dropshippers run their businesses, and then they are surprised when something goes wrong. Either they have spent a bunch of money advertising a low-quality product, the supplier is unreliable in their order fulfillment, or the product is soon-to-be discontinued. Either way, the product, and supplier are not worth your time, but you never found out because you jumped right to selling.
How can you avoid this? Do your research. Find out what you can about the company. Who manages it? How often do they reply to emails? How long does shipping take? What does the packaging look like when it arrives? Will the company be selling this product for the foreseeable future? These are all important questions worth finding the answers to before you spend your time and money building your business around the products. Will it take longer? Sure. But, the small delay can save you hours and hours of frustration later on. Better to discover the problems at the beginning, than when you have a stack of late orders and an inbox full of angry customers.
#2 - Relying Entirely On Paid Advertising
Many new dropshippers come up with an idea for a store or product and quickly realize that the hard part is marketing it. Even if you have the best idea in the world, it is still going to take some work to get people to see it the way you do. The temptation for beginners is to jump right into Facebook ads and begin spending money advertising. While this is a great way of scaling up once your business once you find out what is working, it can be a very expensive way to find out if something is worth scaling. There are less expensive ways to gather that information.
When you're starting a consumer-facing business, you want to build an audience. An audience is a group of people that follow along with your business and stay up-to-date with your new products and sales. They're the ones that tell their friends and family all about your amazing products. Apple's audience is the group that waits outside the Apple store for a night or two before the new iPhone comes out. I have friends who go to Ikea just to spend the day, without intending to buy anything. This is the power of building a loyal audience.
Your marketing plan should be diversified. You can pay for advertising, but you should have more tools in your arsenal. Posting content on Instagram or TikTok is completely free, and you can reach millions of people through those platforms. Email marketing is nearly free when you are starting out and have a small mailing list. You can offer your customers bounce-back coupons to get them to buy something else a few weeks later, or you can offer them a discount to pass on to their friends and family. While this does eat up a bit of your margin, you don't have to pay for these discounts out-of-pocket. Over time, you'll see more and more of your sales coming from unpaid advertising, and this can cause your business to scale even faster.
#3 - Not Knowing The Numbers
I'm a big fan of the TV Show Shark Tank, a reality show where entrepreneurs go to pitch their businesses to a panel of highly successful investors. In the show, entrepreneurs who don't know the numbers behind their business often get criticized and leave without a deal. They are on the show asking for investment, often hundreds of thousands of dollars, but they don't even know what their profit margins are. They don't know what their year-over-year revenue growth is. Simply put, they don't have a good grasp on the numbers.
Trying to run a business without knowing your numbers is like trying to land a plane with a blindfold on. You might miraculously pull it off, but you are much less likely to safely arrive at your final destination. When you are running a dropshipping business, there are several numbers (metrics) that you need to know. You need to know your average gross profit margin. In other words, the amount of revenue you have leftover after paying for the cost of the goods you sold (usually expressed in a percentage). Another important metric is your average order revenue. As in, the average amount of money a customer spends on their order. This, combined with your gross margin %, will let you know how much money you have leftover (on average) for marketing, administrative expenses, and everything else.
Since you are running an online store when dropshipping, you will also want to know your conversion rate. This reflects the % of visitors on your website that ends up purchasing something. If you have 100 visitors, but only 1 of them purchases something, then your conversion ratio is 1%. Conversion rates vary, but the overall average for consumer retail industries is about 3%. If your conversion rate is small (<1.5%), then it might indicate that you are missing something. Your store's design might be off, your products might not be desirable, or you might just be receiving traffic that isn't very interested.
Either way, if you don't know your numbers, then you won't know how to accurately gauge the health of your business. This can be one of the costliest dropshipping mistakes you can make. Do what you need to do to get your numbers mapped out!
#4 - Quitting Too Early
Due to the simplicity of the business model, and how quickly you can get started, dropshipping has become a magnet for new entrepreneurs. The promises of starting a business with a few hundred dollars and making millions in a short period of time are everywhere. Can it be done? Absolutely. But most people aren't going to be successful right off the bat. And if you want that level of success, it's going to take a lot of work. You might as well learn from the dropshipping mistakes of others, and save yourself the frustration.
When you're starting out in e-commerce, there is no shortage of things you need to learn. You'll need to learn how to manage a supply chain. You need to (or should) learn how to build an audience through social media. You need to learn how to support your customers, and how to handle all of the problems they will throw at you. You'll also need to learn the basics of digital marketing. Naturally, any one of these areas can cause you problems, and make it seem like your business idea isn't going to work. However, this doesn't mean you should give up.
While you don't want to quit too late and waste your time and money on an idea that isn't working, quitting too early doesn't work either. What you want to do is to work on your idea with a committed work ethic, and keep an objective account of what is and isn't working. Is your idea failing, or is it your marketing efforts? Do consumers dislike your products, or do they not drawn in by the photos? The more you can separate the individual issues that are holding you back from success, the better. This will also allow you to salvage some lessons from the experience regardless of how it turns out. If you fail, that's okay. But find out why you failed, learn from it, and try again with a different approach.
#5 - Committing Before Testing
Would you buy a car without taking it on a test drive? Or how about going on a hike without looking at a map of where you're going? The answers to these questions might seem obvious, but there are still people committing to products and business ideas before testing their assumptions. Let's say you have an idea for a product that you think would be a hit. What is the next logical step? Should you send off a deposit to have it manufactured, spend some money on developing a store, and start a big Facebook ad campaign to drive awareness? Probably not.
As you can probably guess by now, the correct approach is to start smaller. You want to test your ideas before you make a large financial commitment to them. Eric Ries, author of The Lean Startup, advocates using a build-measure-learn approach. First, you build a minimum viable product (MVP) that accomplishes the basic premise of your idea. Then, you measure how people react to it. Do they love it or were they underwhelmed? Did they have any constructive feedback for it, or were they simply indifferent? Next, you can try repeating the cycle. Build out the next version, test it, and compare the results to the originals. This should help you learn what direction to move in next.
The reason this approach is so important is that you are able to keep your investment low while you find out what is actually working. If you commit to building out the complete version of your product right from the beginning, and something doesn't work, you'll have way more variables to test. This will complicate the process, and you won't be sure what is causing your success or failure. It's better to start small, have patience, and build something that can grow on its own. Otherwise, by the time you realize why we mentioned this in our list of dropshipping mistakes you will have already wasted your time and money.
#6 - Lacking Focus
Okay, so you just made the decision to get involved with e-commerce. You ask yourself "what's next?", and you decide that you should create an online store. You can't quite decide what you want to sell, so you decide that you should play it safe and sell everything you can find. This way your customers can tell you what they like and dislike. You import hundreds or thousands of products to your store from a bunch of different categories. Good move? Wrong. Big mistake.
One of the biggest dropshipping mistakes you can make is to start a store without any focus. Without a product niche, your customers won't know why they should trust you. Are you an electronics store? A fashion outlet? An arts and crafts store? A home decor store? If you try to focus on everything, you are really focusing on nothing. There's nothing that separates you from all of the other low-budget e-commerce stores that were started by someone looking to make a quick buck.
The e-commerce industry has been developing rapidly, and people are beginning to have more demands than ever before. Consumers want more than products, they want a customer experience. They want to purchase products from brands that they believe in. Sure, Amazon and Apple can sell just about anything they want to. But you aren't Apple or Amazon. You can't afford to be that innovative and spread out in the beginning. You need a focus for your store. Even Amazon started off as a book marketplace before expanding. This focus will help you craft your brand's personality, your social media content, and will help you relate to the segment of the market that you are looking to serve.
"The man who chases two rabbits, catches neither."
Now that you know what the most common dropshipping mistakes are, it's time to apply that knowledge to a real-life project! DropCommerce is the best platform to get started on if you want to open a dropshipping store. We believe that dropshipping should be transparent, which is why we've set up our dropshipping network to display the real names of suppliers. This means you're able to do your own research on the brands you're thinking about partnering with. We also use 100% Canadian and American suppliers, so you're always getting fast shipping and higher quality products.
So what are you waiting for? You can always sign up for a free trial, browse our selection, and get a feel for whether or now we're the best platform for you. You can find us on the Shopify and BigCommerce app stores!