More and more start-up companies in Germany are using DropShipping to fulfill their dream of their own online business. This is no wonder, because only with DropShipping it is possible to offer hundreds of products for sale in your own online shop or on eBay without having to buy a single product in advance.
The reasons for the failure of young companies are manifold
Whoever decides to found their own company naturally wishes to achieve maximum success with the business. At the very least, this means that the company will survive economically and generate enough money to provide the operator with a comfortable life. If this succeeds, then most of the wishes and dreams that led at the beginning to the fact that one has decided at all for a foundation come true.
If it does not succeed instead, then unfortunately one often has to struggle for a long time with the consequences and consequences of failure. So there is a lot to be said for dealing at an early stage with the question of why young companies fail at all. In this way, strategies can be developed in good time to avoid failure.
If we first take a rather general look at the reasons why young companies fail, we usually encounter gaps and deficiencies in terms of financing. The companies run out of financial breath during the start-up phase because the resulting costs were underestimated and the incoming revenues were overestimated. As a DropShipping dealer, you are more on the safe side here, as there are no special costs during the start-up and start-up phase and no high costs during ongoing operations.
Also DropShippers are not protected against missteps
Scheit can be a drop shipping company of course anyway. Here we often have to deal with very specific causes. These relate partly to e-commerce in general and partly to the drop shipping trading model in particular.
Among the causes based on the general characteristics of e-commerce, the lack of or incomplete market analysis should be mentioned above all. Those who, as founders, do not deal extensively with the potential of the targeted market risk financial shipwrecks. A lack of product knowledge has also brought down many a start-up project. If we turn our attention to those causes that relate specifically to drop shipping, then those reasons that are related to the suppliers are particularly noticeable here.
The manufacturers and wholesalers that DropShipping works with have a great responsibility and are instrumental in determining whether business is developing positively or negatively. Therefore, it is important to look here when it comes to finding and combating the most frequent mistakes at the start of drop shipping companies in advance.
Who knows the worst mistakes, can protect himself consciously and effectively
With founding mistakes, it’s such a thing. This includes the most common causes that can lead to the failure of a young company shortly after its launch. Inexperienced founders have the disadvantage that they often do not know these potentials well enough. This hardly gives them a chance to prepare adequately for what is to come. Unfortunately, one usually only has the appropriate experience when one has been in business for several years.
However, it is precisely then that knowledge about mistakes in setting up a company is of little use. Of course, such founders and entrepreneurs are particularly familiar with the causes of failure, as they have already experienced the economic collapse of their companies. Therefore we should find a way to know the most common mistakes of founders in the field of DropShipping without having to experience them ourselves. If this happens, then it is usually already too late.
Now, of course, one could turn to experienced entrepreneurs and ask them to accompany one’s own founding and start-up process and, above all, to make sure that not too many mistakes occur. The problem, however, is that on the one hand there are not very many entrepreneurs who are willing to provide such information, and on the other hand such entrepreneurs also work constantly rather than devote their precious time to advising and supporting future competitors. In search of a better and more realistic way, you will be interested in the following 10 sources of error, which we would like to present to you and give you along the way.
Successful learning from the mistakes of other DropShippers
We have compiled for you the most frequent and most serious causes of the failure of young companies. We have been guided by the e-commerce industry on the one hand and the DropShipping trading model on the other. Therefore, you do not expect unimportant commonplaces, but instead a very differentiated elaboration of the most frequent sources of error in exactly the business area you have chosen.
We recommend that you study the presented errors, reasons and causes very carefully. Try to internalize the individual sources of interference deeply and pay particular attention to the many recommendations in the text that will help you avoid these mistakes. With this you lay the stable foundation stone for a long-term stable company that is economically well off and provides you financially with everything you need.
You should avoid these errors at all costs
In order for a DropShipping trade to start successfully, it is important to exclude potential sources of error. Below are the ten most common mistakes made by inexperienced DropShipping resellers. Those who take these sources of error into account when setting up their own drop shipping business and consistently avoid them have good prospects of a profitable and flourishing company in the long term.
Market and consumer interests disregarded
Products cannot be sold without a reasonable demand on the market and a corresponding interest on the part of consumers. Before you decide on a specific trading area, you should carefully analyze the market potential. In this context, do not only examine whether the respective goods are in high demand, but also get an accurate impression of the competition and the current prices on the market.
If you succeed in discovering a promising niche that has so far been little occupied, then your chances of successful sales will increase. If you have well-founded doubts about the success potential of products, then you prefer to choose a different product area.
Too little time is invested in the selection of suppliers
Anyone who’s too quick for a DropShipping Suppliers who risks overlooking crucial details. Every potential drop-shipping provider has to be put through its paces before starting a concrete cooperation. This requires comprehensive research, which ideally also involves personal discussions. One way to get in touch with potential suppliers is through appropriate trade fairs and commercial exhibitions.
Extensively test the efficiency of the potential wholesaler. Make some test orders and especially check the quality of the products and the reliability of the delivery. Question existing customers of the respective supplier about their Experience with DropShipping at the company and search the Internet for opinions and ratings.
Conditions with suppliers are not well negotiated
The profit is made on the purchase. Remember this old principle of successful merchants and check the purchase prices of your DropShipping suppliers carefully. Wrong shame in negotiating list prices is out of place here. Your counterpart is an experienced dealer and will not feel attacked by an open request for special discounts and better prices.
However, do not only consider the pure product price, but also agree the costs and fees for shipping and handling with your suppliers. Please also talk about minimum order quantities and any surcharges for small quantities that may apply. These conditions must in any case be clearly agreed before the start of the cooperation, as they are very decisive for your future profits.
Products are traded that you don’t understand.
When selecting a product area, you should not be guided solely by market opportunities and achievable profit margins. Make sure that you have as much personal reference as possible to your future product range. Keep in mind that you can describe and document products that you know well much better. As a specialist stranger, the compilation of a consumer-oriented assortment would already present you with an almost unsolvable task.
When choosing a specific product group, remember that you need to answer customer questions regularly, both before and after the purchase. If you decide on products that interest you personally, you will follow the markets, the technical innovations and the trends anyway and will not have to invest additional working time for this.
The costs in the DropShipping trade are underestimated
Those who opt for a business model based on drop shipping often have the low start-up costs in mind. Even if this business model requires considerably less capital than a comparable concept in classic trading, you will still have to bear various costs. You should be aware of these and take them carefully into account in your planning. Think, for example, of the software and design of your future online shop and the expenses for programming interfaces to the respective suppliers.
In addition, calculate the costs of setting up your future workplace, creating business stationery and include the advertising and marketing expenses necessary to make your future shop known on the Internet. Although drop shipping allows you to dispense with a warehouse and staff for warehousing and shipping, you should consider early on who can support you in handling customer inquiries and support tasks and what this support will cost you.
No regulations are made with return of goods
If you sell products on the Internet to private customers, then you are legally obliged to grant the buyer a 14-day right of return. Remember that this right does not apply between you and your DropShipping supplier. This is due to the fact that there is trade between merchants here and that in this environment the rules of private consumer protection do not apply. Under certain circumstances it may be possible to agree an extraordinary right of return with the DropShipping supplier.
If your supplier is not prepared to do this, you should plan to sell returns on eBay. Keep in mind that you will not normally achieve the originally planned sales price with such returns. Please also clarify with your DropShipping suppliers how to proceed in warranty and guarantee cases. In any case, agree to whom the customer can return a defective product during the warranty period and how it will be replaced.
Communication with the supplier is inadequate
In order to convince yourself of the efficiency of a drop shipping supplier of your choice, you should personally and locally get an exact picture of the company of the future partner. Although today a large part of commercial communication is handled by telephone or e-mail, personal contact, especially at the beginning of the cooperation, cannot be replaced by anything else. In direct dialogue, you have better opportunities to negotiate concrete prices and conditions.
In the premises of your potential supplier you can get a comprehensive picture of the seriousness and efficiency of the company. Check whether the products offered are actually in the warehouse and have the processing structures and processes in the company explained to you. Pay particular attention to how quickly incoming orders are processed and ordered goods shipped.
The amount of work is underestimated
Online trading via drop shipping involves considerably less processing effort than traditional mail order trading. However, even the modern form of online trading cannot do without planning and structure. It is therefore imperative that you plan in indispensable work steps and increased time requirements.
On the one hand, you should not underestimate the effort involved in the careful care of prospective buyers and customers. On the other hand, the business relationship with your drop shipping suppliers can also involve a greater amount of work if, for example, inventories have to be transferred manually instead of being updated via a data interface.
The ability of the goods to be delivered is not checked optimally.
As a drop-shipping online retailer, it is your responsibility to verify the delivery capability of the products you offer. If a product is not available or only available late, this is due to your reputation as an Internet trader. When trading drop-shipping products on eBay, even the seller guidelines oblige you as a seller to make sure that the products can be shipped immediately after the sale.
The consequences of delayed availability of products can also affect you economically. For example, if a customer orders two products, one of which is not available on schedule, you usually pay twice the shipping costs.
Goods with high return rates are selected
Product returns are part of the daily routine of every online retailer. Both the law and the general rules for customer friendliness require an unconditional right of return of at least 14 days. In many cases, returned goods can no longer be sold regularly, but must instead be sold elsewhere, usually at a lower price. The resulting losses are to be borne by the online merchant himself.
Against this background, the product areas envisaged should also be reviewed with regard to the return rate to be expected. The market knows of various product categories which are particularly susceptible to returns and can therefore be classified as unsuitable for drop shipping. An example of this is the clothing sector. Here, the return rates can reach up to 40 percent in some cases.
If you know the most serious mistakes, then you are in the best position to avoid them consistently. To complete the picture, we provide you in our guidebook in addition 7 stumbling blocks on the road to success in front of you. So you are optimally prepared to do everything right.
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