Top 10 Reasons Why Dropshipping Businesses Fail [Major Issues]

Small Update: I’ve got quite a few angry emails and comments since I wrote this article a few years ago… Like how dare I to say dropshipping businesses fail, like that’s not the case LOL.

Any business out there can fail, no plan is 100% bulletproof, even giants have died. So don’t tell me that dropshipping can’t fail.

There are plenty of forum threads across the web, from store owners complaining that they can’t even get one sale, or that the costs are too high and the margins too low, or that they can’t afford to pay for Shopify for months with 0 revenue.

All I’m saying is this, it’s your choice if you want to read this article or not, and you can do your own critical thinking about the subject.

If you blindly think that dropshipping businesses can’t fail, then save your angry comments and emails because they don’t get a reply from me anyway… I really don’t CARE.

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I don’t promote anything on this post, so there’s nothing for me to tain or to lose 😉

Cheers,
Stephen

Yes, unfortunately, many dropshipping businesses fail.

Why do I say that? Well because it’s the truth.

You see, there are many “gurus” on the Internet and especially on YouTube, that will tell you how wonderful dropshipping is, and how they are living their dreams on an island or some exotic country because of it.

But most of them are full of shit, sorry 🙂

All they do is promote their courses, which are “modestly” priced between $97 and $499, and they will sell you on the fake hype dream, that dropshipping will solve all your money problems.

Ha Ha… far from the truth my friend… and in this article, I will explain to you why dropshipping actually sucks and why dropshipping businesses fail.

Small Note: I’m mainly talking here about dropshipping with Shopify and Oberlo or Aliexpress with vendors from China. However, most of these points still apply, regardless of how you do dropshipping.

Why Would I Do That? 

Simple, because the fake “gurus” are actually making their “dream” money, by selling you crappy courses and not from actually dropshipping sites.

I see so many people especially beginners in Internet marketing, following their courses and failing hard while also losing a big chunk of money on buying their crap.

But first…for the people that don’t know what I’m talking about:

What Is Dropshipping?

To put it in simple terms, dropshipping is a system in which you are selling physical products on the internet, without having to worry about holding an inventory, shipping the products, etc. because someone else does that for you.

Basically, this is how it works:

1. You create an online store by using Shopify or WordPress, or any other eCommerce platform
2. You then search for cool and hot products that you would like to sell, from places like AliExpress
3. You add those products to your website
4. You set up a payment system
5. You send traffic to your website and wait for orders to arrive
6. When orders arrive you go to the vendor’s website and order the products and use your client’s address for the vendor to ship directly to them.
7. You talk to your customers and provide them with support for anything they need.

Of course, this is oversimplified, and it’s not an actual dropshipping guide, I might create one in the future if people are still interested in pursuing this business model.

So yeah, it sounds simple, so why doesn’t it work?

Well it works, but not for everybody, and only a few people get “lucky” in having a few dropshipping stores that are making them a nice profit every day.

And even if they get a nice profit every day they will still face all the other problems that I will talk about right now, and it doesn’t matter if you’re making a nice profit, you will still get encounter them, everyone who dropships does.

The Main Reasons Why Most Dropshipping Businesses Fail

1. Shipping Time

The most popular dropshipping method is to use Shopify to create a store, and then add products to it from AliExpress which has vendors from China who will directly ship the products to your clients. That sounds great in theory, but in practice, it’s another story.

The biggest issue with having vendors send the products to your client directly from China is the shipping time.

Most of the packages that are being sent by the vendors from China will reach their destination all over the world in about 4 to 5 weeks. That’s an INSANE amount of time to wait for a damn bamboo toothbrush, don’t you think?

Yes, China does have some sort of trade agreement with the U.S. regarding shipping times, so they have a special ePacket service where every product shipped from China will reach the U.S. in about 20 days.

WOW, such an improvement… I mean technically it’s better than having to wait 4-5 weeks, but in reality with Amazon shipping products in under 24h, it’s kinda hard to make your customer wait for nearly 20 days for their package.

I know that whenever I order something online if it doesn’t arrive at my doorstep in under 2 – 3 days, I don’t bother anymore, and search another website.

This is a MASSIVE downside to dropshipping with vendors from China.

Yes, there are people that will tell you to put messages all over your website, that shipping takes at least 20 days, etc… to inform your visitors upfront about the long shipping times, and also to be on the good side of PayPal, since they can close your account when they feel like it.

But guess what?

Most of the time, the visitor on your website won’t read every piece of text, especially if you hide it down in the footer, or make it too small to read.

Also after they order,  after about 7-10 days, they will want their package and will start messaging you about it, some of them even requesting a refund before they even receive the package, because of the long shipping time.

Oh, your customer wants to track their package?

They Can’t…

Well at least most of the time they can’t… simply because not every supplier from China will provide you with a tracking number or link, so you will have to explain now to your customer why you can’t give them one.

And if the supplier does have a tracking number and link, you will still need to install some kind of addon or plugin on your store in order to automate that and send it directly to your customer via email. And guess what? Most of them cost money or are too difficult to install and you will have to hire someone to do it for you.

2. Orders being split into multiple packages

Wait, what?

Yeah, most of the time if someone orders from your website multiple items, they won’t receive just 1 package with all the items they have ordered from you. Instead, they will receive 1 item today in 1 package, 2 items in another package 5 days later, and after 3 more days, they will receive the last item that they have purchased.

Ok, so you might be wondering…

WTF is up with that? It doesn’t make any sense…

Well, you should’ve known that if you have a big store where you feature products from different suppliers in China, not all products will be shipped at the same time and in the same package.

Instead, the products that your client ordered, will arrive at the destination at random times and in different packages, can you imagine the confusion that your customer will have when the package they receive only contains 1 item from the whole order?

Now you will have to talk with them via email, chat, Facebook, phone, etc…and assure them that they will receive the last of the products in a short while and that they come separately because you have different suppliers, etc.

Yes, there is a solution to that, but it costs…

Basically, you will need to have all of the products in every order to be handled by a warehouse and fulfillment service.

Of course, using a service like this costs extra money, and it can chew up your profit pretty quickly… but hey if you don’t want your products to be shipped individually by your Chinese suppliers, this is what you will have to do.

How much will a service like this cost? Well, it depends on the service you will choose, so I can’t really give you an example, but you can check out the following companies and see their price rates: Shipbob, RedStag, and Shipwire.

3. Small profit margins

Profits are not that great for many dropshipping stores… If you check Flippa for a bit you will see. Flippa is a website where people sell and buy websites, apps, stores, etc… and it’s the most popular one, anyway here are some Shopify stores that are using the dropship from AliExpress method:

See how most of them have to invest crazy amounts of money every month, and barely get anything back?

I would never invest close to $55,000 a month just to make $14,000 in profit, but that’s just me. Personally, I think there are many other great business models where you could make a $14,000 per month profit without having to risk and invest $55,000. Heck, you could get to $14,000 per month without spending a single dime on paid ads or have to buy others people’s products just to sell them a bit higher later on.

But anyway back to the issue…

You don’t have a large margin for error. What if you invest $13,435, and you make back only $7,111 because there were some unexpected refunds and returns involved? You will have to pay with your own money to cover those… and yeah it can happen:

What if you invest $13,000 in ads and PayPal decides to block your account for 6 months until you can provide further documents and resolve all your refunds and problems that your account will have? (Yeah that’s right, keeping PayPal happy is another beast altogether). How will you withdraw the money now and pay for ads and also order the products from the suppliers?

See how quickly things can get messed up?

That’s why I think dropshipping sucks. You don’t even promote your own product, yet you’re the one having to take all the risks.

4. Finding reliable suppliers

You know, it’s not enough to just order something from a supplier in China and expect everything to go smoothly every time you do it.

Instead, you want to build a great relationship with these people so that they can handle all your orders in a timely and professional manner.

Also, you would want to ask them not to include any invoices or promotional stuff inside the packages. Yes, some vendors will add little flyers in the packages in order to promote their business directly to your customers. That sucks.

So you really want to build and strengthen your relationship with your suppliers as much as possible.

But finding these great suppliers isn’t always easy… so you will need to do a lot of research and dig through a lot of crap in order to find them.

It can be worth it though since a reliable supplier can save you a lot of time and money down the line.

Most of the time though, people who do dropshipping don’t even care about talking with their suppliers directly, instead, they just rely on platforms like AliExpress and just order without even making contact with the vendor. This is not something you would want to do if you want your dropshipping business to survive.

At the very least, try and include in every order that you place with your suppliers this message: “I’m dropshipping. Please DO NOT put any invoices, promotions or your brand name logo in the shipments. Please ship as soon as possible for repeat business. Thank you!”

5. Returns & Refunds

Customer returns can be one of the biggest issues when doing dropshipping.

If someone bought a red t-shirt from your online store, but instead, received a blue t-shirt, they will want to return the blue t-shirt and get their money back or a red t-shirt.

So how do you do that if you don’t control anything? (More on that later)

Well, most of the time… you will have to just refund them with your own money, and tell them they can keep the product. In that case, almost 99% of your customers who wanted the refund will be more than happy… they get their money back and get to keep the product.

And that’s because you can just simply tell them to ship their product back to you…

Did you forget that you dropship directly from China? Their package will arrive from an address in China, and that’s the address they will use to try and return their product.

But…

Your suppliers from China will never accept returns just because your client changed their mind about an order. They might accept some returns if the item is faulty and not working properly, but never because an item was too small or it was a different color, etc… So yeah, you’re kinda screwed there.

If the item is faulty, your customers will have to go to the post office and send back a package all the way to China… can you imagine the costs of that? And also what would they think when they realize they just received some poor quality item from China at a much bigger price than usual?

There is a way… 

If you really want to receive the product back to you before you refund them the money, you will have to set up a P.O. box. Then you will give the P.O. box address to everyone who wants to return something, and when you receive the package from them, you can issue their refund.

But then again…you will need to spend extra money on a P.O. box.

So that’s why most of the time, it’s just easier to refund them the money directly from your PayPal account and just let them keep the product, is not worth the extra hassle and money that you might lose on setting up a P.O. box.

Too many people on the internet are talking about dropshipping and how it’s the latest trend in making money online and how easy it is to get started… yet they all fail to mention all these extra problems and extra money that you will have to spend just to make a little bit of profit.

6. Expensive / Unprofitable Ads

So you got your domain name, set up your store, and added the products you want to sell… now what?

Now comes the hardest part… 

You will need to get people to your store and convince them to buy your overpriced products, with a 20+ day shipping time. Good luck with that 🙂

But seriously, you will need to spend money on advertising your new store. Because it’s new, and more than likely you wouldn’t have done any SEO to it (not that many store owners bother with SEO anyway).

All the gurus will tell you to start a Facebook Ad campaign. It’s so easy to start and you only need to spend $5 a day.

Haha…

Listen, there are many pro marketers out there, that are failing miserably at Facebook ads, even big companies. Why? Because Facebook ads are hit or miss these days, with so many changes to their algorithm and also the increase in price.

For example, yesterday you spent $18 on ads that brought you 6 new customers to your online store, but today you spent $50+ in ads and nobody even added your stuff to the cart.

Why? Nobody knows…

Well, I have an idea… it’s basically because people aren’t in the mood to shop when they are browsing Facebook, they want to see baby pictures and funny videos with cats. They don’t really want to buy your funny toilet seat cover. Or it might be because you are targeting the wrong people or your products are priced too high, or your ads suck, or your website design is crap… etc

The only thing I know is that you will more than likely lose money on Facebook Ads, and most of the time you won’t even see a conversion or give up way before it happens because Facebook burned up all your ad money.

It’s weird how everybody who starts doing dropshipping immediately goes and creates an ad campaign on Facebook, without even realizing that there are much better ways to get cheap website traffic without breaking the piggie bank.

But fine… 

Facebook can work sometimes and it will bring you a high number of orders if you do it right. But for that to happen you will need to be a pro at creating FB ads, have dozens of campaigns, and test different ads and targeting options all day every day. Oh, and to invest and burn through a lot of money until you realize what works and what doesn’t.

7. Counterfeit & Poor Quality Goods

It comes as no surprise that most products that are being sold on AliExpress from China are of poor quality and some of them are even counterfeit products that will probably get you into trouble if you start selling them on your website.

Finding good quality products that you can sell on your website is a huge problem and not many people are realizing this.

Most of the new dropship store owners don’t care or at least they don’t think that the quality of the products they sell has any impact on their business. Which is of course wrong. Because if you sell cheap and poor quality products, you will get a higher amount of refunds and nasty comments on your social media profile pages, and thus you will also lose future customers.

So think carefully before you add a product to your store just because it’s super cheap and you can make a much bigger profit, instead of going with the much more expensive version of that product from another vendor.

Finding quality products to sell is tough, you will have to do all the research and carefully select items that have a good number of positive reviews and recommendations from other people who bought them. And most of the time you will have to pay extra for a product just because it’s worth it and it has better reviews than its cheaper version.

8. High Competition

Do you have a great idea to open up a store with cute toys for cats and use suppliers who dropship from China? Awesome… you and other 120432 (not a real number, but you get the point) people want to create the exact same store as you. Good luck.

Imagine the competition you will have when doing Facebook Ads, and how expensive it will get because everyone else trying to advertise in the same niche as you and targeting probably the same people as you.

I mean you could probably think of some obscure niche, and create a store around that, but if it’s too obscure then not many people will know about it and show interest in the products you will sell, so you will have a harder time trying to get orders.

The high competition also affects shipping times from the suppliers and also sometimes you will see suppliers increasing their product costs, simply because they get too many orders, and they see an opportunity to make even more money if they raise the price just a little bit.

Ok…let’s say you don’t care about all the other people who do dropshipping… and you think that they aren’t that many out there anyway… (they are though).

I hope you haven’t forgotten about Amazon, eBay, Walmart, etc…

I mean Amazon alone will almost kill your whole business, simply because most people who are shopping online will go to Amazon or Google first, and not on Facebook…

When people want to buy things online, they don’t even go and search for it on Google anymore, in fact, 55 percent of online shoppers start their product searches on Amazon directly. 

Amazon has become the biggest search engine after Google and YouTube, so imagine now how your little store can compete with that…

Add eBay, Walmart, and all other big shopping websites into the mix, and you can quickly see why you won’t be able to get insane amounts of orders on your shop every day.

9. Branding & Trust

Here’s the deal…

Your shop is new, the name of your store is not familiar to people, and your products can be found on a bunch of other websites too.

Branding plays a huge part in eCommerce, and any serious shop owner knows this.

If you can’t have your own brand, your own exclusive items, your own design on the products… then you can’t really create a big brand for your store. And without branding, you won’t make that many sales.

Did you know that Amazon has a conversion rate of an incredible 74% for their Prime members? And for the users without Prime, Amazon still has an amazing conversion rate of 13%.

Do you know the average conversion rate for other online retailers? It’s 3%. So basically people buy from Amazon 4 times more than from any other online shop. Not even talking about the Prime members here, with their insane 74% conversion rate.

So why is that?

Because of branding and trust. You see, Amazon invested a lot into their brand, and their service is phenomenal. They come up with new ideas and solutions to make online shopping an easier experience for the customer, and they are always at the top of that.

P.S: Jeff Bezos (Amazon CEO) is now the richest man on the planet, with a net worth of 142.5 billion USD (2018). That’s because his company is always innovating and investing a lot in its brand so that people trust it more and order more from them.

10. You Don’t Control Shit

Uhm… yeah it’s a bit harsh I know… but it’s true.

With Dropshipping, you don’t control anything. 

Is your store hosted on Shopify? Great… you don’t have access to the server, and all you can do is use their basic online editor to make changes to your website, without really controlling your website files and data.

The products are not yours, instead, they are being made and shipped from suppliers in Asia. So you have no control over:

• the design
• the branding of the product
• the product pictures
• the labels on the product and on the package
• the shipping time

You didn’t do any SEO, or don’t know how to bring traffic to your website other than using Facebook ads? Awesome… you don’t even control your audience and you will have to rely on Facebook every day. If Facebook goes down, you won’t receive any more orders, so you might as well close down your store.

Are you now starting to realize how important having control over your business is? And why if you do dropshipping you have almost no control over anything?

I mean, in case you forgot, dropshipping is a business, and most of the time it’s even recommended to form a company before you start.

So would you start investing in a business that you have little to no control over? I certainly wouldn’t… so why would you do it?

In conclusion… I Hate Dropshipping

Yeah, I do. I think there are much better ways to make money online than doing dropship. There aren’t even that many good reasons to start doing it if you’re a newbie anyway. It’s not really easier than regular affiliate marketing, or other methods.

It’s a mystery to me why so many people jump on the dropship train, hoping they will get rich overnight, as some of the “gurus” out there are saying.

I hate it because:

• You have terrible shipping time for your customers
• The products that you sell are not yours and are of poor quality
• You have no control over anything
• You have to invest a lot in paid traffic at first and barely break even
• The profit margin is too low
• Your clients could buy the same product at the same price as yours on Amazon, and Amazon will convert better than you.

So should you start doing dropshipping? 

I would recommend you not to, as you can see, from everything I wrote so far in this article, there are many reasons why most dropshipping businesses fail. Instead, you should start with affiliate marketing first, or create your own products to sell, or simply anything else. Heck, even working at McDonald’s could be a better option than dropshipping, especially since some people are only making $1 profit for every product they sell, after having to pay for ads, products, extra services, extra add-ons, taxes, etc…

I mean you don’t really have to go and apply for work at McDonald’s but the point stands…it would be better to focus on something else to make money online like: affiliate marketing, your own service, starting a blog, etc… just my opinion.

Yeah, maybe I’ve been a bit too critical of this whole business model, and maybe you might think that I’m writing this post because I’m bitter or because I haven’t been successful in dropshipping (which in reality I haven’t, if you count success as being able to make over $20k a month in pure profit without all the hassle you have with dropshipping, otherwise what’s so great at making $100-$500 in profit per month via dropshipping if you could make more doing something else?).

If dropshipping was so good, why are all the people selling their stores on Flippa and also on Shopify exchange? Yeah, it might’ve been awesome 2-3 years ago, but not anymore. There are some people who are successful and run a few good stores, but they are a small percentage.

You know what? If you’re really into dropshipping and want to start something related to dropshipping, it would be much easier for you to create and sell something to all the people that do dropshipping instead of doing it yourself. Think about Shopify themes, apps, plugins, extra services, etc… it would be much better in the long run. Plus you own your own product/business and keep all the profits.

I’ve written this whole article because I was fed up with all the lies that people are spreading on YouTube, forums, websites etc… Not that many people are writing about the bad stuff, which in my mind are more important to know for a newbie, than anything else.

So I hope you enjoyed this post, and if you wanted to start dropshipping (or you already have) and I broke your dreams… then you should know that I’m sorry… I’m sorry that you had to start dropshipping when you could’ve done anything else with your time and money. Check out my other article: 15 legit ways to make money online.

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