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DropShipping: The 10 Most Common Startup Errors

More and more people wanting to start a business in Germany are using DropShipping to fulfill their dream of their own online business. This is also no wonder, because only with DropShipping is it possible to offer hundreds of products for sale in your own online shop or on eBay without having to buy a single one in advance.

 

There are many reasons for the failure of young companies

Whoever decides to set up their own company naturally wishes to achieve maximum success with the company. This at least means that the company will survive economically and generate enough money in the process to enable the operator to live a comfortable life. If this succeeds, most of the wishes and dreams that led to the decision to start a business at the beginning will 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 addressing the question of what causes young companies to fail at an early stage. In this way, strategies can be developed in good time to avoid failure.

If we first take a more general look at the reasons why young companies fail, then we usually come across gaps and deficiencies in terms of funding. The companies ran out of financial breath during the start-up phase because the costs incurred were underestimated and the income received was overestimated. As a dropshipping retailer, you are on the safe side here, as there are no special costs during the founding and start-up phase and no high costs during ongoing operations.

 

DropShippers are also not protected against missteps

Of course, a dropshipping company can still go wrong. Here we are often dealing with very specific causes. These relate partly to e-commerce in general and partly to the drop shipping retail model in particular.

Among the causes based on general characteristics of e-commerce, the missing or incomplete market analysis should be mentioned. Founders who do not deal in detail with the potential of the target market risk financial shipwreck. A lack of product knowledge has also brought down quite a few start-up projects. If we turn to those causes that relate specifically to DropShipping, then above all those reasons that are related to the suppliers become apparent.

The manufacturers and wholesalers with whom you work in the context of DropShipping bear a great deal of responsibility and are crucially involved in the question of whether business will develop positively or negatively. You should therefore urgently focus your attention when it comes to finding and combating the most common mistakes when starting up a drop shipping company in advance.

 


 

Those who know the worst mistakes can protect themselves consciously and effectively

It is one of those things with founding errors. This includes the most common causes that can lead to a young company failing shortly after it starts. Inexperienced founders have the disadvantage that they often do not yet know this potential well enough. This gives them little chance to adequately prepare for what is in store for them. Unfortunately, you usually only have relevant experience after you have been in the business for a few years.

However, it is precisely then that the knowledge about founding errors is of little use. Those founders and entrepreneurs who have already seen their companies collapse from an economic point of view are of course particularly familiar with such causes of failure. We should therefore definitely find a way to know the most common mistakes made by founders in the area of ​​drop shipping without having to experience them first. If this happens, then it is usually too late.

Now, of course, you could turn to experienced entrepreneurs and ask them to accompany your own founding and start-up process and, above all, to make sure that not too many mistakes happen. Here, however, the problem arises that, on the one hand, there are not very many entrepreneurs who are accordingly willing to provide information and, on the other hand, they also work constantly, rather than devoting their precious time to advising and supporting future competitors. In the search for a better and more realistic way, you will be interested in the following 10 sources of error, which we would like to introduce to you and give you along the way.

 

Successfully learn from the mistakes of other DropShippers

We have compiled the most common and most serious causes of failure in young companies for you. In doing so, we were guided on the one hand by the e-commerce industry and on the other by the drop shipping retail model. You therefore do not expect unimportant generalities, but instead a very differentiated elaboration of the most frequent sources of error in exactly the business area you have decided on.

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 errors. With this you lay the stable foundation stone for a long-term stable company that is economically in good shape and financially provides you with everything you need.

 


 

  

You should definitely avoid these mistakes

In order for a DropShipping trade to start really successfully, it is important to exclude potential sources of error. Below we introduce you to the ten most common mistakes made by inexperienced DropShipping sellers. Those who consider these sources of error when setting up their own DropShipping business and consistently avoid them have good prospects for a profitable and long-term flourishing company.

 

Mistake 1:
Disregarded market and consumer interests

Products cannot be sold without a reasonable need in the market and a corresponding interest among consumers. Before you decide on a specific trading area, you should carefully analyze the market potential. In this context, 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 not yet been occupied, your chances of successful sales increase. If you have well-founded doubts about the potential for success of products, then you should opt for a different product area.

 

Mistake 2:
Too little time is invested in the selection of suppliers

Who is going too fast for one DropShipping suppliers decides who risks overlooking crucial details. Every potential DropShipping provider must be put through its paces before starting a specific cooperation. This requires extensive research, which ideally also involves personal discussions. Appropriate trade fairs and commercial exhibitions are one way of getting in contact with potential suppliers.

Test the capabilities of the potential wholesaler extensively. Make some test orders, most importantly, check the quality of the products and the reliability of the delivery. Ask existing customers of the respective supplier about theirs Experience with DropShipping with the company and do research on the internet for opinions and reviews.

 


 

Mistake 3:
The conditions with suppliers are not well negotiated

The profit is made when shopping. Keep this old principle of successful merchants in mind and carefully review the purchase prices from your DropShipping suppliers. There is no place here for false shame when negotiating list prices. Your counterpart is an experienced dealer and will not feel offended by an open request for special discounts and better prices.

Do not only consider the pure product price, but also agree the costs and fees for shipping and handling with your suppliers. Talk about minimum order quantities and any applicable surcharges for small quantities. In any case, these conditions must be clearly agreed before the start of the cooperation, as they are very decisive for your future profits.

 

Mistake 4:
Products are traded about which one does not understand anything

When choosing a product area, you should not be guided solely by market opportunities and the profit margins that can be achieved. Make sure that you have a personal connection to your future range as far as possible. Remember that products that you are familiar with can be described and documented much better. As a non-specialist, putting together a consumer-friendly range would be an almost impossible task.

When deciding on a particular product group, keep in mind that you will have to answer customer questions on a regular basis, 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 you will not have to invest any additional working time.

 


 

Mistake 5:
The costs of drop shipping are underestimated

Anyone who opts for a business model based on DropShipping often has the low start-up costs in mind. Even if this business model requires significantly less capital than a comparable concept in traditional retail, you will still have to pay different costs. You should definitely know these and carefully consider them 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 for setting up your future workplace, for the creation of business stationery and also include the expenses for advertising and marketing that are necessary to make your future shop known on the Internet. Although you can do without a warehouse and employees for warehousing and shipping with DropShipping, you should think early about who can help you with handling customer inquiries and support tasks and what this support will cost you.

 

Error 6:
There are no regulations for the return of goods

If you sell products to private customers on the Internet, you are legally obliged to give the buyer a 14-day right of return. It is important to note that this right does not apply between you and your DropShipping supplier. This is due to the fact that business people are trading here and that in this environment the rules of private consumer protection do not apply. Under certain circumstances it is possible to arrange an extraordinary right of return with the DropShipping supplier.

If your supplier is not ready to do this, then you should plan to sell returned goods on eBay. Please note that you will usually not achieve the originally planned sales price with such returns. Make sure to clarify with your DropShipping supplier how to proceed in warranty and guarantee cases. In any case, agree to whom the customer can send a defective product back during the guarantee period and how he will receive a replacement.

 


 

Error 7:
Communication with the supplier is poor

In order to convince yourself of the efficiency of a DropShipping supplier of your shortlist, you should get an exact picture of the company of the future partner personally and on site. Even though a large part of commercial communication today is handled by telephone or e-mail, there is no substitute for personal contact, especially at the beginning of a collaboration. In direct dialogue, you have better opportunities to negotiate specific prices and conditions.

In the company premises of your potential supplier you can get a comprehensive picture of the seriousness and efficiency of the company. Check whether the products on offer are actually in the warehouse and have the handling structures and processes in the company explained to you. Pay particular attention to how quickly incoming orders are processed and ordered goods are dispatched.

 

Error 8:
The workload is underestimated

Online trading via drop shipping is associated with significantly less processing effort than traditional mail order business. However, even the modern form of online trading cannot do without planning and structure. It is therefore essential to plan indispensable work steps and an increased time requirement.

On the one hand, you shouldn't underestimate the effort involved in carefully caring for 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, stocks of goods do not have to be updated via a data interface but must be transferred manually.

 


 

Error 9:
The ability to deliver the goods is not checked optimally

As a drop shipping online retailer, it is your responsibility to convince yourself of the delivery capability of the products you offer. If a product is not available or is only available late, it will fall back on your reputation as an internet retailer. When trading drop-shipping products on eBay, you as the seller are even obliged by the guidelines for sellers to ensure that the products can be dispatched immediately after they have been sold.

The consequences of delayed availability of products can also hit you economically. For example, if a customer orders two products, one of which is not available on schedule, you will usually be charged twice the shipping costs.

 

Error 10:
Goods with high return rates are selected

Returning products is part of the everyday work 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 instead have to be sold elsewhere, usually at a lower price. The online retailer has to bear the resulting losses himself.

Against this background, the product areas envisaged should also be checked with regard to the return rate to be expected. The market knows various product categories that are particularly susceptible to returns and can therefore be classified as unsuitable for drop shipping. One example of this is clothing. Here the return rates sometimes reach up to 40 percent.

 


 

If you know the worst mistakes, then you are in the best position to consistently avoid them. To complete the picture, we also provide you with our guide 7 stumbling blocks on the way to success in front. So you are optimally prepared to do everything right.

 

About the author Sebastian Huke