{"id":13083,"date":"2021-11-15T13:13:04","date_gmt":"2021-11-15T21:13:04","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dcl-v3\/?p=13083"},"modified":"2023-11-01T11:56:22","modified_gmt":"2023-11-01T18:56:22","slug":"challenges-of-dropshipping","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/shipping\/challenges-of-dropshipping\/","title":{"rendered":"The Challenges of\u00a0Dropshipping\u00a0\u00a0"},"content":{"rendered":"

A fulfillment method that is growing in popularity,\u00a0<\/span>dropshipping<\/span><\/a>\u00a0can simplify inventory management for ecommerce sellers. It reduces storage and picking fees, plus it eliminates the risk of having items on hand that just won\u2019t sell.\u00a0<\/span>\u00a0<\/span><\/p>\n

With the increase in customer preference for online shopping the global\u00a0dropshipping\u00a0market is expected to reach over\u00a0<\/span>$557\u00a0bilion\u00a0by 2025<\/span><\/a>, with a compound annual growth rate (CAGR) of 28.8% from 2019 to 2025.\u00a0<\/span>\u00a0<\/span><\/p>\n

\u201cWe estimate that more than 75% of all ecommerce sales will go through a drop-shipment or marketplace. If we continue to see ecommerce grow this rapidly, we predict the same number of ecommerce sales from last year will be done through\u00a0dropshipping\u00a0in a couple of years. It\u2019s going to be a massive amount.\u201d\u00a0 \u2014Jorrit\u00a0Steinz, CEO of Channel Engine<\/span>\u00a0<\/span><\/p>\n

There are many reasons why many ecommerce brands are taking on this fulfillment method. There are obvious benefits for retailers, but also many for sellers. What some sellers don\u2019t see are the big challenges that come with\u00a0dropshipping. Here are some of the biggest hurdles to a successful\u00a0dropshipping\u00a0strategy and how to overcome them.\u00a0<\/span>\u00a0<\/span><\/p>\n

Case Study: How Aura Frame tripled their year-over-year sales volumes with new\u00a0dropshipping\u00a0accounts and found easier inventory planning in the meantime.\u00a0<\/span>Read more<\/span><\/a>.\u00a0<\/span>\u00a0<\/span><\/p>\n

Get Good at Giving Up\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

Outsourcing your fulfillment means giving up a lot of control. The benefits of working with a reputable, reliable 3PL far outweigh the costs, but it can be an adjustment to outsource if you\u2019re used to fulfilling products yourself.\u00a0<\/span>\u00a0<\/span><\/p>\n

It\u2019s\u00a0really important\u00a0to source a great partner when\u00a0<\/span>outsourcing fulfillment<\/span><\/a>. It\u2019s\u00a0pretty hard\u00a0to explain to your customers when it\u2019s not your fault that products weren\u2019t in\u00a0stock, or\u00a0fulfilled accurately. Even if it is the fulfillment provider\u2019s issue at the end of the\u00a0day,\u00a0you\u2019ll take the heat (and lose the customer).\u00a0<\/span>\u00a0<\/span><\/p>\n

\u201cThe number one challenge to\u00a0dropshipping\u00a0is finding a fulfillment provider that has the same standards as your brand, and that treats your brand as if it were their own. To tackle this, a brand must get an SLA in place and guard the brand standards as much as possible. Communicate often to maintain the standards you want,\u00a0i.e\u00a0reasonable cutoff times, delivery time (carrier), on-time return handling, customer contact, etc.\u201d \u2014Richard\u00a0Noordervliet, Partner and Fulfilment Manager at Channel Engine\u00a0<\/span>\u00a0<\/span><\/p>\n

When you outsource, it\u2019s imperative that you choose wisely. Look for a provider who has a proven track record of\u00a0dropshipping\u00a0for similar products or who have relationships with the retailers you want to have too.\u00a0<\/span>\u00a0<\/span><\/p>\n

If you’re still fulfilling all products yourself, read these\u00a0<\/span>eight signs that it\u2019s time to outsource fulfillment<\/span><\/a>.\u00a0<\/span>\u00a0<\/span><\/p>\n

Low Volume Means Lower Margins<\/span><\/b>\u00a0<\/span><\/p>\n

Timing is everything in fulfillment.\u00a0Dropshipping\u00a0is a great model for certain types of products, but also certain order volume. If your volume is too low and you\u2019re not already outsourcing your fulfillment, adding a supply chain partner to dropship for you will cut into your profit margins.\u00a0<\/span>\u00a0<\/span><\/p>\n

In order to\u00a0dropship\u00a0you\u2019ll want to be shipping an average of XXXXX per month for it to be worth the cost. On average, most midsized 3PLs require XXXXX orders per month to start shipping.\u00a0<\/span>\u00a0<\/span><\/p>\n

There’s an added issue to low volume\u00a0dropshipping, as opposed to regular DTC or B2B fulfillment.\u00a0Typically\u00a0dropshipping\u00a0works best with low-cost goods, like consumables that get purchased often or CPG items that people use up and buy again. Low-cost items that have a low average monthly volume mean lower margins. Don\u2019t eat into slim profits just to hop on a new fulfillment trend. Try scaling in other channels first before\u00a0dropshipping. Once you have a solid foundation of steady order volume, month after month, it will work in your favor.\u00a0<\/span>\u00a0<\/span><\/p>\n

Read more about how to quantify the\u00a0<\/span>pros and cons of\u00a0dropshipping<\/span><\/a>.\u00a0<\/span>\u00a0<\/span><\/p>\n

Finding a Reliable Supplier<\/span><\/b>\u00a0<\/span><\/p>\n

One of the main aspects of\u00a0dropshipping\u00a0is speed. Goods and products need to be moved from supplier to fulfillment center quickly, sometimes on relatively short notice.\u00a0<\/span>\u00a0<\/span><\/p>\n

Working with a supplier that is reliably quick is key to making this fulfillment method work. If your supplier can\u2019t make or ship your orders on time you risk\u00a0<\/span>stockouts,<\/span><\/a>\u00a0which is a very fast way to lose customers. Not only can you lose customers this way,\u00a0you\u2019ll\u00a0lose revenue which can be debilitating if it\u2019s a perennial\u00a0occurrence.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Be Clear with Customers about Shipping Times<\/span><\/b>\u00a0<\/span><\/p>\n

Dropshipping\u00a0is faster than traditional fulfillment in some ways, but it doesn\u2019t mean faster shipping to customers. Transit times and last-mile delivery times are still the same. Some sellers who start\u00a0dropshipping\u00a0may not understand that and think the speed of getting products from suppliers to the\u00a0fulfillment\u00a0center or retailer equals faster overall transit times to customers. That\u2019s just not true.\u00a0<\/span>\u00a0<\/span><\/p>\n

A few myths about\u00a0dropshipping:<\/span>\u00a0<\/span><\/p>\n