10 Dropshipping Mistakes That Can Destroy Your Business (And How To Prevent Them)

10 Dropshipping Mistakes That Can Destroy Your Business (And How To Prevent Them)

By JoAnne D. | eCommerce/Dropshipping

Dropshipping takes time to get right. You’re sure to make mistakes along the way. Today, I discuss common dropshipping mistakes and how to not do them.

Dropshipping is not a get-rich-quick scheme, no matter what so-called “gurus” say.

It may seem like the only things you need to bother yourself with are getting customers and effectively selling your products, but as actual experienced dropshippers will tell you, nothing could be further from the truth.

In today’s article, I’ll list down common dropshipping mistakes you’re probably making right now and how to avoid them.

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Common Dropshipping Mistakes

Selling Trademark/Copyrighted Goods

First, a disclaimer: I’m not a lawyer and don’t practice anything related to the law. The information below was obtained from extensive research on the topic. For any legal concerns, always consult a lawyer.

gavel and law books

Let me start with the seemingly obvious but often taken for granted rule: You cannot sell items that are registered trademarks or registered copyrights of another company without permission.

These can include but are not limited to characters (e.g., Disney characters, Marvel characters), sports teams (e.g., NBA teams, NFL teams), company logos (e.g., Nike, Starbucks), and even phrases (e.g., “Super Bowl,” “Let’s get ready to rumble”; if it sounds unbelievable, look it up).

If you want to sell them, you’ll have to get a license to sell, which can range anywhere from a few hundred dollars to tens or hundreds of thousands of dollars.

Chinese manufacturers are particularly notorious for producing items that have logos, images, and other trademark-protected elements. It may seem lucrative to dropship items like these, but it’s not worth risking a lawsuit, getting your site closed down, and being made to pay fees.

How to avoid making this mistake: Sell “white-label” items.

When looking for products to dropship in supplier websites, every time you see goods that are marked with well-known brands, especially luxury ones, just walk away.

White-label goods are those that are manufactured or produced that other companies can buy and rebrand as their own. Even if you don’t end up rebranding the products that you buy, it’s still wise to choose these items to dropship to avoid the legal hassles of selling trademarked/copyrighted goods.

Having Unrealistic Expectations

Dropshipping can be lucrative, yes. But that doesn’t mean you’re going to earn five figures in a month.

So many dropshippers start out with expectations that either set them up for disappointment or leave them unprepared for success.

Dropshipping takes time, effort, and plenty of learning to successfully profit. Even the most successful dropshippers encounter issues and obstacles before they got a sizable income from dropshipping. If you don’t take this into consideration, you might find yourself demotivated and give up before you even get the chance to succeed.

By contrast, setting too-conservative expectations will bite you in the rear if you do stumble upon success early in the game. If you happen upon a hit product (or products) and suddenly get a lot of orders, you can be caught off-guard and not know how to deal with large orders.

How to avoid making this mistake: Set realistic expectations for yourself and your website early on.

This is a tricky one because no one can see into the future. But you can always interact with other dropshippers, from rookies to veterans, when you join dropshippers’ forums. You’ll have a better idea of what to expect and how long before you can see certain milestones.

Structure your website in such that you can easily scale up your operations if you need to, but get rid of unnecessary bells and whistles. For example, you’ll want to have hosting that can accommodate a sudden increase in traffic, but you don’t want to subscribe to an email service plan to handle 10,000 emails a month.

You’ll want to hope for the best, but prepare for the worst.

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Posting Too-Optimistic Shipping Times

Shipping, in general, is a pain when dealing with dropshipping suppliers from China. You just never know when the shipment will arrive, especially if they use a method without tracking available.

Suppliers usually can’t tell how long shipment will take, either. They’ll normally place estimates with a wild range, like “10 to 30 days.”

desk calendar

While it’s not ideal to have long shipping times, what’s unacceptable is claiming a shorter delivery time than your supplier is able to accomplish. For example, stating on your site that the estimated delivery time for an item is “two weeks” when the supplier states that they deliver anywhere from “14 to 40 days” is asking for disgruntled customers and numerous refund requests.

How to avoid making this mistake:
1. Order the product yourself.
It’s hard to tell your customers what to expect when YOU don’t know what to expect.

Place your own order for the products you’re dropshipping so you can see how quickly an order actually gets processed and how long it takes before the shipping gets dispatched.

If you haven’t done this yet, there’s no better time to do this than now.

2. Clearly indicate how long they can expect their packages to be delivered.
Setting your customers’ expectations early on will save you from complaints later on.

If your supplier tells you it takes “10 to 30 days” to deliver a product, it’s better to place “21 to 30 days” instead. This way, they’re ready for the shipment to take a month to arrive, plus if the package comes in early, they’ll be more satisfied.

3. Don’t shy away from contacting your supplier.
Hopefully, you’ve chosen your supplier carefully and have a relationship with them.

When it seems like your shipments aren’t moving as expected, don’t hesitate to contact the supplier, even if your customer hasn’t contacted you about it. That way, when they do contact you, you’ll have something to update them with.

Plus, it’s just good practice to maintain open communication lines with your supplier. They’d want to know as well if you’re satisfied with their service so they can improve. And if it seems they don’t want to reply or address issues you have, then maybe it’s time to look for a new supplier.

Offering Various Shipping Fees

While we’re on the subject of shipping, let’s talk about shipping fees.

Chinese suppliers use a variety of shipping methods. The most popular one is ePacket, which offers the best value for money, but they can use anything from China Air Mail or EMS to DHL or FedEx.

If you offer multiple modes of shipping like your suppliers, you’ll have too many options on your website when most of your customers just want their items shipped at the lowest cost possible. Not to mention the trouble you’ll have when you’re dealing with multiple products, and thus more than one supplier.

How to avoid making this mistake:
1. Offer free shipping.
Adjust the prices of your items and factor in shipping costs into the cost of the product so you can offer free shipping. If you’re using ePacket, the difference in price won’t be that large, and you’ll get more satisfied customers in return, even if shipping takes longer.

2. If you want to offer faster shipping, offer a flat rate.
You don’t have to offer your customers all the shipping options that your supplier offers. It’s fine to offer the best one and then just charge a flat rate instead of charging different shipping fees.

This way, your customers will have a choice between free shipping but longer delivery times, or flat rate shipping for slightly more but shorter delivery times if they really want to get the product as soon as possible.

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Publishing Vague Or Generic Policies

There are numerous wordings of store policies available online, and you’re bound to find at least one that fits your business. It’s tempting to just copy and paste policies from other sites. After all, you’re all dealing in ecommerce.

The problem with this is that not all of their policies are applicable to your site. You may have the same product offerings, and you may even be writing for the same niche, but their policies may not be a good fit for what you want to offer on your site.

Worse, the policies you’re copying may not even be legally sound; that is, they may not hold up to a lawyer or a judge’s close scrutiny. It may not seem like a big deal for you now, but in case you have to deal with chargebacks in the future, you’ll have to have policies that have no loopholes and assure that you and your site are protected.

padlocked keyboard

How to avoid making this mistake: Research and rewrite your privacy, shipping, and return policies.

Be crystal clear about how you are going to use and protect your customers’ information, how long shipping takes, the shipping fees and how they vary, how long they have to return items (if you’ll allow returns), and how the process of refunding them will go and how long it will take.

If possible, find an attorney who specializes in laws covering small businesses and ask them to rewrite the policies in accordance with existing laws. This may have unexpected costs, but these are going to be worth it when you get your first chargeback claim.

Competing On Price

It’s tempting to undercut your competitors and offer the lowest prices in the market. After all, customers always want the lowest price, right?

As many dropshippers have found out the hard way, having price as a competitive advantage is not sustainable in the long run. Over time, as competition grows, the profit margins go down.

Price is only a sustainable competitive advantage if you are a big retailer (that is, your product catalog is in the tens of thousands or more). Otherwise, you’ll end up losing money in the long run.

How can this be, when you’re (theoretically) taking home a profit for each product sold?

Well, there are hidden costs of doing a dropshipping business.

There’s the cost of keeping your website running (which increases as traffic to your site increases), losses through force majeure, fraudulent transactions, and other causes, and other incidental costs that add up.

Plus, you have to deal with fluctuations in price set by your supplier due to normal market movements or because they’re coming up with new models.

How to avoid making this mistake: Offer higher-priced products to increase your profit margins.

Selling products with higher price points will give you the breathing room to set higher profit margins on your products. Make up for the difference in price by providing top-notch customer service, a website that’s easy to use, and plenty of high-value resources about the product via your blog.

If you can’t completely shift to high-ticket items, start offering a mix of low-ticket and high-ticket products so you can offset the lower profit margins on your low-ticket items.

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Not Factoring in Holidays

The Lunar New Year in China is a huge, nationwide celebration for them to go home to their loved ones, rest, and relax.

chinese lanterns

Why am I even bringing this up?

Every Lunar New Year, the entire Chinese workforce goes on holiday for one week.

That means that during this time, the banks are closed, delaying payment processing. The post offices and shipping services are closed, meaning nothing gets shipped out. Manufacturing facilities are closed, meaning no one is producing your items or even available for inquiries.

Some companies will even slow down their operations a couple of weeks in advance in anticipation of the holiday.

If you’re working with only China-based suppliers, then the best-case scenario you’re looking at would be delays in shipping of a week or more.

Worst-case scenario: Three weeks of no products shipping out and no orders being fulfilled.

How to avoid making this mistake:
1. Contact your suppliers in advance to know their holiday schedules.
Once you know for sure how long they plan to be closed, you can decide what steps to take.

2a. List the item as “in stock” but indicate a longer delivery time.
If a particular item isn’t a very big seller, you can choose to still list that item as in stock, but with a longer delivery time specified. This can deter customers who are interested but want the product sooner, and at the same time ensures that those who order it are aware of delays in shipping.

2b. Temporarily delist the item.
If an item is in demand, you don’t want your customers to be able to order it only to be disappointed. Indicate the item as “out of stock” or “backordered” to lessen negative feedback.

2c. Order a large number of the product in advance and send those out to customers who order during that period.
If your bestseller is affected by the holiday break, it may make sense for you to order a large quantity of the product weeks before your suppliers go on break and then ship those out to customers who order that product.

You may lose a little bit because you’ll have to pay the shipping costs for shipping the items to you plus the shipping cost to your customers, but you can make up for the difference by increasing the prices even by just 10%.

You might still lose a bit of profit during this time, but what’s important is your customers are satisfied and that you don’t have to close your store even if your suppliers go on holiday.

Relying Too Much On A Single Supplier

You’ve gone through the trouble of researching and sometimes talking to suppliers to find the best one. Then one day, they suddenly decide they don’t want to work with you anymore for any number of reasons.

Or, worst-case scenario, they go belly up.

Meanwhile, you have orders that need fulfilling and customers who are waiting.

Your options are to cancel the orders, frantically find another supplier to fulfill the orders or take the loss in case their price is higher and inform your customers that their orders will be delayed.

Neither option seems very appealing. Either way, your customers will have a bad experience.

How to avoid making this mistake: Always have a backup supplier.

When you’re initially looking for a supplier, it’s wise to choose a go-to supplier, which offers the best value for money and have open communication lines with. Aside from your go-to supplier, choose a backup supplier that can step in if something goes awry with your go-to supplier.

Instead of having a backup supplier, you can fulfill orders with multiple suppliers if their price and reliability are comparable. Be aware, though, that this might mean more work for you when listing the product on your website and when shipping it.

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Allowing Orders To Be Placed On Out Of Stock Items

Customers expect items that are listed as “in stock” on your site to be, well, in stock.

The problem is that sometimes you list the item as in stock when you supplier has actually run out.

Since you’re not in charge of inventory, you’re completely dependent on your supplier to update you with how many they have left of a particular item in their inventory. Some suppliers have a straightforward way of doing this via inventory management software, but others (surprisingly) don’t.

boxes in a warehouse

Even when you’re working with multiple suppliers, it’s still possible to run out of stock before you can update your website.

When this happens, you can cancel the order and apologize for the inconvenience, informing them that you ran out of stock before you can unlist the item.

Of course, this isn’t an ideal customer experience, so you can sweeten the apology by offering a similar product or a discount when the item does go back in stock.

But these are short-term solutions.

How to avoid making this mistake: Improve your inventory management.
How available their inventory count should be one of the things you look at in a supplier.

You’ll need to require your supplier to share their inventory count with you on a real-time basis. If they can’t provide you real-time information, at least have them update you daily, especially when inventory falls below a certain number.

Not Building A Relationship With Your Suppliers

At first, your relationship with your supplier might be a strictly supplier–dropshipper relationship. Your inquiries might be limited to product availability and shipping concerns, and your conversations may be limited to email, Skype, and phone conversations.

When your interactions are limited to virtual channels, it’s easy to take for granted how important your suppliers are to your business.

Remember, you are not the only dropshipper that they can work with, and they can easily terminate your relationship and decide not to work with you at any time and for any reason.

Maintaining a good relationship with your supplier has its benefits such as better prices and priority service, which you may be missing out on.

How to avoid making this mistake: Well, foster that relationship!

1. Always pay on time.
Start with the basics.

Having a good payment history with your supplier could earn you better prices for future orders.

2. Treat them with respect.
The most effective way to turn your suppliers off is to act like you own them.

Suppliers are dealing with other dropshippers and retailers, they’re managing inventory, they’re shipping out products. You don’t have monopoly over their time and products. Always keep that in mind when you’re contacting them.

3. Work together to solve issues instead of blaming the supplier.
There are always going to be risks and issues with dropshipping, as is the case with any business.

When problems arise, you want an ally in your supplier, not an enemy.

Regardless which party was at fault, the goal of your conversations with your supplier should not be about “Who is to blame?”; rather, it should be “What can we do to resolve this?” This approach is much more effective than merely passing the buck.

Bonus: Meet them personally.
This may not be a feasible option for everyone, considering the costs involved. But if there are exhibitions or trade fairs that are closer to home and your supplier is attending, try to arrange a meeting.

It may seem old-fashioned in today’s virtual marketplace, but showing your face to your supplier and having them know that you’re not merely an account number but a serious businessperson willing to invest time and money in building personal relations with your supplier.

Suppliers you’ve met personally are more likely to do more on their end to help you succeed in your business, like the best prices for their items and sometimes even first dibs on their new products and offerings.

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Final Thoughts

Dropshipping isn’t easy. Mistakes can be made by everyone, from the rookies to the veterans. Here’s a recap of the common dropshipping mistakes I listed in this article:

  • Selling Trademark/Copyrighted Goods
  • Having Unrealistic Expectations
  • Posting Too-Optimistic Shipping Times
  • Offering Various Shipping Fees
  • Publishing Vague Or Generic Policies
  • Competing On Price
  • Not Factoring in Holidays
  • Relying Too Much On A Single Supplier
  • Allowing Orders To Be Placed On Out Of Stock Items
  • Not Building A Relationship With Your Suppliers

 

And now let me leave you with one last reminder:

You’ll probably make other mistakes… but that’s okay.

What I just listed down are typical mistakes, but these aren’t the only mistakes you can make.

Don’t beat yourself up over these mistakes, or let them be a reason for you to give up.

Remember: the most successful dropshippers are the ones that embrace their mistakes and learn from them.

Have you tried dropshipping? What were the dropshipping mistakes you committed? What other mistakes would you add to this list? Share them in the comments!

About the Author

JoAnne is your average, everyday, sane stay-at-home mom who believes in the power of the internet to make dreams come true. She has an insatiable appetite for chocolate, as well as all things internet marketing. She keeps up with the latest trends in blogging, affiliate marketing, e-commerce, and more.