Dropshipping as a system has been a savior for many ecommerce businesses both big and small. But ask a seasoned ecommerce entrepreneur who has used dropshipping for any length of time you will hear dropshipping for it’s own share of troubles and challenges.
Dropshipper Fraud – Not all dropshippers do business with your level of integrity and commitment. You might find that few dropshippers are plain bad at communication or delivery accuracy. The dropshipper with the right inventory might fall back on delivery and vice versa. Luckily you can weed out good dropshippers from the bad ones.
- Check for reviews of dropshipper online
- Ask the dropshipper for referral contact numbers
- Test relationships before you scale. Test the dropshipper for a small assignment and then give bigger assignments as they prove their value and service
- Separate Class A drop shippers from the rest based on fees, minimum order, industry knowledge, support staff, responsiveness to email orders, and availability of data feeds.
Handling Returns and Delivery – Sometimes your brand can take a hit if the drop shipper delivers a wrong order to the customer. The customer might take to social media and harm your brand for no mistake of yours. It may also happen that you offer free returns to your customer but the drop shipper might not be comfortable with the idea of taking a used product.
The best solution to solve such disagreements is to have a clearly documented service level agreement which foresees all future problems. You should even update the SLA with new learnings you have gained by working with your dropshippers and customers. A good SLA document will have clear terms on returns, refunds, delivery accuracy, delivery time, damaged goods and communication protocol which both your drop shipper and you agree upon.
You can’t compete on price well – All the convenience you get because of outsourcing fulfillment and inventory comes at a cost. Dropshippers offer a price which is usually above the wholesale price. This depletes your margin as compared to competitors who maintain their own inventory. You might have to sell the product at a higher price than your competition or compromise on margins to stay competitive.
Shipping Costs are higher – If your customer orders your products which needs to be sourced from 2 or more dropshippers then you have to pay for shipping costs to each dropshipper while you are expected to offer free shipping to your end customer. This makes it extremely difficult for you to get decent margins on products. You can overcome this is by offering free shipping to the customer only when she reaches a minimum order value.
Your customer service is out of your hand – Your customers expect you to solve their problems when your dropshipper screws up the delivery. With products sourcing from multiple dropshippers it is quite possible for few of them to under deliver on their promise once in a while. This is completely out of your hand. Few alternatives to this are
- Keep inventory of your most popular products to control customer service
- Work only with A class dropshippers
- Streamline communication with a multi channel inventory sync tool
Selling products you haven’t seen – When you are using dropshipper highly likely that you haven’t seen and felt the products yourself. It is difficult to sell products which you haven’t seen. Product photography, content and customer support is best possible when you have seen or used the product yourself. This is usually not possible when you are working with a dropshipper. You can solve this problem to a certain extent by asking your supplier to send few samples to get better understanding of the product. You can even buy out a sample of each product you plan to sell if borrowing is not possible. This way you can provide your customer better content to make decisions on.
Inventory sync across all dropshippers – Most dropshippers don’t update their inventory numbers. Few update the numbers using a product feed upload but the numbers are usually not real time. When such a lapse happens possibility of a product being out of stock when a customer places order is possible. This is terrible user experience for the end user and damages brand reputation. You can solve this problem using API sync across all your dropshippers. You can achieve this using HubLogix and Channelape.