What are the cons of running a drop shipping business?

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What are the cons of running a drop shipping business?
#business #cons #drop #running #shipping
  • Profile picture of the author antis
    1) Low profit margins.
    2) Not everything depends on you. If your supplier will make a mistake, everything goes on you.
    3) Difficult refund process
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  • Profile picture of the author jmferret
    Returns, refunds, confused orders etc.
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  • Profile picture of the author Importexport
    Originally Posted by felisitie View Post

    What are the cons of running a drop shipping business?
    In answer to your question about the cons of dropshipping as a business model, I would suggest you think seriously about the pathetically low profit margins usually earned from dropshipping.

    This is not just my opinion, you will find countless posts on WF talking about the low margins. When responding to one such post, a dropship aficionado spoke about his 20% margin!!!!! That margin is pathetic compared to the huge margins you can get by buying even small quantities direct from manufacturers in China.

    People using dropshippers often do so because they lack the funds to purchase stock for sale and they lack the confidence to purchase stock that they have not yet received an order for.

    Without the need to carry any inventory or even handle the goods, dropshipping can be a relatively easy way to run a small retail business with very little outlay.

    BUT....... Now to show that this is not just my opinion, here are a few quotes from other threads on this subject:

    "All the products I was interested in were being sold cheaper on eBay than I could buy them for from dropshippers. So, my question is does anyone here make money with dropshipping?"

    "Why would you Drop ship when you can import and have full control over your inventory. It doesn't make sense."

    "Explore China , You leaving a lot of money on the table trust me on this.
    My first experience in China blew my mind ....If you get a chance to go over there do it. Your mind will spin because you'll see things in China for $5-$10 that are selling in Wal-Mart for $200-$300 ..... There is no reason why you can not do the same as them just in your own local market and your own product.
    In a nut shell China is where the big profits are made. .... When you import and CONTROL the goods you CONTROL the price. .... When you buy from middle men your always buying at inflated prices."


    "Customer returns. By far the biggest issue when dropshipping. Remember, Dropshippers DO NOT accept returns on items unless the item is faulty (some may accept item exchanges, though I have never come across one that accepts a return just because the end consumer changes his/her mind). When you buy from a Dropshipper it is classed as a Business to Business transaction (B2B), and the consumer protection laws do not apply in B2B transactions."


    This last quote was in the context of the need to have sufficient funds to cover inventory, because if customers change their minds, maybe due to a model upgrade just released, you have to refund and suddenly finance those refunds.

    You can buy small quantities direct from manufacturers at genuine ex-factory prices if you take the right approach, but for maximum profits you need to avoid traders, wholesalers, and dropshippers.

    Walter Hay.
    "If you think education is expensive - consider the cost of ignorance."
    Signature
    Don't just slap on a label. Build a GREAT BRAND https://Labelsthatexploit.com Safe sourcing and easy importing from 41 countries globally. https://provenglobalsourcing.com
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  • Profile picture of the author kor420
    I'm making quite a bit drop shipping. I read all these posts every where, and it turned me off for several years. I decided to give it a shot and i wish i would have done this sooner! I think most people that write about how drop shipping sucks, are you can't make money from it has never done the research to find a legit drop shipping source, or drop shipping from a retail stores, or just dont know what they are doing.

    My markup is 50% on every item i sell. If i get an item from my source for $1,300, and i mark it up %50, then i sell it on amazon for $1,950. When it sells, amazon takes 15% because of category i list in, then i pay my source $1,300 and i pocket $357.50.

    If i pay 0.99 at the source, i markup 50% + i add $2 to cover the amazon fee and i list it for $3.48. When it sells, i'll pay my source $0.99. Amazon take a $1 and i pocket $1.49.

    Even adding on 50%, i'm still coming under the lowest price on amazon for 80% of the items i have listed. I have got messages from my competitors asking for my source, which i respond "Commercial Secrete".

    My current goals.

    Save the money and buy my best selling products at wholesale.
    Have a professional website built to eliminate the need for amazon.
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  • Profile picture of the author GowebMkt
    Im thinking of setting up a Shopify online store.....and and have products drop shipped from banggood.com

    Ill just mark up the prices from 15 to 50% to see how that works....then place ads on Facebook.....posts on related FB groups....and possible place ads in relevant magazines.
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    • Profile picture of the author Importexport
      Originally Posted by GowebMkt View Post

      Im thinking of setting up a Shopify online store.....and and have products drop shipped from banggood.com

      Ill just mark up the prices from 15 to 50% to see how that works....then place ads on Facebook.....posts on related FB groups....and possible place ads in relevant magazines.
      Maybe you should consider a different business model:
      • bangood.com compete with their own customers.
      • Their discount for dropshippers is 20%. Then you have to deduct your costs.
      • You could probably make more from their affiliate program. That's probably why the forum so often has people breaking the rules and posting affiliate links for bangood.
      The different business model I suggest is to import small quantities direct from manufacturers in China. I teach how to safely source. How to be sure you are dealing with the real manufacturers, not with the traders who pretend to be manufacturers.

      If you buy direct you will get the best prices, but if you buy from traders or wholesalers you are throwing a big part of the profit potential down the drain.

      Walter Hay.
      "If you think education is expensive - consider the cost of ignorance."
      Signature
      Don't just slap on a label. Build a GREAT BRAND https://Labelsthatexploit.com Safe sourcing and easy importing from 41 countries globally. https://provenglobalsourcing.com
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  • Profile picture of the author Synnuh
    In to follow. I'm considering dropshipping. 15% to 20% margins are still better than the 8.5% I get from Amazon.
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  • Profile picture of the author violet0176
    All of the above can go wrong if you're using the wrong suppliers and there are ways to avoid all of the above when drop shipping.

    It's all about finding the 'right' niche and finding the 'right' suppliers that will meet or exceed your needs as a Reseller. If you partner with actual manufacturers, you will often receive the same pricing as Resellers that buy in small/medium bulk which will result in 30-50% profit margins, depending on the product.

    I'm not much of a gambler, so the idea of buying large quantities of a product with no guarantee if or when it will sell is not appealing. That outlook has more to do with my bottom line rather than "confidence." If you're relying on others for product(rather than creating your own), drop shipping is just an overall accommodating business model and a great way to research and learn the ropes of starting a small business. After a product has shown success, it's definitely a smart idea to invest in it and buy in bulk, as I have done with a few products.

    Where people often go wrong in drop shipping is in dealing with scammers and third party retailers rather than legitimate manufacturers and distributors. Do your research and vetting thoroughly.
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    • Profile picture of the author Importexport
      I would like to add some more to the post #4 I made.

      I have taught hundreds of people, mostly newbies, how to safely source small and large quantities direct from genuine manufacturers, then import them the hassle-free way.

      The margins are way above dropship resellers' wildest dreams. There is a low budget alternative to dropshipping that gives those big margins.

      The low budget alternative I suggest newbies consider is to buy small quantities direct from overseas manufacturers at genuine ex-factory prices. You can get huge margins by buying even small quantities direct from manufacturers in China. Here is an email from one who has done just that, on a budget of less than $300:
      "...... was able to successfully import an order from China. Not only that but it was also a "sample order" for less than 300.00. A 300% mark up has allowed to get initial investment back and I have 70% of my inventory left. " Email on file for FTC inspection if required.

      Here's a post by Shellg on Warrior Forum: "
      I was gonna do dropshipping till I found how small the margins are. Now I have started importing straight from the factory in China and Im selling at 5 X my cost."

      Buying large quantities is not necessary, but if you don't do your market research first, you are gambling, regardless of the order value.

      Walter Hay.
      "If you think education is expensive - consider the cost of ignorance."

      Signature
      Don't just slap on a label. Build a GREAT BRAND https://Labelsthatexploit.com Safe sourcing and easy importing from 41 countries globally. https://provenglobalsourcing.com
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  • Profile picture of the author Oziboomer
    There is nothing wrong with doing a mixture of all supply methods as long as it meets customer needs.

    There are circumstances where supplying your own product or a value-added product to a customer makes sense.

    Other times there are opportunities to drop ship.

    It is designing the model that works best for you where you will get the best results.

    I'll give you a couple of real life examples of where drop shipping did make a shed load of cash.

    A client had been buying processed or value added products from us for a period of time and we were known to them as a supplier of a particular product.

    Their usual supplier could not meet their demands for a large order...nor could we with what we were holding in stock.

    There were serious consequences for my clients if they failed to meet deadlines to supply a product to a national chain who had begun a media campaign promoting a particular product.

    All my competitors had insufficient stock to meet the order requirements.

    I just drop shipped all the competitor's stock from three suppliers who were bitter rivals to my client and made over $12K for three 5 minute phone calls and emails to organise the drop.

    Another time I supplied a warship that was docked in port and was desperate for a particular product. The big supplier would not process a foreign government credit card over the phone so I processed the payment and organised the couriers to take the product to the ship before it left port on the next high tide.

    5 minutes work and a transfer of funds....another healthy profit.

    These might seem extreme to some people but the world is getting smaller and it is the people who you have a reputation with or can build a relationship with that can change your life.

    if you are thinking of drop shipping small items with minimal profit then DON'T.

    Not to exclude Walter Hay whose book I have and who I look up to for solid info on importing but you can do both.

    Build a real business.

    It is all about running a profitable business.

    If that business requires you to sell a product at a lower profit than what could be got by sourcing then they must sell the drop shipped product but more importantly they must be professional in business and develop their businesses accordingly.

    At the earliest opportunity take the next step.

    It is about moving up the chain.

    When you find your comfort zone.

    Don't stop there!

    Take it up a level and then another.

    Best regards,

    Ozi
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    • Profile picture of the author antis
      Originally Posted by Oziboomer View Post

      There is nothing wrong with doing a mixture of all supply methods as long as it meets customer needs.

      There are circumstances where supplying your own product or a value-added product to a customer makes sense.

      Other times there are opportunities to drop ship.

      It is designing the model that works best for you where you will get the best results.

      I'll give you a couple of real life examples of where drop shipping did make a shed load of cash.

      A client had been buying processed or value added products from us for a period of time and we were known to them as a supplier of a particular product.

      Their usual supplier could not meet their demands for a large order...nor could we with what we were holding in stock.

      There were serious consequences for my clients if they failed to meet deadlines to supply a product to a national chain who had begun a media campaign promoting a particular product.

      All my competitors had insufficient stock to meet the order requirements.

      I just drop shipped all the competitor's stock from three suppliers who were bitter rivals to my client and made over $12K for three 5 minute phone calls and emails to organise the drop.

      Another time I supplied a warship that was docked in port and was desperate for a particular product. The big supplier would not process a foreign government credit card over the phone so I processed the payment and organised the couriers to take the product to the ship before it left port on the next high tide.

      5 minutes work and a transfer of funds....another healthy profit.

      These might seem extreme to some people but the world is getting smaller and it is the people who you have a reputation with or can build a relationship with that can change your life.

      if you are thinking of drop shipping small items with minimal profit then DON'T.

      Not to exclude Walter Hay whose book I have and who I look up to for solid info on importing but you can do both.

      Build a real business.

      It is all about running a profitable business.

      If that business requires you to sell a product at a lower profit than what could be got by sourcing then they must sell the drop shipped product but more importantly they must be professional in business and develop their businesses accordingly.

      At the earliest opportunity take the next step.

      It is about moving up the chain.

      When you find your comfort zone.

      Don't stop there!

      Take it up a level and then another.

      Best regards,

      Ozi
      Even if the profit margins are minimal, you can still have a great dropshipping business if you have a very fast turnover rate
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      • Profile picture of the author Oziboomer
        Originally Posted by antis View Post

        Even if the profit margins are minimal, you can still have a great dropshipping business if you have a very fast turnover rate
        Depends on how you define great business.

        If it is hands off totally automated and the returns and support are either outsourced or totally controlled then maybe.

        If you've got to do any of the administration and there is a mass of sales with issues then not so good I'd say.

        Best regards,

        Ozi
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      • Profile picture of the author Importexport
        Originally Posted by antis View Post

        Even if the profit margins are minimal, you can still have a great dropshipping business if you have a very fast turnover rate
        That is a very big IF. Oziboomer is right in saying that it would have to be totally automated then maybe it could be a great business.

        Walter Hay.
        "If you think education is expensive - consider the cost of ignorance."

        Signature
        Don't just slap on a label. Build a GREAT BRAND https://Labelsthatexploit.com Safe sourcing and easy importing from 41 countries globally. https://provenglobalsourcing.com
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  • Profile picture of the author startup
    Originally Posted by felisitie View Post

    What are the cons of running a drop shipping business?
    Pros outweigh cons if done correctly...learn with Amazon /eBay arbitrage ..then step up to bigger profit sources....I haver used some that provided profits of $100-$350+ per sale

    Step at a time...you can do it !
    Signature

    Maverick Arbitrage Secrets - If you can follow a simple, step by step blueprint, you can start your own Product Arbitrage Business, starting with ZERO cash, today! http://www.warriorforum.com/warrior-...inventory.html

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  • Profile picture of the author johnbrent606
    - Since you don’t own the inventory, you usually can’t control packaging and can’t include coupons or offers to boost return business.
    - There are different fees from different companies for drop shipping, so do your research. You don’t want shipping costs to be so high that it turns away customers.
    - You won’t get as good a deal on products because you’re ordering one at a time as opposed to buying in bulk.
    - Selling multiple products from multiple suppliers can result in a significant drop-ship fee for the customer.
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  • Profile picture of the author GeorgeyBoy
    I run an E-commerce store on Ebay.

    Yes profit margins are tight, hence why I've developed a business model around selling high volume of products (100's of sales a day)

    Not only does this model get around the issue of low profit, but high volume also boosts your credibility; buyers will trust you more, and so will Ebay. You'll get tons of positive feedbacks, which will lead to Top rated status.

    Top rated Status has a nock on effect and produces more sales.

    As your reputation increases, you can then start upping your prices.
    Signature

    Start generating 100's of sales a day on Ebay virtually on autopilot https://georgek.sendlane.com/view/ebay-course

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  • Profile picture of the author Importexport
    Originally Posted by kor420 View Post

    I'm making quite a bit drop shipping. I read all these posts every where, and it turned me off for several years. I decided to give it a shot and i wish i would have done this sooner! I think most people that write about how drop shipping sucks, are you can't make money from it has never done the research to find a legit drop shipping source, or drop shipping from a retail stores, or just dont know what they are doing.

    My markup is 50% on every item i sell. If i get an item from my source for $1,300, and i mark it up %50, then i sell it on amazon for $1,950. When it sells, amazon takes 15% because of category i list in, then i pay my source $1,300 and i pocket $357.50.

    If i pay 0.99 at the source, i markup 50% + i add $2 to cover the amazon fee and i list it for $3.48. When it sells, i'll pay my source $0.99. Amazon take a $1 and i pocket $1.49.

    Even adding on 50%, i'm still coming under the lowest price on amazon for 80% of the items i have listed. I have got messages from my competitors asking for my source, which i respond "Commercial Secrete".

    My current goals.

    Save the money and buy my best selling products at wholesale.
    Have a professional website built to eliminate the need for amazon.
    You say you are "making quite a bit drop shipping" but you obviously know that you can make a lot more if you buy inventory.

    You say one of your goals is: "Save the money and buy my best selling products at wholesale."

    If you have even a few hundred dollars you can do that now. But you can do better than buying "Wholesale". You can make a killing by buying direct from genuine manufacturers in China and other countries. The margins that wholesalers add when they buy from the manufacturer and resell to you can be yours.

    I have taught hundreds how to do that safely and to import the easy way.

    Direct importing with high margins is a low cost viable alternative to the low margin business model of dropshipping.

    Walter Hay
    Signature
    Don't just slap on a label. Build a GREAT BRAND https://Labelsthatexploit.com Safe sourcing and easy importing from 41 countries globally. https://provenglobalsourcing.com
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