ECOMMERCE

Risks of Dropshipping: Ideas to Overcome and Prevent Them

Risks of dropshipping

In one of our previous articles, we have covered the dropshipping model as a notion and as a business model as well as overviewed some of its most viable benefits. In addition, as a custom software development company, we have also suggested a simple way to start a dropshipping ecommerce activity.

In this article, we will focus on the not-so-common risks of dropshipping to get you well-prepared if this is the type of ecommerce activity you want to start.

Introduction. Previously in NEKLO Articles on Dropshipping

If you’re pressed for time to read the full version of our previous article on the dropshipping business model, here are the main points:

  • Dropshipping is a form of sales when a supplier delivers goods directly to the customers while a merchant owns and sells products through an online store;
  • The business scheme can be summarized to the following: you attract customers to your online store, accept orders, and transfer the orders to the supplier. The supplier sends the product to the customer;
  • How to generate profit with dropshipping? The common way is through getting the difference between the wholesale price of products and the retail price that you set for the customers.

Running a dropshipping store looks attractive to many as there is no need for bulk purchases, renting a warehouse, and dealing with couriers. According to the stat data, in 2020 almost 27% of online retailers have been using dropshipping as their order fulfillment model.

However, there are still risks just as with any business model. We want to help you become aware of them.

With quarantine keeping everyone in and putting a major halt on jobs back at the start of 2020, it wasn’t surprising to see the major lean toward dropshipping. With social distancing just beginning and physical stores closing down, it was inevitable that people would look online for solutions.

We’ve managed to reach out to Jes Grimm (https://www.linkedin.com/in/jes-grimm-4776351a1/) who is a Director of eCommerce Operations at Stealth Agents which is a US-based company offering on-demand virtual assistants.

Jes told us that dropshipping is often made out to be much easier than it actually is and explained why it can often lead to frustration and disappointment.

“Dropshipping is often glamorized as a quick income. Not taking the time to really research ecommerce is the first mistake people make who are in a hurry to get the process started.

Learning about suppliers and fulfillment is an essential part of the process as that is what everything revolves around.

Do the research, take the time to really read about dropshipping and the current trends, the services available, the product demand, and options available. Doing all of this will help you plan for possible problems even if you go into it not knowing anything about the customer service side. Knowing about the possible problems will better assist you in ways so you can prevent them from occurring in the first place.

Is dropshipping worth it? It’s totally worth it if done right.”

– Jes Grimm, a Director of eCommerce Operations at Stealth Agents

Below, we revise the dropshipping challenges that specialists at NEKLO consider to be “not on the surface”. More, in each paragraph we also suggest ideas to overcome them. 

Stay tuned.

5 Not-so-Obvious Risks of Dropshipping

First thing, we suggest you to revise what the basic scheme of dropshipping looks like.

Dropshipping business model

Running a dropshipping website, you do not need to hire personnel for store keeping and logistics. In some cases, you do not even need to deal with accounting systems and a CRM. 

Our software development teams have been working on custom app development for ecommerce for more than a decade to be able to identify the vivid and hidden downsides of dropshipping that are rather tricky. 

What to be aware of? See the list of dropshipping challenges below.

Risk 1. Limited number of products 

It often happens that merchants purchase the no-name Chinese goods for a resell. Naturally, they stock the popular products only, those that are in high demand. And that’s it. By following this strategy, there’s no opportunity to widen the range of goods to provide to your customers.

How to overcome and prevent it

If you want to sell products of more or less renowned brands, you should start dealing with international suppliers. Also, we suggest you take a closer look at your domestic suppliers that operate within the area of a convenient reach for you. Through collaborating with your domestic suppliers, you will expand your product range, become able to offer a wider assortment line to your customers.

Risk 2. Limited delivery options

As a rule, dropshipping websites don’t provide a varied list of options for order delivery to customers. In many cases, the “cash on delivery” option becomes the commonly selected. It’s rather slow. Customers from remote areas become unlikely to wait for their orders to be delivered. In big cities, the thing is that customers are less patient.

How to overcome and prevent it

While selecting the suppliers for your dropshipping stores, pay special attention to the delivery services you want to collaborate with. Make sure your trusted delivery services stay in contact with the suppliers, receive updates timely. 

Risk 3. Low upselling opportunities

With dropshipping, it becomes not so easy to increase the average check because the main and additional products often come suggested by different suppliers. Customers will hardly wish to pay for each item delivery separately and are unlikely to accept that they will have to receive the items on different days.

How to overcome and prevent it

Through your ecommerce website that you use to showcase products for and its analytics feature, you can see the products that your customers like, heart, or star in advance. This brings you a chance to think it over. For example, you can make a special offer containing items from customer wishlists. Contact the supplier immediately to find out if the products are in stock.


If you wonder how to increase the number of orders and return customers in your web store, study our article that has to do with cross-selling promotions.

Risk 4. The need to open access to customer base

Of course, you can save it on your devices. However, the dropshipping scheme itself implies that you share your customer base with the suppliers and there is no guarantee that there will not appear issues.

How to overcome and prevent it

Keep it in mind that normally 20% of regular customers make 80% of a store’s profit. Dropshipping as an ecommerce model, as a rule, only focuses on new customers, leaving those returning ones without attention.

We advise to take special care of your regular customers through providing them with special offers and good deals. This way, even in the case of your customer base being taken advantage of, you will still have your dedicated audience to sell for. 


From NEKLO’s experience working with ecommerce clients, the UX of your ecommerce website is also critical for attracting and retaining customers. Study the useful tips on UX improvement in our article. 

Risk 5. Almost no control over the supplier

Yes, the dropshipping model presupposes that the supplier delivers on your behalf. However, you still want to have the promotional materials for your ecommerce store attached to the order. 

Think if there is not your store logo on a branded bag or other packaging provided by the supplier but the supplier’s one? A customer who might appreciate this product would become confused by this information, misled by the wrong store name, etc.

How to overcome and prevent it

Be careful when selecting a supplier. Discuss all the details of your concern with the supplier in advance, at the initial stages of cooperation. The clearer the rules you agree on and document, the easier it will be to work together.

Conclusion

If you are new to ecommerce, then dropshipping is a good start.

One of the main challenges of online stores is the inability to create a stable demand for the products. With dropshipping, suppliers can shift this task on the shoulders of a dropshipper, while dropshippers can fully focus on promoting the website and products, leaving the delivery and storage tasks for their partners.

With the deep expertise in web app development services for ecommerce, NEKLO team is ready to help newbies in ecommerce have a great start.

Contact us through the form on our website or directly.

Together we will work out the strategy for your exact ecommerce activity.

Related posts

MAGENTO
Magento in 2021 and Beyond: Magento Experts Share Predictions
Two experts from the NEKLO ecommerce team, contributing to our expertise as a Magento development company, share their thoughts on the potential of their favorite and one of the most popular ecommerce platforms on the market today. Find below expert quotes about Magento development, Magento services, and Magento partners from our Senior Magento Developer Michail…
author's avatar
Nadya Bakhur
Researcher, Content Writer
TECHNICAL
App Development Cost Breakdown: How Much Does It Cost to Design an App
There is a wide price range within custom software development and mobile app development today. This article focuses on the factors that affect the final average app development cost of a project. It will help you negotiate the price with any application development specialist googled through the “app developers near me” query and understand how…
author's avatar
Dasha Korsik
Content Team Lead
TECHNICAL
Build vs Buy Software: Pros & Cons of Custom Software Development
In today’s digital world, almost every business, regardless of its size or niche, needs a software solution to manage data, improve customer experience and update internal processes. A dizzying array of business software programs is already available on the market and there is always a prospect to build a custom software solution. “Buy vs build…
author's avatar
Nadya Bakhur
Researcher, Content Writer
INSIGHTS
NEKLO DIGEST #5: Is Dropshipping Worth It? Ecommerce Strategy Tips
Starting an ecommerce activity seems the right choice for many business owners today. However, many of them are puzzled about existing ecommerce business ideas and aren’t sure which one to follow.  When the choice is difficult, they come to our ecommerce development company for a custom software solution or professional consultancy. Additionally, we provide the…
author's avatar
Dasha Korsik
Content Team Lead
MAGENTO
Magento Big Data Solutions: How Big Data Projects Change eCommerce?
If you rely on data and analytics, the chance you will be disappointed is minimized. In this article, we’re going to overview why and how companies use big data within their ecommerce initiatives. What’s more, NEKLO team wants to make it certain for you that one of the key benefits of merging Magento web development…
author's avatar
Nadya Bakhur
Researcher, Content Writer