Dropshipping can be a bad idea for a business if you're largely unfamiliar with how the business model works. Over the years, dropshipping has changed and introduced new challenges. Common dropshipping issues today include shifting consumer behavior, massive competition, shorter shelf life of winning products, expensive shipping rates, limited inventory control, smaller profit margins, and more.
Global market size for dropshipping is expected to hit $476.1 billion by 2026, increasing at a compound annual growth rate (CAGR) of 28.8%. With its rapid growth, industry competition has also become way harder than it was years ago. Many new entrepreneurs now prefer dropshipping because it's a low-cost way to make money online. You don't need to own any products or deal with inventory management.
As a drop shipper, your only job is to sell merchandise at a profit and offer the best customer experience possible. On Quora, Rishu Jain reminds aspiring dropshippers that they can "most certainly lose a lot of money" with the business model. It's definitely not "the perfect business, with zero risk," as some gurus would have you believe.
"There are anyway a ton of traps that can cost you and where you can lose cash with dropshipping." writes Rishu. "You can lose 200 or 300 hundred dollars with discounts, returns and chargebacks (or) lose 2,000 or 3,000 with publicizing and you could lose substantially more in the event that you get sued."
In this article, we'll take a closer look at why dropshipping is a bad idea. First, we'll uncover some of the critical flaws in the business model and share some solutions to help you out with your dropshipping journey. Towards the end, we'll share why starting a local lead generation business is better if you want complete control over your business and money.
11 Reasons Why Dropshipping Is A Bad Idea In 2024:
1. There’s a Shift In Consumer Spending Among Dropshipping Buyers
There is a shift in consumer spending among dropshipping buyers - and ecommerce shoppers, in general. According to a WebFX report, buyers today “aren’t as easily influenced,” plus they have “more say in what and when they purchase something.” Lead Internet Marketing Consultant Sharon Petsch also adds that consumers “have more purchasing power in 2024.” However, they’re also more prone to “(weigh) factors like price, features (and) benefits” because they want to make the most of their money’s worth.
As a dropshipping business owner, you need to understand the latest trends and changes in the industry. It’s definitely important to recognize that psychological and customer behavior is shifting. People now prioritize product quality and value above anything else, so they don't want to spend their money on something that won’t bring them any benefits in the long run. So consider the perceived value of your product and then alter your marketing tactics to fit the changes in people's mindsets.
Check out TikTok’s #TikTokMadeMeBuyIt hashtag to find popular products being marketed and sold on the platform. You can also use Google Trend to access information on top search queries to discover trending products. In any case, your goal is to find good items that fill a gap in the market. When doing product research, consider the following questions:
How can this product help people save time or solve people’s problems? Is this a low-price tag product or a high-ticket product? How much profit can you make from selling it? Where is the competition lacking, and how can you do better?
These questions can help you develop a unique angle as you create your marketing campaigns and scroll-stopping creatives. Of course, you will need a clear call to action to drive traffic to your online store and boost the number of your potential sales, and stay ahead of your competition.
2. Cut Throat Competition in the Dropshipping Market
Cut throat competition in the dropshipping market can make it hard for new businesses to establish their brand. The glory days of the 1990s are long gone. Throwing up a sub-par website and selling cheap products from China isn't going to cut it anymore. In 2024, you need to be the best marketer to outplay the competition. Outdated marketing styles no longer work, so you need to create attention-grabbing videos and reels with on-point copy. Not to mention that rising ad costs can be a recurring challenge for most dropshippers, too.
As a solution, you can leverage third-party ad research tools like BigSpy or AdSpy to see what your competitors are doing. You can also use free analytic options on platforms like TikTok and Facebook Marketplace to check out their ad libraries and watch the top-viewed videos to find inspiration for yours. Study why certain content gets engagement and why they work well. TikTok is the leading social media platform for dropshipping in 2024. So if you can create short videos with virality potential, you could make a ton of cash. You can also use the platform's analytics to see the highest CTR and maximize your ROIs for a minimal spend.
3. Winning Products in Dropshipping Have a Short Shelf Life
Winning products in dropshipping usually have a short shelf life, which means you often have to look for the next trending items. Ecommerce expert and Studying.com CEO Andy Main says winning products usually have “an average lifespan of 3 weeks to 3 months.” In a YouTube video, he shares that being an early adopter of a trending product can bring significant profits, which can go as high as $20,000 to $40,000 per day.
While certain products can get you a ton of sales, it can be easy for competitors to swipe your ad copy and marketing content. As other dropshippers duplicate your strategies, they can end up taking your market share. They might even outplay you out of your own market and you can lose potential profits.
That said, rising above the competition requires non-stop research and hard work. Become better than. You need to move quickly and constantly come up with new marketing strategies to gain advantage over other dropshippers. Remember, the roots of your business are the most critical parts of your ecommerce business journey, include:
If you can be the best in these areas, you can beat your competition and earn a constant stream of income from dropshipping.
4. High Shipping Costs Can Affect Your Dropshipping Business
High shipping costs can directly affect your dropshipping business and your overall sales. According to a Baymard Institute study, 48% of online shoppers abandon their carts because of expensive shipping rates. Today, most customers prefer cheap or free shipping when they purchase online.
As a seller, you need to weigh your options to offer affordable shipping without reducing your potential profits. You won't make many sales if your prices or shipping fees are too high.
Tips To Cut Your Shipping Costs
- Contact various dropshipping suppliers. Inquire about their order fulfillment process and compare shipping prices to find the best deals for your business. If possible, tap suppliers from your home country.
- Utilize shipping software. Dropshipper Noah Mincis recommends using tools like GoShippo, Pirate Ship, or Ship Station for discounted rates.
You need to get eyeballs on your offers. So leverage platforms with high-quality content. Then provide the best customer journey. And become a trusted brand in your niche to increase sales and make money.
5. Limited Inventory Control Often Hurts Dropshipping Brands
Limited inventory control can often hurt dropshipping brands since dropshippers don’t hold any physical stock. Instead, they rely on third-party suppliers to manage inventory and the order fulfillment process. Although this is commonly considered as an advantage of the business model, it also has its downsides. For instance, you'll gain negative customer reviews and lose future earning opportunities if people are unhappy about their purchases.
Another possible problem is when you receive multiple customer orders but your dropshipping supplier fails to meet the stock demand. If this happens frequently, you’ll end up damaging your brand reputation. Sudden price changes may also cut into your profits.
To overcome these obstacles, consider solutions like:
Connecting with multiple suppliers Reading reviews of suppliers to determine which are most reliable Using a dropshipping marketplace like CJ Dropshipping to find local suppliers
Working with wholesalers who can guarantee a set amount of inventory
Quora user Sunny Zeng also says dropshippers should track inventory levels in real-time. According to her, effective inventory management requires “strategy, discipline, and adaptability.” When done right, dropshippers “can ensure they are providing a top-notch customer experience while also maximizing their profits.”
6. Shipping Delays Can Impact Customer Retention in Dropshipping
Shipping delays can also impact customer retention in dropshipping. In 2024, there's no chance a buyer will wait 3 to 6 weeks to get their orders. They’ll likely buy from other sellers, unless you can guarantee quick delivery times.
In a Koerber survey conducted among 2,200 people from 8 global regions, we learn that 70% of consumers encountered shipping delays without explanation. 90% also admit they are “less likely to buy from a brand again” following a poor shopping experience.
UPS company Roadie also shares that 72% of customers “prioritize convenient delivery times” while 68% say that shorter delivery windows at checkout “is the determining factor in their purchases.” The company also adds that around 50% of online shoppers are willing to wait 2 to 3 days to receive their orders. Meanwhile, 30% “prefer to wait” for 1 day while 8% want same-day delivery.
Customers definitely expect seamless delivery these days. So you need to find dropshipping suppliers that can help you achieve that. As you avoid disappointing your buyers, you can look forward to converting them as repeat customers. They may even write positive reviews and recommend your brand to other people.
7. Profit Margins Can Be Unpredictable in Dropshipping
Profit margins can be unpredictable in dropshipping for the most part. Although the industry average falls between 15% to 30%, actual profits will always depend on your niche and the type of products you sell. As a dropshipper, your goal is to find low-cost products with high markup potential in order to generate the highest ROI possible. Consider these questions:
- How can you increase the perceived value of your product?
- How can you market your products to convince customers they need to buy it right now?
- Where can you get free online traffic?
- Are there upsells or cross-sells you can add to increase your average order value?
Also, determine how much it costs to get a customer and what you can do to increase your customer lifetime value. Refunds and returns will dig into your overall profit margins, so you need to provide stellar customer service to minimize those cases.
Getting five-star reviews and social proof for your drop shipping store can work for your advantage. So take the time to develop a strategic pricing strategy and offer customer rewards and incentives. Find items that complement your product and do cross-sells and bundles.
8. Increased Ad Costs & Platform Bans
Dropshippers often struggle with increasing ad costs and platform bans - two factors they do not have control over. To make sales, you need a constant stream of traffic. However, getting eyeballs on your products can be hard. Dropshipping products are often based on trends (unless you have an evergreen product that is always in demand), so you need to get your product in front of people fast. The quickest way to achieve that is to pay for ads on platforms like Facebook and Instagram. Unfortunately, paid ads costs are rising as much as 15%-30% these days, so that’s a significant amount of investment to attract potential buyers. You risk dipping into your already razor-thin profit margin.
Meanwhile, creating videos with virality potential can get you a ton of views and engagement on TikTok and YouTube. However, you're at the mercy of the platform's rules. While these social media channels love content, not all of them like dropshippers. You could face account bans - sometimes for no apparent reason.
As such, you need to create videos and ads that drive online traffic and are also compliant with platform rules. Keep a close eye on your campaigns and be ready to pivot fast when things aren't working to avoid losing money or getting shut down due to policy violations.
9. Customer Service Concerns Can Be a Pain Point in Dropshipping
Customer service concerns can be a pain point for dropshippers and can even contribute to business failure, if not handled well. In a Reddit post, user Dexterp91 shares that he had to deal with customer order inquiries and refunds too often. “It's a nightmare, and something I will warn anyone looking into dropshipping about,” writes the Redditor.
Customers in 2024 have “high and growing expectations for friendly, knowledgeable, and responsive support,” an INC article says. Unfortunately, many businesses “fall short in this regard, whether due to a lack of training or simply neglecting to understand what their customer needs.” So when orders are delayed, some customers simply cancel their purchases and post negative reviews on social media.
To offer the best customer service possible, you should:
According to Ruby Newell-Legner’s “Understanding Customers,” it usually takes “12 positive customer experiences to make up for one negative experience.” As you prioritize customer service, you can boost your business success.
10. Unreliable Suppliers Can Ruin Your Dropshipping Business
Unreliable suppliers can ruin your dropshipping business as fewer customers will trust your brand in the long run. According to Shift4Shop, 84% of ecommerce retailers say “finding and securing a good supplier to be the biggest obstacle to getting their business going.”
In the dropshipping model, you are essentially a middleman between the supplier and the buyer. This means you’ll be put in a bad light when your supplier makes any mistakes. So you have to be cautious when selecting your providers.
“You want someone with at least five to ten years experience in drop shipping - or at least manufacturing and logistics,” says 7-figure ecommerce and Shopify dropshipping expert Austin Rabin. Ideally, you'd want to work with multiple suppliers but make sure each one can deliver on their promises. With this, you don't can avoid the risks of running out of stock or getting hit with supply chain issues - which can directly impact your profit margin and reputation.
11. Dropshippers Have No Control Over Product Quality
Dropshippers have no control over product quality, which can lead to major problems. Although you can choose which products to sell in your store, you can’t actually check the quality of each one and so you. This can prove to be a challenge, especially if your buyers end up receiving subpar or defective items.
3 Ways You Can Control Product Quality
- Read customer reviews. Before listing and promoting a trending product in your store, see what other buyers have to say about them. Learn about the product’s advantages and disadvantages.
- Do competitor research. As you research your competition, check out which of their products are already selling well. This will give you a good idea about which ones can gain you sales and which ones to avoid - especially if their websites also display buyer reviews.
- Do test orders in advance. One of the keys of successful dropshipping is testing products before listing them online. Not only does this process allow you to take product photos, it also helps you decide whether the product is worth selling. Also, be honest when writing your product description, ads, and social media posts. Do not over promise to avoid setting unrealistic expectations among your customers.
Is Dropshipping Still Worth It?
Dropshipping is still worth it if you can find a winning product that is in high demand among your target consumers. Despite all the drawbacks of the business model, it’s possible to make money - and even get rich - if you do dropshipping right.
However, you also need to keep in mind that dropshipping only has a success rate of 10% to 20%. Around 80% to 90% fail in the first few months of doing dropshipping and only those who persist, learn from their mistakes, and take time to understand the business model eventually make profit.
Are Dropshipping Courses Worth It?
Dropshipping courses are worth it if you want to learn from experienced dropshipping experts. They can help you avoid common mistakes and provide you with guidance as you start your ecommerce journey. Some courses also offer one-on-one mentorship and the opportunity to join a community of fellow learners. You can check out courses such as:
- Biaheza Dropshipping Course by Biaheza
- Conquer TikTok Dropshipping by Sebastian Ghiorghiu
- Full Dropshipping Course by Mostafa Nouman
- Online Business Mastery by Chelsea Guarriello
- Performance Dropshipping by Hayden Bowles
How Can You Be Successful With Dropshipping In 2024?
You can be successful with dropshipping in 2024 as you adapt to the new changes of the business model. Stop relying on traditional methods and use current techniques to survive and thrive in the industry. Pick a profitable niche and create a professional ecommerce store. Be ready to test the market and find dropshipping products that provide value for your end users.
Other factors that can increase your odds of success with dropshipping in 2024, include
Running social media and Google ad campaigns in different regions/countries to expand your market. Getting an agent who can do the legwork for you - someone who can find and source products for you. Posting original content on TikTok to take advantage of the potential traffic and leads from the platform. Use third-party tools to create ads and simplify the process (such as Viral Ecom Adz).
More importantly, you need to stay consistent. Dropshipping requires constant testing and not every product you list online will lead to huge sales. What's important is that you continue to
“It's going to take you a lot of swings before you hit a home run,” says Sebastian Esqueda. “You're going to probably have some sort of success if you just stay consistent rather than giving up too early.” Currently a 7-figure ecommerce entrepreneur, Sebastian was only 17 when he began dropshipping and started earning $100 per day.
Why Local Lead Generation is a Better Business Model Than Dropshipping
Local lead generation is definitely a better business model than dropshipping in 2024. With dropshipping, you are selling physical products online, which involves many variables in itself. Your success as a business is entirely reliant on how reliable your suppliers are. Your earnings also depend on the number of monthly sales and the percentage of your profit margin. The market has also become competitive because of the low barrier to entry - everyone seems to be trying dropshipping and we see so many stores popping up all the time.
Compared with dropshipping model, local lead generation allows you greater control over every aspect of your business. With lead gen, you are building generic business websites and then ranking them to the top of search engine results. Once your sites reach prominent search engine spots, you own prime digital real estate that can generate you passive income.
You can offer your sites for rent to local entrepreneurs who need traffic and leads for their businesses. You won't need to own a store or constantly reply to customer inquiries. The ranking lead gen sites will bring you money each month without requiring much work on your end.
Better yet, you can build and rank multiple websites at the same time - which can help you scale your lead generation business faster. Take this website below, for example. I created this site in about 10 hours and it took around 6 months to get to the top of the SERPs.
This site has been making me $2,000 a month since 2015 and now that I own over 80 more, my income's just way better now than when I sold shark onesies online as a dropshipper.
Local lead generation also doesn't require a ton of capital to start. Personally, I spent only about $500 getting this site to the top. Overhead costs are likewise minimal since I only pay $50 per month for hosting, tracking number, etc. Profit margins go as high as 90% which makes this a more lucrative idea for anyone who wants to start an online business.
This is such a nice article. Apart from the points mentioned in this article, I think legal issues are also a reason. Dropshipping can lead to legal issues, such as trademark violations, if you're not careful about the products you sell. Also, it can be difficult to scale a dropshipping business since you're limited by the suppliers you work with and their product offerings.