5 Things I Wish I Knew Before Starting a Dropshipping Business As an expert in eCommerce with over 14 years of experience in the dropshipping industry, these are the things I wish I knew when I started out so that I could have done things right the first time
By Steve Tan Edited by Jessica Thomas
Opinions expressed by Entrepreneur contributors are their own.
Trial and error are an inevitable part of doing business. As entrepreneurs, we find that mistakes are sometimes needed to produce breakthroughs. As the ancient Chinese proverb says about learning from our mistakes, "Failure is the mother of success."
Indeed, there is no replacement for hands-on experience when dealing with real-world problems while running our own businesses. Some missteps may be unavoidable, but you can save yourself from costly mistakes and years of wasted time by learning from these lessons that I learned the hard way.
Related: 4 Actionable Tips To Start Your eCommerce Journey via Dropshipping
With the clarity of 20/20 hindsight, here are five things I wish I knew before starting a dropshipping business:
1. Put emphasis on product quality
If I could go back to the time when I first started dropshipping, I would have told my younger self to put product quality above everything else.
I wish I knew I shouldn't trust product quality without seeing the product itself.
A lot of dropshippers source their products from AliExpress and Alibaba, which are great platforms. However, don't do what I did, which was choosing the supplier with the cheapest prices.
That was a big mistake, because suppliers would compromise product quality and the quality of packaging in order to offer the most competitive prices. We didn't check the samples, because we were dropshipping. As a result, we got a lot of customer complaints that the products did not match the ones used in the advertisements.
We started looking back and reflecting on what went wrong. We realized that the suppliers we chose were those who were offering the lowest prices but were providing subpar products.
Put the lesson in action:
Don't always go for suppliers that offer the cheapest prices without checking the quality of their products first. Doing so could hurt your bottom line in the long run. Always place a test order with your chosen suppliers so you can check product quality and see exactly what your customers will receive.
Doing your due diligence right from the start will save you from making costly mistakes in the future.
Related: Focusing on a Single Product May Be the Key to Dropshipping
2. Do not rely on just one supplier
In the past, we were relying on just one supplier for all orders of one viral, hot-selling product, and we were swamped by the amount of orders that came in for this product. We quickly ran out of stock.
Because we had a really good relationship with this supplier, we sent him all of the orders. He wasn't able to keep up with that amount of growth, but he kept quiet about it. Long story short, we had a backlog of orders that we could not fulfill on time and we got a lot of chargebacks from angry customers because of the long delay.
When you get a lot of chargebacks, you run the risk of your merchant account being shut down.
Following this setback, we now look for three to five suppliers for every product that we sell. And even though we know that Supplier A could fulfill all of our orders, we now split our orders among other suppliers to serve as a backup.
We use this formula:
60 percent goes to Supplier A
30 percent goes to Supplier B
10 percent goes to Supplier C
This way, we are also building up relationships with other suppliers whom we can tap into in the future should things go awry with Supplier A.
Put the lesson in action:
Your suppliers will form the foundation of your dropshipping business, so selecting good suppliers is crucial to the success of your online store.
When starting a dropshipping business, look for three to five reliable suppliers. Assess each of these carefully so that you can identify the supplier who should receive the bulk of your orders.
This way, you'll diversify your risk and could potentially minimize your downtime.
Take note that even the best suppliers can run out of stock. This is a common situation in dropshipping, especially when you are selling popular products. Your supplier should keep you updated when there is a manufacturing or supply chain problem. However, it's your responsibility to ensure that your customers are able to receive their products and to ensure that your clients are informed about delays in shipping times.
Dropshipping relies on the relationship that exists between a seller and a supplier. Taking the time to forge strong relationships with different suppliers will definitely pay off in the long run.
3. Invest in providing great customer service
At the start of our dropshipping journey, we were pretty good at marketing, so we were able to get a massive influx of orders.
Unfortunately, we didn't have sufficient time to scale up our infrastructure and get a support team to deal with customer concerns. As a result, we received a lot of complaints from customers asking for updates regarding their shipments.
That was one of our biggest problems, which is why we decided to invest significantly in customer service. We now take pride in providing excellent customer service and having prompt response times.
Put the lesson in action:
Keep in mind that the supplier is not accessible to the consumer. Dealing with the customers' queries and concerns is your job, which is why it's important to address inquiries and complaints as soon as possible.
Neglecting this will deal a serious blow to your customer satisfaction ratings and could result in lost opportunities.
4. Diversify your traffic sources
Relying on only one source of online traffic could cost you a lot of time and money in the long run. Ninety-nine percent of dropshippers are only focused on one traffic source: Facebook.
As advertising on Facebook becomes more expensive, it will eat into your profit margins. As a result, you could see less and less profits as a dropshipper. And when you have all your eggs in one basket and you encounter problems (such as your ad account getting banned), you could see major profit losses overnight.
We did not bother to diversify, and that is one thing that I would have done differently from the start.
Put the lesson in action:
Make sure your website traffic is coming from multiple sources. It is critical to have backup plans when running your business because they give you flexibility and options when there is a crisis.
Tap alternative traffic sources such as Snapchat ads, Pinterest ads, Google Shopping, Google AdWords and SEO (search engine optimization).
You should be proactive in diversifying your traffic sources so you won't suffer from drastic losses when there are algorithmic updates on Facebook or Google.
Related: 6 Steps to Building a Successful Online Drop Shipping Business
5. Aim for a global market
Although a lot of dropshippers focus on English-speaking countries, such as the United States and Australia, Europe is a great market as well. We have found great success in European countries.
It has never been easier to sell internationally through dropshipping, and quite frankly, I wish I had thought about global expansion right from the start.
Put the lesson in action:
The beauty of dropshipping is being able to sell globally when you already have systems in place. There are plenty of opportunities in overseas markets where you'll often find less competition for your products.
To prepare for this, check if your payment gateway supports the different currencies used in other countries or if there are additional fees that will be incurred.
As an expert in eCommerce with over 14 years of experience in the dropshipping industry, these are the things I wish I knew when I started out so that I could have done things right the first time. Hindsight is a major asset, and looking back at our past trials and errors can provide us with the lessons that will show us the way forward.
Learn from my mistakes and from other eCommerce business owners who came before you. These may be exactly what you need to grow and expand your dropshipping business to the next level.
