The business model of drop shipping is highly advantageous but has some hurdles that entrepreneurs must cross to be successful. One of the most prominent challenges is managing customers’ expectations regarding delivery time. Even though platforms like Drop shipping allow businesses to operate without inventory, relying on third-party suppliers for order fulfillment will always lead to delays. In a survey conducted by BigCommerce, 30% of consumers who shopped online abandoned their carts because of slow shipping. This indicates the significance of having suppliers able to deliver in a timely manner to meet customers’ expectations since delayed shipments have the potential to deter customer satisfaction and lower repeat business.
Another of these is maintaining the quality of products. Since drop shippers never handle products, they are left with having to believe in suppliers mainly to supply them with good-quality products. A report by Oberlo has 22% of drop shipping stores experiencing issues with low-quality or defective products. Low-quality products in the possession of customers can lead to negative reviews and returns, damaging a business’s reputation. Drop shippers, then, have to properly vet suppliers and verify product quality frequently in order to avoid this.
Competition in the drop shipping industry is also fierce, and it becomes challenging for businesses to stand out. According to a report by Statista, over 20% of e-commerce websites have adopted drop shipping as their business model, and this has made the industry extremely competitive. Having a low entry threshold implies that entrepreneurs are entering the market with minimal investment, creating price wars and slim profit margins. For example, certain drop shippers offer products at a very low price to attract customers, and this can make it challenging to guarantee profitability.
Another significant challenge is managing customer service issues. Drop shippers do not have control over shipping or inventory because they don’t stock the products, so they have limited control over the fulfillment process. This leaves the customer service team to deal with complaints in case there are errors, like wrong products or delays. According to a study conducted by Zendesk, 42% of customers would like their inquiries responded to within an hour. Customer service must be managed efficiently, particularly where issues are not within the drop shipper’s control.
Lastly, reliable cash flow may be difficult for Drop shipping firms. Unlike regular retailing schemes, where firms buy products in advance, drop shippers remit payment for products only once the customer has ordered. However, the interval between the time the customer makes a purchase and the time the supplier makes delivery may lead to cash flow gaps. According to a QuickBooks survey, 61% of small businesses do suffer from cash flow problems at some point, pointing to the challenge of maintaining records and managing customer orders versus supplier payments.
As business man Richard Branson once said, “Business opportunities are like buses, there’s always another one coming.” Drop shipping opportunities may be out there, but the resolution of such problems requires forward planning, decent supplier relations, and customer care.