Drop Shipping 101: Protect Profits by Avoiding Common Pitfalls

Drop Shipping : Earning profits by avoiding common pitfalls

You don’t have to own stock. You don’t have to have a warehouse. You don’t have to face customers. You can still sell goods and pocket a profit.

Do these statements about drop shipping sound too good to be true? Well, while drop shipping does offer some fantastic advantages, there are some basics that must be addressed. In this blog, we dive deeper into some of the most common pitfalls.

Wrong product choices

Drop shippers new to the business sometimes make the mistake of picking products without adequate knowledge of their features or pricing. Additional information you should know upfront includes how merchandise will be shipped, the damage that could be incurred, and how popular the product is based on online search statistics.

It’s alright if you have already started drop shipping certain kinds of products. You can always have a course correction and create a better product catalog based on the following:

  • The product should ideally support a markup of 100%
  • It should reflect a healthy online search volume (at least 100,000 monthly searches)
  • Non-fragile, non-perishable, easily transportable goods are perfect

Based on the above, here are a few product categories that are favored by drop shippers:

  • Beauty products: Makeup kits, skincare products, makeup accessories, etc. These products are light-weight, can be easily transported and have a prolonged shelf life.
  • Electronics: Smartphones, laptop accessories, music headsets, fitness bands, etc., have a constantly growing user base. Also, it is possible to sell bundled products as part of a single order. The only challenge is to transport them safely.
  • Clothing: One product category that will never go out of vogue in the eCommerce space is clothing. Clothing with unique design traits, pricing or other product differentiators can prove to be excellent choices for drop shipping.
  • Curio items: Fancy, quirky and unique items with a character of their own sell easily.

Choose suppliers wisely

Drop shipping is a business process that is carried out remotely. The chances of you meeting and working in close quarters with a supplier are small. Also, you most likely will not get to personally verify the quality of goods being supplied under your brand name.

Finding reliable suppliers of high-quality products is critical in any industry, and even more so in drop shipping. In fact, one of the major pitfalls of drop shipping is the high probability of malpractice and fraud.

Some typical instances of malpractices used by scammers include:

  • Demanding an upfront bulk order
  • Improper communication
  • No proper agreement on pricing

Speak with at least a dozen suppliers to get a clear picture on prevailing pricing, distribution processes and payment terms before making a final choice. It is also recommended to have backup suppliers who can pitch in when your primary supplier runs out of stock.

Incorrect pricing

Drop shipping is a dicey game of lower prices and whoever can sell the product at the lowest price wins. But in a crowded marketplace where even giants like Amazon, eBay and Walmart are selling, how do you sell at low prices and still make a profit?

This is where Minimum Advertised Price comes in. Minimum Advertised Price (or MAP) is the lowest price that sellers can advertise selling a product for. This ensures that sellers are not able to undercut each other by constantly dropping prices. Sticking to MAP also ensures that the drop shipper is able to make some amount of profit.

Read more: The Road to Drop Shipping Success: 9 Key Areas of Focus

Pitfalls aside, drop shipping is still viable…and fun!

It is fun running a drop shipping business. You can make a decent revenue without the hassle of managing day-to-day affairs or investing huge amounts of money upfront – just remember to steer clear of these pitfalls.

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