Are you wondering What is the Failure Rate of Shopify Dropshipping?
Understanding the success and failure rates in the world of Shopify dropshipping is crucial for anyone considering this e-commerce model.
What is the only thing that is certain in the world of business? Change. Traditional brick-and-mortar establishments have taken a backseat to e-commerce as more and more business owners choose to sell their wares online. And one such popular platform is Shopify.
In recent years, dropshipping on Shopify has gained immense popularity among new and seasoned entrepreneurs alike. Many would-be entrepreneurs are drawn to it because of the low entrance barrier, inexpensive beginning expenses, and simple setup procedure. However, as with any business venture, there is always the risk of failure. This article will delve into Shopify dropshipping and explore the factors contributing to its failure rate.
Introduction to Shopify Dropshipping
Before diving into the failure rate of Shopify dropshipping, let’s first understand what it is and why it has become so popular in e-commerce.
What is Shopify Dropshipping?
In simple terms, dropshipping on Shopify involves selling products directly to customers without physically handling or storing any inventory. The process works like this: as a seller, you create an online store on the Shopify platform and source products from third-party suppliers. When a consumer makes a purchase from your shop, the order is sent to the supplier. The supplier then dispatches the purchased item straight to the customer. Because of this, you won’t have to buy stock or worry about shipping and fulfillment.
Benefits of Choosing Shopify for Dropshipping
For several reasons, entrepreneurs choose Shopify as their preferred platform for dropshipping. Here are some of the key benefits:
- Easy setup process: Shopify offers a user-friendly interface and step-by-step guidance, making it easy for even non-tech-savvy individuals to set up their online store.
- Low startup costs: Compared to traditional businesses, dropshipping on Shopify requires minimal investment. You only need a laptop, an internet connection, and basic marketing skills.
- Possibility of choosing from a large inventory: Shopify’s vast supplier network makes it possible to stock your online shop with a large range of items without actually stocking them.
- Scalability: As your business grows, Shopify offers various tools and features to help you scale up your operations seamlessly.
Now that we have a basic understanding of Shopify dropshipping let’s take a closer look at how it works.
How Dropshipping with Shopify Works
The success of your dropshipping business on Shopify depends on several factors, including setting up your store, finding reliable suppliers, and managing orders and customer service. Let’s break down these key components in more detail.
Setting Up Your Shopify Store for Dropshipping
Here are the essential steps to get your Shopify dropshipping store up and running:
- Choose a niche: Select a specific product category or niche you are passionate about and have some knowledge or expertise in. This will help you curate products that resonate with your target audience.
- Create an account on Shopify: Sign up for a Shopify account and select a plan that suits your business needs.
- Customize your store: Let your online shop front stand out from the crowd by customizing one of the many available templates or working with a professional designer.
- Integrate with suppliers: You can’t begin taking orders or making sales unless you connect your online shop with reliable vendors. Shopify’s app and plugin stores provide several options for establishing relationships with vendors.
- Prearrange shipment and payment methods: Set up a payment processor, such as PayPal or Stripe, to collect client payments, and choose a shipping company to handle shipments.
- Promote your store: After you have your shop ready to go, you can begin advertising it using social media, email, and other methods to bring in clients.
Finding Reliable Suppliers
The success of your dropshipping company is greatly dependent on the dependability and productivity of your suppliers. Here are some tips to help you choose reputable suppliers:
- Research thoroughly: Do your due diligence before partnering with a supplier by researching their reputation, customer reviews, and product quality. You can also reach out to the supplier and ask for samples to test the product quality yourself.
- Communication is key: Choose suppliers who are responsive and communicate effectively. This will ensure smooth transactions and timely fulfillment of orders.
- Consider location: If your target market is in a specific region or country, it’s best to choose suppliers located in that area for faster shipping and better customer experience.
Managing Orders and Customer Service
One of the biggest challenges dropshippers face is managing orders and providing excellent customer service. To ensure a positive shopping experience for your customers, here are some tips:
- Automate processes: Use Shopify’s automation tools to streamline order processing, tracking, and fulfillment processes.
- Be transparent: Set clear expectations for shipping times and product quality to avoid disappointing customers.
- Provide excellent customer service: Have open lines of communication with your customers and work quickly to address their concerns.
What is the Failure Rate of Shopify Dropshipping
Now that we have a comprehensive understanding of how Shopify dropshipping works, let’s delve into its failure rate. Unfortunately, there is no definitive answer to this question, as success and failure rates vary depending on various factors such as niche, marketing strategies, and business management.
In 2023 alone, 90% of dropshipping businesses failed within the first 120 days, according to research. However, this statistic is often misinterpreted as the overall failure rate for Shopify dropshipping. In reality, the failure rate for any type of business, including traditional brick-and-mortar stores, is high in the early stages.
Additionally, extrinsic variables, such as shifts in industry trends and customer behavior, may also impact Shopify’s dropshipping failure rate. Therefore, keeping track of these factors and adapting your business accordingly is essential to increasing your chances of success.
8 Top Reasons Why 90% Dropshippers Fail?
So, what are the top reasons why 90% of dropshippers fail within the first few months of starting their business? Here are some possible factors that may contribute to a high failure rate:
Poor Niche Selection:
Selecting a lucrative market is essential to the growth of a dropshipping company. A study found that copyright and trademark items, electronics, and jewelry were the worst industries for dropshipping. It’s challenging to stand out and make money in these areas because of the high levels of competition and the low-profit margins.
Inadequate Market Research:
Market research is crucial before starting any business, and dropshipping is no exception. Without proper research, you may end up choosing a niche with little demand or high competition, leading to failure.
Lack of Business Strategy:
Just like any other business, dropshipping requires a well-thought-out plan and strategy for success. Without a thorough and well-thought-out strategy, you may have difficulty attracting clients and making sales.
Poor Marketing Strategies:
Dropshipping heavily relies on effective marketing to attract customers. However, many new dropshippers may lack knowledge or experience in digital marketing, leading to ineffective marketing campaigns.
Inadequate Product Quality:
The quality of the products you sell through your dropshipping store plays a significant role in customer satisfaction. Products that are of poor quality or that are not as described might cause customers to lose faith in your company.
Inefficient Order Management:
Managing orders and fulfilling them efficiently is crucial for a successful dropshipping business. However, you may struggle to keep track of orders without proper systems in place, leading to delayed or incorrect deliveries.
Poor Customer Service:
Customer service is crucial for every kind of company, and dropshipping is no different. If customers have a negative experience with your business, it can lead to negative reviews and damage your reputation.
Lack of Adaptability:
As mentioned earlier, external factors such as changes in market trends and consumer behavior can significantly impact the success of a dropshipping business. If you are not adaptable and do not adjust your strategies accordingly, it can lead to failure.
Lastly, many new dropshippers may have unrealistic expectations of overnight success and high profits. Unmet expectations may cause disappointment and, eventually, failure.
What is The Hardest Part of Dropshipping?
Now that we have explored the reasons behind the high failure rate of dropshipping, you may be wondering what the most challenging part of dropshipping is. While there are various challenges faced by dropshippers, here are some common difficulties:
- Finding reliable suppliers: Success in dropshipping depends on a number of factors, one of the most important being the selection of reliable suppliers. However, finding and vetting reliable suppliers can be time-consuming and challenging.
- Managing inventory: With drop shipping, you do not have control over the products’ inventory, which can lead to issues such as stockouts or overselling. This requires careful management and coordination with your suppliers.
- Dealing with customer complaints: Customer service concerns and complaints are inevitable in every company. Efficiently handling these complaints can be challenging, especially for new dropshippers.
- Standing out from the competition: Dropshipping has low barriers to entry, which means there is high competition in most niches. Standing out from the competition and attracting customers can be a daunting task.
- Build the Eye-Catching Dropshipping Store: Your store’s design and layout play a significant role in attracting and retaining customers. However, not everyone may have the skills or resources to create an attractive and functional store. It’s better to seek a professional’s help or look for pre-built dropshipping stores.
What is The Success Rate of Dropshipping on Shopify?
It’s challenging to determine the exact success rate of dropshipping on Shopify as it can vary greatly between different stores and niches. However, research shows that in 2023, there are around 24 million online stores, out of which 33% are using the dropshipping fulfillment method.
Furthermore, some successful dropshipping stores have achieved significant success, with some generating six or even seven-figure revenues. While these numbers may not be achievable for every dropshipper, it shows that it is possible to achieve success in this business model.
According to the CEO of Shopify, Tobi Lütke, in 2017 alone, dropshipping generated $430 million in revenue for Shopify sellers. This shows the potential for success in this business model.
However, to give an estimate, the average success rate of dropshipping with Shopify ranges between 5% to 20%
What Percentage of Dropshippers Are Successful?
As mentioned earlier, it’s challenging to determine the exact success rate for dropshipping on Shopify. However, according to a survey by ShipBob, 61% of Shopify stores successfully generate at least $1,000 per month in revenue.
Moreover, another report showed that out of 13 million online stores using Shopify, only around 7% generate over $25,000 in revenue annually. While these numbers may not be very high, it’s still a significant percentage of successful dropshipping stores.
Best 14 Strategies Adapted By Successful Dropshippers
So, what are the hidden secrets behind the success of some dropshipping stores? Here are some strategies that successful dropshippers have implemented to increase their chances of success:
Offer Product Bundles to Get More From Every Order:
Product bundles are an effective way for dropshippers to increase their average order value. By offering complementary or related products as a bundle, you can entice customers to purchase more items and increase your profits. Additionally, bundling products can also help you stand out from your competitors and offer unique value to your customers.
Find a Reliable Supplier for Your Dropshipping Business:
A dropshipping business’s success heavily relies on its suppliers’ reliability and efficiency. Therefore, it’s crucial to research and find a reliable supplier that consistently provides high-quality products at competitive prices. This will benefit both your business and your suppliers by ensuring happy customers.
Create an Effective Customer Support Section:
As mentioned earlier, providing excellent customer service is crucial for the success of a dropshipping business. Therefore, it’s essential to have a dedicated customer support section on your website where customers can easily reach out for any queries or concerns. It’s also essential to respond promptly and provide satisfactory solutions to maintain a good reputation and retain customers.
Keep Tabs on Your Competition:
In the highly competitive world of dropshipping, keeping an eye on your competitors is crucial. This will not only help you stay updated with market trends and consumer behavior but also allow you to differentiate yourself from your competitors and offer unique products or services.
Communicate Directly with Your Supplier and own Up to Their Mistakes:
In dropshipping, your supplier is essentially your business partner. Therefore, it’s crucial to maintain open and direct communication with them. This strategy will allow you to quickly resolve any possible issues that may arise and ensure the timely delivery of products to your customers. It’s also essential to take responsibility for any mistakes your supplier makes as it reflects on your brand’s reputation.
Creating Compelling Descriptions for Your Products:
Since dropshipping relies heavily on product descriptions and images, creating compelling and accurate descriptions for your products is essential. This will boost your search engine results and bring in more clients by providing them with more information before they make a purchase.
Use Social Media to Your Advantage:
The success of a dropshipping company is directly correlated to the amount of social media exposure it receives. More potential clients will visit your site and buy from you if you establish yourself as an authority in your field via social media by providing thorough product information, responding to customer comments, and running targeted advertisements.
Join Dropshipping Communities to Find Helpful Advice:
Participating in online networks and forums dedicated to dropshipping may connect you with helpful resources and experienced dropshippers. It’s also an excellent way to network and collaborate with others in the same business, which can lead to potential collaborations and partnerships.
Be Ready to Pivot Your Business Approach:
Being flexible and ready to adjust your company strategy as required is crucial in the dropshipping industry. As the market and consumer behavior change, it’s crucial to be open to new ideas and strategies to stay relevant and successful.
Stay Updated on Inventory Levels:
One of the downsides of dropshipping is not having control over inventory levels. However, it’s essential to stay updated on your supplier’s inventory levels to avoid selling products that are out of stock. This will help you maintain a good reputation and ensure timely customer delivery.
Introduce Segmentation into Your Shipping Policy:
Offering various shipping options and rates can increase customer satisfaction and attract more potential buyers. By introducing segmentation into your shipping policy, you can offer different delivery speeds and prices based on location, order value, and other factors. This will not only cater to the diverse needs of your customers but also help you save on shipping costs.
Don’t Compete on Price Alone:
While offering competitive prices is crucial in dropshipping, it’s not the only factor affecting customer purchasing decisions. By focusing solely on price, you may sacrifice profit margins and compete with low-quality products. To stand out from the crowd, you should instead concentrate your efforts on providing superior value, goods, and service.
Focus on Just One Niche:
In the world of dropshipping, it might be tempting to offer products from a wide array of categories in an effort to reach the largest potential audience. However, this can be overwhelming and may result in a lack of focus and expertise in any one niche. It’s recommended to stay focused on just one niche, build your brand around it, and establish yourself as an expert in that particular market.
Give Your Online Store Regular Attention and Effort:
Lastly, success in dropshipping requires consistent time and effort. Like any other business, it takes hard work, dedication, and patience to see significant results. Therefore, it’s crucial to set aside enough time and effort each day to manage your business, research new strategies and products, and stay updated on market trends.
FAQs about What is the Failure Rate of Shopify Dropshipping:
Is dropshipping a get-rich-quick scheme?
No, dropshipping is not a get-rich-quick scheme. It requires hard work, dedication, and consistency to see success in this business model. Researching and planning carefully is important to ensure a reliable and profitable dropshipping venture. In reality, it takes time for any business to grow and become successful.
How much can I expect to make from dropshipping?
The potential earnings from dropshipping can vary greatly depending on various factors such as niche, product selection, marketing strategies, and customer service. Some successful dropshippers have reported making six-figure incomes, while others may make less. However, the average dropshippers make around 20-30% of each product they sell. It’s important to note that success in dropshipping requires hard work and dedication, and there is no guarantee of high profits.
Do I need a lot of money to start a dropshipping business?
No, you don’t need much money to start a dropshipping business. Unlike traditional retail businesses, dropshipping eliminates the need for upfront investments in inventory. However, you will need to invest in website design, marketing, and other business expenses. It’s recommended to start with a small budget and reinvest profits as your business grows.
What are the best products to dropship?
The best dropship products are those with high demand, low competition, reasonable profit margins, and can be easily sourced from reliable suppliers such as clothes and garments. Researching market trends, customer preferences, and competition is essential to determine the best products for your dropshipping business.
Can I Buy a Pre-Built Shopify Store?
Yes, many platforms, like Bebiggy, offer customized pre-built Shopify stores for purchase. However, it’s essential to thoroughly research and vet the store before making a purchase. Check the store’s reputation and the number of its regular customers before committing any money.
Conclusion: The Failure Rate of Shopify Dropshipping
In conclusion, the failure rate of Shopify dropshipping cannot be accurately determined as it varies greatly depending on individual efforts and circumstances. While some may find success and make significant profits, others may struggle to make a profit or even fail. Remember that dropshipping is not a fast way to make money but rather a long-term company strategy that necessitates your time and effort. The success rate of your Shopify dropshipping business may be improved, and the risk of failure may be reduced by using the advice and tactics presented in this article.
Remember to stay adaptable, informed, and focused on providing value to your customers to differentiate yourself from competitors and build a successful dropshipping business.