My success with dropshipping hasn’t come without challenges.
In today’s episode of the eCommerce Lifestyle Podcast, I share some of the biggest challenges that I have encountered.
As always, if you have any questions and suggestions, please feel free to leave a comment below. Don’t forget to share this with someone who needs to hear it.
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What's up everybody, Anton Kraly here from ecommercelifestyle.com, and welcome back to the podcast. If you're new here just know the show comes out twice a week. We have a brand new episode for you every single Monday and Thursday morning. If you are not subscribed to the show, just go to whatever podcast player you use, search for eCommerce Lifestyle, click subscribe and you will get notified every time a new episode goes live.
Now, today's episode, specifically what we are going to talk about are some of the challenges that I have personally faced with drop shipping and e-commerce since I got into this business back in 2007. And for those of you that don't know, my first store that I launched was actually selling cookies online from a bakery that I had a delivery route for in Brooklyn, New York. If you want to hear more of that story I talk about it in some other episodes so I'm not going to go deep into it. But that's how I started and very shortly after that I transitioned into importing products from China, warehousing them in different fulfillment centers in the States, and then shipping them to customers and from there probably 2008, 2009 is when I learned about drop shipping and over the next few years transitioned from importing to drop shipping exclusively, having that as the only way that we fulfill orders on our online stores.Now, with that being said, I was hosting a webinar just yesterday at the time I'm recording this. And it was a webinar for people that are not members of my coaching program called the Drop Ship Lifestyle and that had interest in it. So I gave them a free training but also just had it as a discussion. And one of the questions I asked to everybody there was that exact question, what challenges have you faced with drop shipping? And the reason I asked is because based on their responses I was able to custom-tailor the presentation and give them some data and some real answers that hopefully can guide them on the right path and help them get through those hurdles.
And what was cool about it is typically when I ask that question people do tell me things they've encountered, maybe things like subpar quality products, maybe things like can't get traffic, maybe something like I don't know how to build a store. But the one question or comment I should say that came in that I really liked was somebody just asked me though, "Anton, I want you to answer this, but what are some challenges that you have personally faced?" So I thought there'd be some value in sharing right now with you what I shared with them on that webinar.
It's funny, as I was doing this live I was trying to think of, "Okay, what are some of the biggest challenges?" And pretty much everything that I could think of that came to the top of my mind was from a decade ago, from back when I first got started. And it's funny because that doesn't mean that I haven't had challenges since then, in fact, I've had more challenges than I can even count. But what happens, and this is what I realized as I was going through my list which I'll share with you in just a minute. But what I realized is in the beginning, certain things that come up as your first challenges seem like the end of the world, seem like how am I going to get past this? It seems like my whole business is now flipped upside down and this is the worst thing in the world.
But you kind of, I don't want to say grow with thick skin because that's the wrong way to phrase it, but you almost get used to it and you learn how to roll through challenges and you just learn and you normalize that they're going to be there and that they're not going to put you out of business if of course you adapt, which we'll go through, and if you can learn from it. So yeah, most of what I'm going to share with you is from back when I first got started, again, not meaning that there aren't challenges every day that pop up, but these are the things that first popped into my head when this question was asked of me.
When I first got into e-commerce, even with the cookie business, back then I think I was using probably Chase Paymentech, it's a merchant account through Chase Bank. I think that was the first one that I used. Maybe it was from Bank of America Merchant Services, I'm not sure, but that's what I was set up with, worked great people paid, I got money. Then we switched to the high-ticket model, started importing containers and containers and containers of products from China and started to sell more and more and more. Continued to use, again I think it was Chase Paymentech, no problems at all, everything was fine. And then one day maybe, I don't know, three, six months later, I was like, "Oh, I should add PayPal as an option on our stores so that people can pay with PayPal if they prefer." So, not remove the merchant account but add pay PayPal as a supplemental way.
So did that and instantly sales increased. The same amount of people were using the merchant account, paying with a credit card or debit card, but then we also started to see lots of extra transactions coming in through PayPal, because I guess some people feel safer with it. Maybe people have funds in their PayPal account, I don't know why, they see a name they can trust but it increased revenue so this is amazing.
But what happened very shortly after that is I got an email from PayPal saying your account has been restricted and here's a checklist of all the things you can not do for the next 180 days. And one of those things was withdraw money. Now, what that basically meant is the funds that at that point I had in my PayPal account, I could not withdraw to my bank account for six months, for 180 days so I could not use that money. Now being... I was new to PayPal back then I didn't really, I don't want to say I didn't understand it, I didn't think through it. I didn't withdraw as regularly as I should money from the PayPal account to the bank accounts.
So at the time I got that email there was over $50,000 in that PayPal account. Now, this was at a time where I was probably maybe a year into e-commerce, something like that, so I was making money, I was doing fine, but that $50,000 was not insignificant by any means. That wasn't just money like, "Oh, I have an extra 50K now," that was money to run ads, to cover purchase orders because we had these containers coming in and products being built. And that was something where when I first got that email I first I thought it was a mistake so I called PayPal, they said, "No." And I said, "What happened?" And they said, "You have these new accounts and because the amount of money that's coming in basically is so high in such a short amount of time, that is too much risk for us."
And the reason just so you know now I understand why companies think that that way, the reason for them they're saying that's too much risk is because let's just say I withdrew that $50,000 and I put it in my bank account and then I took it out of my bank account in cash and my bank account was closed, there had no money in it. And then two weeks later all my customers got mad, told PayPal they wanted their money back. If PayPal couldn't get it from me then PayPal would be liable, they'd be on the line.
That is something that, again, at this point I understand why that can happen and I should have planned for it better. Just a few ways that you can plan for a better, one is daily, set a timer on your phone, set an alarm for a certain time every day where you withdraw the funds from your PayPal account to your bank account, that way you don't get stuck with money you need there. That is something that I definitely wish I would have done differently. And something else you can do is as you set up your PayPal account if you're first using it, this is true by the way with any merchant account, but you can warm it up. Instead of just having $5,000 a day go through it on day one, maybe accept a couple orders here or there and almost build that reputation and build that trust with PayPal from yourself, from your company.
I'll tell you when that first happened I did think that was something that could have put me out of business and it probably could have had to really get lean when that happened, definitely cost me growth opportunities for those six months because I didn't have extra money to put into ads, I had to really cut back on how many products I was ordering. And again, that was like the biggest challenge I could think of that came to mind because that was the first big thing where I was scared I was going to lose a business that I was literally just getting going with that I saw changing my life. That was the first one and a couple of ways you can avoid that happening to you.
Now, another one that was big for me was shipping delays. Now, two different scenarios here. The first one isn't drop shipping-specific. This is when I had probably a couple of containers, when I say containers just picture those 40-foot long things that are on top of cargo ships, going from China all around the world. Ours were going from China, some to Long Beach in California, some to New Jersey, but what we were doing back then as a way to manage cashflow and be as profitable as possible is when we would order the containers and the products were on the ocean, so literally that's they say it's shipped, it's on the ocean. We would go ahead and start pre-selling the items that were on the containers. So we put them up on our website, drive traffic, get sales and say estimated ship date is whatever the ETA was for the products to come in.
Now, what I didn't realize could happen, because again I was new, is that occasionally the ports, meaning where the products would get basically taken off the container ships from can actually get backlogs. They can have so many cargo ships basically coming in that dates can change, and other things too like weather can change when the container ships can dock and unload. So I had a big problem with a lot of customers where the products simply just weren't there on time, not on the dates where I assumed that they would be or where I quoted they would be when we had our bill of lading for the shipment. And that was something that again cost me money and angry customers. Had to refund some people, had some angry people. And that was when you first have to deal with an angry customer I'll tell you that is not something you feel good about and it's something you think can put you out of business, so that was not fun.
Now, something with shipping delays regarding drop shipping that again was a huge challenge when I first got into drop shipping was a huge order that I had that was shipping to a home in Florida. Now, I thought, "Nothing of it, get orders all over the States. So, okay, it's going to Florida, all as well." Had it shipped out, had the tracking number. It was sent to the customer, customer didn't respond. Okay, all as well, you're getting your product.
Then what happened is, I was actually at a trade show in Vegas when this was happening. I was at a trade show in Vegas. Back at this point I was still a year or two into e-commerce so doing most of the work myself like customer service, and I had my cell phone ring from a call forwarding service from the company and it was the person in Florida saying, "My tracking just got updated, the product's not going to be here till next week. This isn't my main home, this is my second home. I'm flying out." I don't know when it was, tonight or tomorrow or something like that. And this was a huge order, it was one of my biggest at the time, thousands and thousands and thousands of dollars, and this person was freaking out.
Not just this person, it was a husband and wife on the phone together and I felt so terrible because there was literally nothing I could do about it. Whoever I was shipping with for whatever reason there was a delay, I couldn't get a truck and go load it up and drive it to their home and they had flights out and it was a huge order. And it was just like... I remember being at this trade show going from the highest highs, talking to all my suppliers, finding new ones, getting all unique image assets and videos of all these products and then being on the phone and being screamed at by this husband and wife. And again, rightfully so I get why they were mad and that was something that sticks with me because that was the first time I realized the things that can happen. If somebody is in that case at a second home and it's just... It was a mess.
Now, luckily what happened with that is after a day of going back and forth with them and literally getting yelled at they ended up having a neighbor just accept delivery whenever it was, a few days later whenever it showed up, and they had the products next time they went back to their Florida home. But yeah, that was something that, again, those early things stick with you. And what I'll say is things like that over the past, that was probably 11 years ago, things like that have happened a lot since then but that's the one that stuck with me.
And as far as what you can do as a business owner because I don't want to just share these stories, I want to try to give you some takeaways, what you can do to try to, I don't even want to say combat that because it might happen, but what you can do is just know that it's not going to end your business. And what I realized then is the best thing you can do is just speak to the person. You can't try to hide from it, you can't just magically think they'll calm down on their own or something. Some people when you sell online you sell to the world, you don't know who's on the other end of the computer. Maybe they're justifiably mad, maybe they're not, maybe they're just crazy. These people were justifiably mad, but it's part of the business and it's the minority of transactions that will happen, it doesn't happen every day or anything like that.
Just know that unfortunately those situations will come up. All you can do is be open and honest and responsive and just get it dealt with as soon as it can be dealt with. Don't get angry back to the person that might be angry with you, just try to make the most out of what's possibly there. And I know that might not sound like what am I going to do with that? But all I can say is the way I felt that day about how bad things were, by a few days later when their neighbor received it for them everything was back to normal. And even though it stuck with me it wasn't the end of the world, even though it seemed like it at the time, so try not to get too stressed out I would say when problems arise, just focus on how to solve them.
Going back to that though, customer service... One of the biggest challenges I faced early on with drop shipping was customer service. And it was because I was a brand new business owner and I really thought I could do everything by myself and I did not want to hire anybody to do anything at all. Even though I knew I probably shouldn't be the person answering the phone, responding to live chats, answering emails. Because I built a lifestyle business I wanted to be out on the golf course every day and doing whatever I felt like and checking emails a few times a night. That's not a way to run a business as you grow and as you scale, and I was doing that even at millions of dollars a year in revenue.
So customer service I struggled with in the beginning because I am not a customer service person and I had a mental block in my head that nobody else can do this. I can't put anybody in charge of customer service in my business because they're going to do a terrible job, but I should have realized that I was the one doing a bad job with it and I could bring somebody on who actually is a people person and could be there for eight hours a day or whatever it is and can take customer service from probably graded a D plus and take it to an A minus without even much training. That was something that... Yeah, I learned that after way too much time, I wish I would've learned that lesson sooner, and it definitely was a challenge I struggled with for my first couple of years in business, probably 2007 to 2009.
One other challenge that I dealt with that everybody else that is a drop-shipper will deal with over a long enough period of time is bad suppliers. Now, in my coaching program, the Drop Ship Blueprint, by the way, if you're listening to this and you're not a member and you want literally the best of the best of what I've learned over the past decade plus, you can go to dropshipwebinar.com. I will link it in this podcast description but it's spelled D-R-O-P-S-H-I-P webinar.com, and you can get a free training from me there plus I make a special offer if you want to enroll in the Drop Ship Blueprint. Again, that's dropshipwebinar.com. But yeah, that's where I share just the best of the best.
And one of the things I share in there is how to really vet suppliers before you start listing their products and selling their products, but I didn't know how to do this back in the day and it probably wasn't as easy if I want to make it easy on myself, it probably wasn't as easy to do what we can do now for our research back in the day. And what ended up happening is I had some stores with 200 different brands that we were selling for and over time I would realize that, okay, maybe these two or three suppliers, every time we ship one of their products it takes a week for them to get out of their warehouse, then the shipping is damaged when it gets to the customer's home or the product quality doesn't live up to the expectations from the product images or descriptions.
So, some challenges I faced early on were keeping bad suppliers for too long instead of just cutting them off after a couple of bad experiences, just continuing to sell for them while our customers weren't having good experiences with the products we were selling for those specific suppliers. Again, now you can do research in advance and vet the brands before you even list their products. But if you find yourself, I would say in a situation where you're selling for a supplier and every time one of their products from their brand goes to your customers it seems like it's not what it should be, it could be delays in shipping, it could be customer complaints, it could be product quality, whatever it is, just cut it sooner rather than later and it'll eliminate a lot of headaches very, very quickly.
Yeah, guys, that was what I shared on the webinar and I do hope this provided value for people listening that are thinking about drop shipping or maybe already running stores. Just know again challenges do come up, they can, and they will, it's just a matter of you dealing with them and not thinking anything is the end of the world even though I'm telling you all these are fresh in my mind, it still seems like it is when it's happening. I hope you guys found this episode helpful. As always, if you did I would really appreciate it if you can go to our podcast on Apple Podcasts and leave a review. I will link up how to do that in this podcast description.
And as always, if you got value please let me know. You can send an email, you can leave a review, or be sure to go to dropshipwebinar.com to learn how to get enrolled in my flagship program that was voted best e-commerce course by Shopify, the Drop Ship Blueprint. Thank you everybody, I appreciate you, and I will talk to you on Thursday for the next episode of the eCommerce Lifestyle Podcast. See you everybody.