eCommerce Lifestyle

Top 8 Reasons New Dropshippers Fail


In today’s episode of the eCommerce Lifestyle Podcast, Anton shares the top 8 reasons why new dropshippers fail.

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Hello, everybody. Anton Kraly here. And welcome back to another video that I hope provides a ton of value to everybody out there. Today, we're going to be talking about what I believe to be the top eight reasons why new drop shippers fail. A couple housekeeping things before we get into this list. First, just note that these are in no particular order, they're all very important. Don't just think that the first one I say is of utmost important and you need to make sure you don't do that if you want to succeed. No, they're all equally important. If you mess up with any of them, you might not fail fast, but I fully believe that you will fail over time. So if you want to build a highly profitable semi-automated drop shipping store that continues to grow for the long term, pay attention to all eight, because they're all very important.

Also, I should note that these really apply to the guy or girl out there that's actively actually trying to build a business, right? I'm not talking about the people that say they failed because they heard drop shipping was a good idea. Signed up for a 14 day free trial on Shopify and thought that's too hard. Okay. That's a different level of a failure that you need some more work on. Okay, this is for the people that are actively trying to do it. So keep that in mind and yeah, let's just kick it off with the first reason. This one might not come as a surprise, but it is choosing a bad niche. Now I just recently filmed an entire, I think it was a three-part series called, How to Lose Money Drop Shipping on Shopify. Obviously had some fun with that, but there was a full episode talking about what makes a bad niche.

So if you want to go deeper into it, I'm going to post a link and you can check that out. Learn more about what makes a bad niche. But in general, just know I'm referring to something with a low price points. We don't like to sell products that are less than $200. Our actual average order values are over a thousand dollars, but anything over 200, we've been able to make work. A bad niche, first thing I would look at is what are you selling it to, to the customer? And again, in my opinion, if it's under $200, that is a bad niche. We can get into why as we move through the points. Something else that would make a bad niche is low profit. So you might get into a niche, especially if it's lower price where the margins just aren't there, not just as a percent, but as an actual number. What's that net dollar number you keep per order.

Some people get into niches where that number is $5 or $10 or $20 even per sale. Again, to me, that is a bad niche. It's very hard to make money when you're making a few bucks here or there. Trust me, I know this, my first ever online store was selling cookies from a bakery in Brooklyn, New York, where we made about $3 net profit per sale. Okay. Something else that would make a bad niche is selling a product type that appeals to lower-income households. This is something that if you follow my criteria, you sell more expensive products and you sell to lower-income households.

An example I typically give is let's say you wanted to sell sofas and within the full spectrum of different sofa types, you chose, you chose futons, right? Like $150 futons. And the average customers are going to be probably college students or people that don't have a lot of money. Now, those type of customers in a niche like that, that leads to a ton of customer service. A lot of returns, a lot of hassle for not a lot of profit. So those are all some of the things that I'm referring to when I'm saying a bad niche. Again, if you want to know more about it, I have a full video called, How to Lose Money Drop Shipping on Shopify, by choosing the worst possible niche. I'll link that video up so you can check it out. I'll link up that whole playlist too. I think it would be helpful for anybody that might've struggled with drop shipping in the past.

Second reason why new drop shippers fail. And this one is working with bad suppliers. The suppliers are the companies whose products you're going to be selling. And when drop shipping, they're the companies that are going to be shipping the products to your end consumer. So, what are some issues you can run into with bad suppliers? Well, one of them is if your suppliers are located overseas, for example, if you were selling in the States in the U.S. And you were drop shipping from overseas, from a supplier in China. Now, I'm not saying every supplier in China is terrible. That's obviously not true, but drop shipping from suppliers in China is a terrible, terrible idea. Shipments take forever to get delivered. Quality control is very inconsistent and you're going to have angry customers.

So bad suppliers could mean again, you're drop shipping from overseas. If you're working with a supplier that charges you for access to sell their stuff, that is a bad supplier. If they don't have pricing controls like minimum advertised price policy, that is a bad supplier. And if they are slow to ship orders to your customer, that's a bad supplier. If the product quality doesn't match what you're showing off on your website, that's a bad supplier. So lots of ways to get yourself in trouble there, I will mention this quickly, anybody watching this or listening to this, that's a member of my coaching program, the Drop Ship Blueprints. If you want to go deep into how to find the right suppliers that is in Module 4 of the Drop Ship Blueprint. So check that out. I'll link it up below as well.

Okay. Third reason, the list continues. Why new drop shippers fail, in my opinion, is bad store design. And I get this because my first website, right, that cookie store was not a gorgeous website. It was pretty bad. So I know what bad stores look like. And I'm still by no means a web designer or a coder. I don't touch any of that stuff on our own web properties. We have a designer for that now because I know how bad I am. But let's just say, you're just starting out, right, you're making an honest effort, but you're also terrible with design. Some of the design things you can get away with in the beginning, that's not the end of the world.

The things that will lead to failure are, things that would give a bad experience. That's a better way to phrase it, bad store design in the user experience sector here. So things like broken links on your site. Things like glaringly obvious typos, listen, if you're not a great speller, or if you're slightly dyslexic like I am, get a tool like Grammarly. There's a free version that will spell-check things for you. Not just spell check, but also grammar. You don't want people to be clicking through your site, going through your category pages, reading through your product descriptions and just be like, "Who wrote this?" No, get it fixed before you send any website visitors because that just leads to a bad user experience.

Also, a minimal amount of product images or low quality. Again, if you follow the drop ship lifestyle system, if you do what I teach in the Drop Ship Blueprints, you're going to be selling expensive items and you don't want to have a store design where your product pages have one image of the product you're selling that has a hundred pixels by a hundred pixels, like a thumbnail. And the customer is like, "What am I supposed to do with this?" Right. That will lead to failure. Another thing is just general site speed. The faster, the better you want your store to be able to load on somebody's iPhone when they're in Manhattan on a subway under a thousand feet of street above them, you want them to be able to load your site. So speed is definitely important. If you're a member of Drop Ship Lifestyle, use the Drop Ship Lifestyle Shopify theme. It's extremely fast for that reason.

This video is going to be longer than I thought it would, but hopefully, you guys are getting value. Hopefully, that's okay. If it is, let me know by giving a thumbs up, if you're on YouTube, or leaving a review, if you're listening over on Apple Podcasts. Also, if you can leave a comment below, let me know if you're getting value. I do read them all. I appreciate every single one. And again, since this is going to be a little bit longer than usual, I'm curious to see if you guys like that. If you like the longer videos, the longer podcasts, let me know by leaving a comment below, as I move into the fourth reason why new drop shippers fail, and this is bad traffic. By traffic, I mean your website visitors, who are you sending to your store?

Now, one of the biggest mistakes that new drop shippers make is they basically go all-in with Facebook Ads. And I don't want to say I'm not a fan of Facebook Ads because we do very well with them. We spent a lot of money with them, but they have their time and their place and their place is not to be the platform or the channel that brings in new customers to your store. So let's just compare two traffic sources really quick here, right? Let's say we have Google Ads and we have Facebook Ads. The way Google Ads work is, they will take people that are searching for what you have and take them into your store. So you're basically capturing this traffic that's searching for what you have. And with Google, you're bringing them in.

With Facebook, they're scrolling through their feeds, they're whatever, wasting time on mine at Starbucks. Then you pop your ad in front of them and you're trying to grab them and then turn them into a customer, when they were like, "Hey, I was just at Starbucks waiting for my coffee, right?" So bad traffic going too heavy with Facebook Ads in the beginning. And if you want to know exactly how we use Google Ads, Facebook Ads, Microsoft Ads, search engine optimization, paid social traffic, everything. Again, that's all in the Drop Ship Blueprint, that's specifically Module 6. But yeah, that's some examples of bad traffic.

Another example, this is a huge one, but it's not optimizing, okay. Not optimizing your traffic. So let's just say you set up your first traffic campaigns. Even if you do it in Google from day one, you want to be looking at things like what keywords are your ads showing for? You want to be adding negative keywords. You want to be segmenting your best-performing products into their own ad campaigns and raising the budgets within them. You basically want to be able to pour more money into what's working and cut back on what's not. Sounds obvious, but a lot of people don't do it. They set up their traffic originally, two months later, they're like, "Hmm, what can I do to make this better?" For us, it's a weekly thing. If you're spending a little bit less money, maybe a bi-weekly thing, you should be auditing your own ad accounts and improving them.

Okay. Number five, fifth reason why new drop shippers fail, bad customer service. The key to long-term success with online business, really in any business, it's having happy customers. And so many people start out and they don't even think about how they're going to deal with a customer calling in, or a customer emailing saying, "When did my order ship?" Or they don't even think about when somebody places their order, how am I going to get them their tracking number? These are all things that are extremely important because yeah, you can get sales, but if those customers aren't happy your business isn't going to last and you're going to fail. So this can lead to things like getting bad reviews. This can lead to things like getting chargebacks where customers are contacting their banks, saying, "Hey, this company ripped me off." You want to avoid those things at all costs, sounds obvious, people don't think about it.

A quick tip I can give you is, leverage automations as much as possible for customer service. So things like automatically sending tracking updates to customers. Things like automatically reaching out a week after the products were delivered and asking for a review. Things like having it set up, so emails are responded to within x amount of hours and live chats are available between this hour and that hour, but making sure it's not a secondary part of your business that you're like, "I hope our customers are happy." But it's something you're actively working on improving. It's the most important thing to long-term success. Again, full training on how to do all that in the Drop Ship Blueprint.

But for now, let's keep moving on. Let's get into the sixth reason that new drop shippers fail, and this is bad tracking, all around in their business. And I'll say this too. I don't want anybody watching this or listening to this to think like, "Oh, Anton I've made a lot of these mistakes." I don't want anybody to feel bad basically because everything that I'm listing here is something that I have made the mistake of many, many times over in my business, particularly a decade ago when I was first getting started. So don't feel bad if you find yourself matching the descriptions of what I'm going through. Instead use that as information to not make those mistakes again, right. To improve based on what you now know, or hopefully are learning and benefiting from this episode.

But with bad tracking, I'm referring to not knowing why things work and why things don't work. So your return on ad spends, right ROAS, the holy grail of paid traffic. How much money do you get back for every dollar that you put into ads, which ads are converting, which ads aren't? There are so many store owners that you could ask, like, "What's your return on ad spend?" And they'll have no idea, they just, they won't know the answer. Even people that have been doing this for years. And it always makes me think of the show Shark Tank if anybody watches Shark Tank on TV. Big fan, but all the time, you'll see people are there looking for the Sharks to make big investments.

And the investors will ask the presenters a simple question about their numbers and their books, right? Their profitability, even like what it costs them to acquire a customer and the person seeking the investment will just stand there with a blank look on their face, like, "I have no idea." And those people never get investments because if you don't know what's happening in your business with data, then how is an investor going to invest? But even more importantly for you, right? Think of you as the main investor, how are you going to be able to improve if you don't know what's already there. What gets measured gets managed, I think that's Peter Drucker that said that. So yeah, no, your return on ad spend and know why things do work as well.

So one thing that I advocate a lot for is basically keeping a changelog of your business. So let's just say, what month are we in? We're in June, July is coming up. Let's say, you're in the States. And you run a 4th of July promotion that you send out via email. And it does great, right? You make an extra 30% in revenue in July because of that. And then let's say six months go by and you're like, "Sales have been okay, but sales were really good in July, what happened in July?" Right? And so many people will be like, "I don't know, maybe traffic just worked better, I have no idea." What I would encourage you to do is keep this changelog of your business of promotions, of suppliers added, of things you're changing with your traffic. So you can look back, see what worked because you had this tracking sheet and then repeat it. Right? Okay. July was 30% better because we had a promotion for the 4th of July. Let's have a promotion scheduled every month for a different holiday or event. So do that. It makes a big difference.

Moving right along guys into number seven here, the seventh reason why new drop shippers fail. This one is having a fixed mindset and settling instead of growing, I get this one. Again, I've struggled with all of this. But in the beginning, let's just say you have a goal for yourself and you say, "I'm going to start with drop shipping. I'm going to go with Drop Ship Lifestyle. I'm going to go through the Drop Ship Blueprints and in the next six months, I want to earn $3,000 a month in net profit from my store." Okay, that's your goal? Let's say six months go by and you're earning $5,000 a month net profit from your store. You knocked it out of the park. You did great, good work, to a future you. But let's say, that's you then, and you're like, "Okay, well I've hit my goal, I'm making more than I ever expected to make from this." So let's keep it going. Right. Let's keep the ads the same. Let's keep the store the same, let's just maintain. And that's a bad idea.

Okay. You don't need to try to be a unicorn in Silicon Valley and have your store turned into the next I would actually discourage trying to do that with the way that we build businesses. You know, we're focusing on lifestyle businesses, but I would suggest to you that between 10 and 20% of your time and money that you put into your business, once it's profitable should go towards something new, something exploratory. So let's just say again, six months go by you're making $5,000 a month, net profit. I would recommend you take some of your money and you put it into new traffic sources and you put it into maybe hiring somebody that's going to help you with customer support, or email marketing, whatever it may be, but take part of your money and put it into growth.

Because when you stay with this fixed mindset and you kind of settle as to where you are, not only won't you grow, but eventually, and slowly, things will drop off. So always be focused on growth, invest 10 to 20% of your resources into it. And that'll treat you well for the lifespan of your business. All right. Probably the longest podcast I've ever done, probably the longest YouTube video we've uploaded in like a year. So again, guys, if you like the longer format, let me know by leaving a review on Apple Podcasts, if you're listening there and if you're watching on YouTube, let me know by giving a thumbs up and leaving a comment below.

But number eight, the final reason that I believe that new drop shippers fail, I shouldn't say the final reason, the final of the eight. I could think of more, but these are the biggest, with that being said, number is not treating it like a real business. This is a massive mistake. And I understand why I see this so much. I mean, my program is called Drop Ship Lifestyle, right? Because we're teaching people how to build lifestyle businesses by using our method of drop shipping. So yeah, it's not a business where you need to sign a lease for a retail store in a local strip mall, where you need to hire a bunch of employees and invest six figures to inventory. No, it's not that type of business. It is a business that you could run in a few hours a day when you start. And eventually, as you grow and hire virtual assistants, you can manage between 15 to 30 minutes a day.

But that doesn't mean that you can build a store in a weekend, hire a virtual assistant and then spend the rest of your life on a beach, checking your phone once a week. That's not how it works. So it is a very, very simple business model, but it's not easy in the beginning. Okay. It's simple, but not easy. Expect to put in the work, especially upfront and when done right, that work pays off for years. And for me, over a decade already and still growing strong. So, that's going to do it for this longer-than-usual episode guys. Hope you got value from it as always, if you did let me know by leaving a like, or by leaving a review for the podcast. I'll post links to both in the description.

And if you're listening to this or watching and you want to know more and you want to know exactly how we build highly profitable semi-automated stores, I'm going to post up a link to, where I have a free training. And I give you a list of 237 profitable products to sell online. Again, Also, I make a special offer for our award-winning program, voted best eCommerce course by Shopify at the end of that training. So check that out as well. So thank you, everybody, I appreciate you and I'll talk to you on Monday for the next episode of the podcast. See everybody.