eCommerce Lifestyle
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Will Supply Chain Issues Disrupt Dropshipping Businesses?

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Episode 325

Podcast Description

Will supply chain issues disrupt dropshipping businesses? When will supply chain issues disappear? What to do about supply chain issues today to keep sales coming in?

Anton answers these questions and more in today’s episode of the eCommerce Lifestyle Podcast.

If you liked today’s show, please subscribe on iTunes to The eCommerce Lifestyle Podcast! The podcast is also available on all major podcast players including, Stitcher and Spotify.
Transcripts

What's up guys, Anton here from DropShipLifestyle.com. And in this episode, I want to answer some questions that I've been getting a lot over the past couple of days. The first is will supply chain issues affect drop shippers? The second is what you can do as a drop shipper to keep sales coming in and maintain your profitability even during supply chain problems. And finally, when I expect supply chain issues to resolve themselves.

So to answer the first question, do I think supply chain issues will affect drop shippers? Will they disrupt the industry? The short answer is yes, they already are, and they have been for the better part of two years now. Now obviously, this all started when COVID first was a thing and this coincided with the Chinese New Year, and what that meant is a lot of products that people were expecting to come back in stock to suppliers' warehouses simply didn't because the China factories closed and products weren't shipped, and that led to what we can refer to now as the first wave of supply chain issues. And back when that happened, certain industries got hit harder than others, and there was this window of maybe three to five months or something like that where there were a lot of products that are back ordered. So this isn't something new, that'll be the first way to describe this.

But what is currently happening now, there's a whole nother round of supply chain issues that have been going on for, depending on the industry, some of them for probably a year, some of them maybe within the last six months or so, and these are certainly affecting products being available in the States. I want to talk about what that actually means, and again, how to get around this to continue making money. But the first thing that's important to note is that this isn't only affecting drop shipping businesses, right? This is affecting pretty much everything and anything.

For example, if you want to buy outdoor furniture. I have so many neighbors that over the past year or so have put pools in their backyards because they were stuck at home, they had extra money, they got all these fancy things built. And they got built, and some of them are still waiting on the outdoor furniture because it was back ordered so long, because of supply chain issues. So it's not that they all bought it online. Some of them worked with designers, and it's still back ordered. So not drop shipping exclusive. This is more just the commodities and goods in general.

Now, with that being said, this is something that is affecting certain brands, certain suppliers. The way that we do business in DropShipLifestyle is we sell for domestic suppliers. For us that means suppliers in the States. For members in Australia that means suppliers in Australia, for members in the UK that means suppliers in the UK, and so on and so on. But many of these companies have their products manufactured overseas, then they warehouse them locally in the countries that we do business. That's how we get that super fast shipping within two days. That's how we have easy return processes. That's just the best way to do business. But because their products aren't manufactured domestically, for the most part, we still deal with these supply chain issues. So yes they're real, yes they're happening. Now let's talk about what we can do to get around them.

So typically what people will do is they'll build their store on Shopify, like I recommend, best e-commerce platform out there. And they will get approved with the brands that they sell for. Let's just say in the beginning, we'll call it 10 brands. So they have 10 brands they sell for, and maybe throughout those 10 brands, they have access to something like 500 products. And they list those products on their Shopify store, and they set up their Google ads, and the Google ads advertises those 500 products. And that's how they get traffic, that's how they make money. So what do you do when supply issues arise and you are running your store? Well, the ones that are back ordered and specifically have no clear ETAs, or have ETAs out of three weeks plus? My advice is your Google ads that are advertising the products that aren't available? And let's just say out of the 500, it's something like 150, which would probably be a somewhat reasonable number. Then what you want to do as soon as possible is your Google ad spend? Cut it for those products.

Instead of advertising 500 products now, all the ones that are back ordered, the ones where there are supply chain issues, cut your ad spend for those and put your money towards the 350 in this case that are in stock. Keep your ads going to those so you're not wasting money on products that people are either going to buy and then be mad when they find out they're back ordered, or when they go to the page and the page says out of stock.

So what do you do with the 150 products in this hypothetical that are back ordered? Do you take them off your store? Do you mark inventory as zero? What's the best way to keep making money from them, because you're still going to have people find them. You're still going to get your organic traffic, that free traffic we love so much. What do you do with these when they're back ordered? Well, couple things. What we do, first of all, is update the product pages and right by the add to cart button ... I'll call it ATC for short, we put the ETA. So we have a notification right there, literally right next to that button, before they click it they have to read this thing that says when the product will be coming back.

So before somebody buys it, they know this is when this product is back ordered to. So for all the people that find that product organically ... again, we're not paying for them to find it. If they still want it, they're still willing to wait, they can do so. And again, for us, the cutoff of doing this is typically if something's back ordered for three weeks or more. If it's less than that, then we'll continue to sell it as per usual. We'll continue to spend money on ads.

Now, what else can you do to take advantage of, in this case, these 150 products that people are still finding? Because what if somebody goes to one of those product pages and they see it has an ETA of, let's just say, 10 weeks out? Not everyone's willing to wait 10 weeks. Some people need products sooner rather than later. What I do, and what would I encourage you to do, is on those product pages, link to similar products that are not dealing with supply chain issues. Similar products that could ship fast. So for example, right now I am at a standup desk. I'm sitting at it, but I'm on a standup desk. So if I was selling a white 76 inch standup desk that was back ordered for 10 weeks on that product page, I would have links to say something like "need it sooner?" And then I would say, "check these out", and I would link to the products on my store that didn't have those issues, the products that were in stock, the products that could ship within two days. That way you're taking advantage of that traffic that's going to your pages organically, and you're still able to capitalize, in this case, on those 350 products that are still in stock.

That's the short of it. What to do to continue making money during supply chain issues. We'll talk about, again, when I think things will normalize and when this hypothetical 150 products would be back in stock. But before I do that, I think it's worth noting that one of the reasons inside of the Drop Ship Blueprint, which is our flagship coaching program, the only program to ever be voted best e-commerce course by Shopify, super proud of that. Learn more at dropshipwebinar.com. But one of the reasons I recommend working with at least 20 suppliers and finding at least 20 brands you could sell for while you're doing your market research is because this is something that can always come up.

There could always be a reason where your business could be affected by suppliers. That's just the nature of the game with drop shipping. There's tons of pros, but of course, like anything, there will be some cons. The worst scenario would be if you were one of the people out there that built your Shopify store, and maybe you built a one product store, which I would never recommend, or you simply sold many products, but they all came from one supplier. Now the people that were doing this and that are doing this, what happens when that supplier has those inventory issues?

You're done, because then you're going to cut your ad spend for that one supplier's products. Maybe you're going to get that organic traffic, the free traffic, still coming to your store, but then what are they going to do? Everybody simply has to accept the wait time for whatever it is? You have nothing to advertise, you have nothing to offer as a replacement. You're simply not going to make money. And if you're trying to build a lifestyle business like I do, and like I recommend ... if you're currently living in Prague and supporting yourself from your drop shipping store income, if you have that business that is simply going to be done the minute one supplier runs into issues, you don't have a real business. And this is a reason why, if you ever want to sell your store, if you ever want to sell one of your businesses and build more or retire or do whatever, if you have a store that sells for only one supplier or even just a couple of them, the value of it is not as high as a store that is properly diversified, that is selling many products for many different suppliers, because potential buyers know the risk that comes along with having limited inventory or your whole business being limited by one or even a small number of brands. So keep that in mind.

Okay. So again, this is affecting drop shippers. This is how to get around it and continue to be profitable. But let's answer that other question that we started with, which is when do I expect the supply chain issues to blow over and be behind us? Well, listen, I am by no means an analyst, so all that I can do is research what people that actually follow this stuff say. And basically all the predictions or projections that I've seen say by mid 2022. So if you want to be optimistic, you're looking at spring. I personally always try to go a little further out because I think most predictions are wrong and I'd rather be safe than sorry, and with the way the world changes now, who knows what's going to happen? But I do think it's safe to say by summer of 2022 that many of these supply chain issues will be gone.

Every product that used to be available will be available again, because it's not like the factories aren't trying to get them out. It's not like the brands that we sell for and you sell for, or maybe you're looking to sell for, aren't looking to get them back in stock. We're simply dealing with this bottleneck right now. That will correct. This is not going to be here forever. But the truth is, while it's here, it's not like we're not making money.

If you're currently running a store, do what I just said. If you're not running a store yet and you want to, be sure to visit dropshipwebinar.com for a free training from me that'll show you how to get started. And as always guys, if you got value from this episode, give it a like, click subscribe. We have two new episodes every week, every single Monday and Thursday. And with that being said, I'll be back on Monday for the next one. So stay healthy, stay safe, and I'll see you soon.

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