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How Dropshipping Stores Lose Money? (A Guide To Win In 2024)
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by
Aleksandra -
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Chief of Content Marketing
Aleksandra teaches marketing and management at various levels in High School. She writes about marketing, the economics and logistics of the dropshipping business and ecommerce in general.
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Chief of Content Marketing
16 minutes

Dropshipping has emerged as an enticing avenue for aspiring entrepreneurs to make money online from the comfort of their homes. With its promise of low startup costs and minimal inventory management, it’s no wonder that many have ventured into this e-commerce model. But still, how dropshipping stores lose money, and how to escape this yourself?

In this guide, I’ll explore the common reasons why dropshipping stores lose money and provide you with actionable strategies to increase profits in 2024.

From the foundation of your online store to operational efficiency and managing chargebacks, I’ll cover it all.

Let’s embark on this journey to transform your dropshipping venture into a profitable business.

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The Foundation of Dropshipping Success

In this blog article, I will pinpoint the most frequent reasons why dropshipping stores lose money.

πŸ‘‰ Also, check out the 20 Most Frequently Asked Dropshipping Questions – Answered.

1.1 Poorly Designed Website

Your dropshipping website is your digital storefront, the first impression you make on potential customers. A poorly designed website can deter visitors and result in lost dropshipping sales. Common design mistakes include cluttered layouts, slow loading times, and confusing navigation.

Optimizing Your Website Design

To avoid these pitfalls, focus on:

  • Clean and User-Friendly Design: Simplify your website’s layout for easy navigation.
  • Mobile Responsiveness: Ensure your site looks and functions well on mobile devices.
  • Fast Loading Times: Optimize images and minimize plugins to speed up your website.

Your website’s design should be a seamless gateway for customers to explore your products. A well-designed site creates trust and encourages visitors to stay and make purchases.

For example, I always go to Notebook Therapy for inspiration. Let’s check this real quick.

As soon as you visit their website, a fun pop-up appears, offering a $50 discount gift card. This is a clever way to promote your business.πŸ‘‡

Let’s also discuss the store’s appearance. This Shopify store features a big photo layout that covers the whole screen, with the right buttons in the right spots. That’s a big win! πŸ™Œ

Remember, buttons like “Shop Now” are really important to get customers interested.

The website also has a simple horizontal menu with four clear categories. It’s easy to understand.

And if you’re looking for a great Product Page, this Shopify store has it all, from detailed product info to high-quality pictures and all the right buttons.

Ready to revamp your website’s design for a better user experience?

πŸ’‘ Call to Action: Explore the 13 Most Successful Shopify Dropshipping Store Examples.

1.2 Not Offering Discounts

Wondering how dropshipping stores lose money? Thus, here’s another reason why- dropshippers fail to offer discounts.

In fact, discounts can be a powerful tool in your dropshipping arsenal. They influence purchasing decisions, create a sense of urgency, and encourage repeat business. Yet, some dropshippers shy away from offering discounts, fearing reduced profit margins.

Leveraging Discounts Effectively

To harness the power of discounts, consider:

  • Strategic Discounting: Offer discounts on select products or during specific seasons or holidays.
  • Bundle Deals: Create bundle offers that encourage customers to buy more.
  • Loyalty Programs: Reward repeat customers with exclusive discounts.

Hence, discounts can attract new customers and foster loyalty among existing ones. Also, it’s good to think of them as an investment in customer acquisition and retention, ultimately boosting your bottom line.

πŸ’‘Tip: Learn about Setting Up Shopify Discounts: 5 Important Things You Should Know.

Take AliExpress, for instance. They’ve got a nifty trick with coupons as a way to boost their dropshipping marketing.πŸ‘‡

So, when you punch in a coupon code when you’re buying stuff, you can score some cool discounts on all sorts of things, like clothes, gadgets, home stuff, and more. These savings can really pile up, especially for folks who shop on AliExpress a lot.

And here’s the kicker: you can be smart about it and use AliExpress coupons to get the most bang for your buck. Like, you can mix and match different coupons to get even bigger discounts on your orders.

Moreover, for my dropshipping store over Instagram, I love making Giveaways. It makes my customers happy, and I always gain a lot of new followers during the process. Plus, as far as I have realized, a good 30% of them become my customers later on.

Product Selection and Presentation

2.1 Selling Only Seasonal Products

While seasonal products can be lucrative during specific times of the year, relying solely on them is a common mistake made by dropshipping stores. This approach can lead to inconsistent sales and revenue fluctuations.

Diversifying Your Product Catalog

To avoid this pitfall, consider:

  • Evergreen Products: Include evergreen products that have year-round demand.
  • Product Trend Analysis: Research trends and emerging products within your niche.
  • Continuous Updates: Regularly update your product catalog to stay relevant.

A diverse product catalog ensures a more stable income stream throughout the year, reducing the impact of seasonal fluctuations.

For example, let’s say that you are a dropshipping store selling only Christmas products. Now, let’s check on some Christmas product demand over time.

For instance, I will use Christmas glasses. So, as you can see from the Google Trends results, the demand is going to the roof between November and December. But, what about before or afterward? Drastically falling down.

And, believe me, this happens with most of the seasoned products, whether is a swimsuit, a Christmas tree, or sweet easter bunny accessories.

But, I think you get my point. So, instead, you should focus on high-quality products with low competition. For example, a self-improvement niche might be one to think about.

People are always looking for stuff that can boost their self-esteem, help them do well in their careers, or set everyday targets to improve themselves. And, as far as I can see, the products are ALWAYS in demand! It’s like evergreen.πŸ‘‡

And, according to my research using Semrush, I found some other keyword suggestions for dropshipping in the self-improvement category. Also, the keyword competition is low at 24%, which means low competition.πŸ‘‡

2.2 Low-Quality Images

If you are wondering how dropshipping stores lose money, here’s one of the biggest mistakes. Low-quality product images! Remember, this is the only way customers can check out your product before making a buying decision online. So, don’t mess it up! This is your first product advertisement.

In the world of e-commerce, visuals play a significant role in influencing purchasing decisions. Unfortunately, some dropshipping stores compromise on the quality of product images, leading to missed sales opportunities.

Actually, let me provide you with two illustrations. For example, consider these two pictures from distinct dropshipping beauty product shops:

Now, have a glance at the second one:

Which one captivates you more? Or, which vendor would you have more confidence in? I’m guessing it’s the first one! Well, I agree. Now, I believe you understand what I’m getting at.

Not just that, but the first dropshipping store, also provides you with multiple product images, and you can see the product from all angles.

Emphasizing High-Quality Images

Therefore, to showcase your products effectively, prioritize:

  • Professional Photography: Invest in high-resolution product images that highlight details.
  • Multiple Angles: Provide multiple images from different angles for a comprehensive view.
  • Image Optimization: Optimize images for fast loading without sacrificing quality.

High-quality images help potential customers better understand the products you offer, increasing their trust and confidence in making a purchase.

πŸ’‘Tip: Read about Why It Is Essential To Have High-Quality Images For Your Dropshipping Products.

2.3 Product Description Lacks Information

Next, product descriptions serve as your virtual sales pitch. So, insufficient or vague product descriptions can leave potential customers with unanswered questions and doubts.

Crafting Compelling and Detailed Descriptions

Therefore, to create persuasive product descriptions, consider:

  • Key Features: Highlight the essential features and benefits of each product.
  • Scent Notes and Ingredients: For fragrance products, provide detailed scent notes and ingredients.
  • Problem-Solution Approach: Address potential customer concerns and explain how the product solves their problems.

Comprehensive product descriptions provide customers with the information they need to make informed purchase decisions, reducing hesitation and cart abandonment.

For instance, for me, Shopify Magic Tool is very helpful for writing my product description. It re-writes my product description clear, attention-grabbing, detailed, and SEO-friendly.πŸ‘‡

So, if you lack of idea about how to write a stunning product descriptions, you can use AI tools, like Shopify Magic, or ChatGPT, and ask for their help.

For example, you can say, β€œPlease write a product description for this kitchen blender,” or β€œGenerate a unique store name for my home decor business.β€œ ChatGPT will then respond by generating text that fits the context of your request.

πŸ’‘ Tip: Discover the ChatGPT Hacks For Dropshipping: How To Boost Your Business?

2.4 Absence of Product Guide and Size Charts

For clothing and apparel dropshippers, the absence of size charts and product guides can be a significant drawback. Without these resources, customers may hesitate to make purchases due to uncertainty about fit and suitability.

Providing Size Information and Product Guides

Hence, to address this issue, consider:

  • Size Charts: Include detailed size charts for clothing and apparel products.
  • Product Guides: Create guides that explain how to use, care for, and benefit from your products.

Size charts and product guides instill confidence in customers, helping them choose the right products and ensuring a better shopping experience.

For example, I really love how Zara helps their users find the best fit for them. Thus, they do not use size charts, but instead, they have size guides. So, if you are patient enough to go through all these steps you can check on specific measures based on your body type.πŸ‘‡

πŸ‘‰ Learn about How To Convert Asian Size Chart to US Size for Dropshipping.

Dropshipping Branding and Marketing

3.1 Failure to Build a Brand

In the dropshipping landscape, building a brand might not seem like an immediate priority. However, overlooking brand development can limit your long-term success. Without a strong brand, your store may appear generic and fail to stand out in a crowded marketplace. And, this is also how dropshipping stores lose money.

πŸ’‘ Tip: Read about Branded Dropshipping: Best Tactics For Building A Strong Brand.

The Significance of Brand Building

So, building a brand involves:

  • Unique Identity: Creating a unique and memorable brand identity that resonates with your target audience.
  • Consistency: Maintaining consistent branding elements, from logos to color schemes.
  • Storytelling: Crafting a compelling brand story that connects with customers emotionally.

A strong brand not only attracts customers but also fosters loyalty, encouraging repeat purchases and word-of-mouth referrals.

For example, have you considered the idea of print-on-demand dropshipping? So, if you’re a creative person, you can create your own products and put them in your dropshipping store. Thus, you can explore dropshipping suppliers like Printful, which offers customized dropshipping.πŸ‘‡

In fact, right now I’m using Printful for my custom hats dropshipping business. This service allows you to pick your product and quickly apply your design to it. Moreover, the Printful Mockup Generator is user-friendly, and you can manage everything right from the Printful dashboard.πŸ‘‡

πŸ‘‰ Check out Printful vs Printify – Which Platform Is Better for print-on-demand dropshipping?

3.2 Not Marketing Products Properly

Effective marketing is the lifeblood of any successful dropshipping business. Yet, if you are thinking about how dropshipping stores money, well, some dropshippers miss the mark by either underestimating the importance of marketing or executing ineffective marketing strategies.

Unlocking the Power of Marketing

To market your products effectively:

  • Know Your Audience: Understand your target audience’s preferences, needs, and pain points.
  • Content Marketing: Create valuable content that educates and engages potential customers.
  • Paid Advertising: Utilize paid advertising channels like Facebook Ads and Google Ads to reach a wider audience.

Marketing isn’t just about selling products. In fact, it’s about building relationships with your audience. When done right, marketing can turn one-time buyers into loyal customers.

πŸ’‘ So, I highly recommend you build a strong marketing plan So, you can start out with search engine optimization (SEO), social media marketingemail marketing, and content marketing.

For example, I make use of the targeting options provided by social media platforms, like Facebook to connect with your particular audience by considering factors like age, interests, and online habits. πŸ‘‡

Next, since you start to grow, you can also think about tactics like cross-selling, up-selling, promotional code offerings, and the establishment of referral programs

Also, incorporating video marketing into your strategy is highly recommended. Videos provide an engaging way to showcase your dropshipping products, highlighting their features, benefits, and usage. 

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Dropshipping Operations

4.1 Long Shipping Times

One of the common pain points in how dropshipping stores lose money is long shipping times, especially when dealing with international suppliers. Thus, prolonged shipping times can lead to customer frustration and even cart abandonment.

Managing Shipping Times Effectively

Thus, to minimize the impact of long shipping times:

  • Set Clear Expectations: Clearly communicate expected shipping times on product pages and during the checkout process.
  • Offer Expedited Shipping: Provide expedited shipping options for customers who are willing to pay extra for faster delivery.
  • Order Tracking: Enable order tracking so customers can monitor the progress of their shipments.

While you may not have control over shipping times entirely, transparent communication and options for faster delivery can mitigate potential issues.

So, for this matter, I advise you to choose dropshipping suppliers that collaborate with popular shipping providers like FedEx, DHL, UPS, etc. For example, UPS offers expedited options guaranteeing delivery within 2-5 business days, while DHL delivery takes 3-7 days.

Also, if you are an AliExpress dropshipper, consider learning about AliExpress Premium Shipping: The Key to Get Your Orders on Time.

Or, you can use third-party shipping providers, like ShipBob that take care of these services

However,  I use the supplier directory on Dropshipping.com. They provide a comprehensive list of more than 2000 reliable suppliers for you to select from, completely free of charge. So, this way, I never have to worry about long shipping times, since I have the best service when it comes to shipping. Plus, I got the information about the supplier shipping times in addition. πŸ‘‡

πŸ’‘ Tip: Learn How to Reduce AliExpress Shipping Times in 2024.

4.2 Poor Customer Service

If you are wondering how dropshipping stores lose money, and yet they sell high-quality products, here’s one! Poor customer service! Customers want to feel important. And, you don’t provide them this comfort, they run away!

In the world of e-commerce, exceptional customer service is a competitive advantage. Unfortunately, some dropshipping stores overlook the importance of providing reliable and responsive customer support.

Elevating Your Customer Service

Hence, to provide excellent customer service:

  • Timely Responses: Respond to customer inquiries and issues promptly and professionally.
  • Knowledgeable Staff: Ensure your customer service team is well-informed about your products and policies.
  • Problem Resolution: Address customer complaints and issues efficiently, going the extra mile to ensure satisfaction.

Exceptional customer service not only resolves problems but also builds trust and loyalty, encouraging customers to return and refer others.

Want to see what bad customer service does to your dropshipping success? For example, try typing β€œbad customer service” in the TikTok search bar. What results did you get?

Next, check on the video views, and everything will be much clearer to you. You don’t want to be on this list, do you?

I got dozens of videos with millions of views about customer complaints about customer service. Customers talk! They leave reviews, comments, Reels, and short videos! This can really give you a bad reputation. 

So, my advice on this is to give your customers multiple ways to contact you, like chatbots, live chats, phone calls, email, etc. Also, keeping the communication going after the sale is just as important as the interaction before or during the purchase.

That’s why it’s a good idea to send a confirmation email to your customers after they’ve made a purchase. This email should contain information about the order, tracking details, contact information, and what they can expect next.

4.3 Slow Returns Process

Handling returns and refunds efficiently is another critical aspect of dropshipping operations. A slow, cumbersome returns process is one of the causes of how dropshipping stores lose money. Plus, it results in unhappy customers and negative reviews.

Streamlining the Returns Process

So, to expedite returns and refunds:

  • Clear Return Policy: Maintain a transparent and user-friendly return policy on your website.
  • Automated Systems: Implement automated systems for processing returns and refunds.
  • Customer Communication: Keep customers informed about the status of their returns.

A hassle-free returns process demonstrates your commitment to customer satisfaction and can turn unhappy customers into loyal ones.

Let me give you an example. I think the return process on the Everlast website is a piece of cake. Their return page is simple and it says you can return stuff within 30 days from when you bought it, as long as it’s unused and still in the original package. πŸ‘‡

πŸ’‘ Tip: Read about Dropshipping Returns: How To Set Up Your Returns & Refunds? [Full Guide].

Managing Chargebacks when Dropshipping

5.1 Chargebacks

Chargebacks can be a significant headache for dropshipping stores. They occur when a customer disputes a transaction with their credit card provider, resulting in the reversal of funds. Chargebacks can lead to financial losses, damage to your store’s reputation, and even account suspension.

πŸ‘‰ Read about How to Cancel a Dropshipping Order? [A Step-By-Step Guide].

Understanding and Preventing Chargebacks

So, to mitigate the risk of chargebacks:

  • Transparent Policies: Clearly communicate your return, refund, and cancellation policies on your website.
  • Responsive Customer Support: Address customer concerns and issues promptly to prevent disputes.
  • Fraud Detection: Implement fraud detection measures to identify and prevent fraudulent transactions.

Also, chargebacks are not only financial losses but also red flags that warrant attention. Thus, proactive prevention is key to minimizing its impact on your dropshipping business.

πŸ‘‰ Learn How To Determine Shipping Costs When Selling Online.

What’s more, even if you have chargebacks over your head, make sure you use reliable payment gateways for dropshipping based on your needs, like: 

  • PayPal 
  • Stripe
  • Amazon Pay
  • Shopify Payments
  • Google Pay
  • ApplePay

πŸ’‘Tip: Read about Dropshipping PayPal: How To Use It & Not Get Banned.

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Conclusion

In the ever-evolving world of dropshipping, understanding the dropshipping pitfalls that can lead to financial losses is essential for building a profitable venture. As we’ve explored in this guide, the journey to increasing profits in 2024 begins with a strong foundation.

From website design and product presentation to branding, marketing, operational efficiency, and managing chargebacks, each aspect plays a vital role in your dropshipping success.

Avoiding common mistakes, such as relying solely on seasonal products, neglecting image quality, or overlooking customer service, is key to creating a thriving dropshipping business.

By implementing the strategies outlined in this guide, you’ll be better equipped to navigate the challenges and transform your dropshipping venture into a profitable and sustainable source of income.

Now that you’ve gained insights into how dropshipping stores often lose money and how to overcome these challenges, it’s time to put this knowledge into action. Remember, the journey to increased profits is a continuous one, filled with opportunities for growth and success in the ever-expanding world of e-commerce.

About the Author

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Aleksandra Miteva
Aleksandra teaches marketing and management at various levels in High School. She writes about marketing, the economics and logistics of the dropshipping business and ecommerce in general.