5 Pitfalls of Dropshipping and How to Avoid Them

Walmart and the local jewelry store are more different than they are alike – size, scale, number of SKUs, just to begin to scratch the surface. But as customer’s expectations continue to change, businesses large and small are looking to a distributed fulfillment model as a way to improve the customer experience and enhance operations.

In a dropshipping arrangement, the manufacturer ships orders directly to the shopper, allowing ecommerce merchants to sell more merchandise with hands-free efficiency – and focus on what they do best, retailing.

While tying up fewer resources in inventory and warehouses may seem like a no-brainer, shedding such overhead also puts brand image and customer experience at risk. As an online retailer and dropshipping advocate turned logistics expert, I’ve witnessed the challenges that retailers and manufacturers encounter and how they overcame them. As with most strong partnerships, better communication is key.

Order Visibility: “Your Package Has Left the Warehouse”

From the moment shoppers hit ‘buy’, they want to know everything about their order until it arrives. For dropshippers who are not controlling the process, things can get a little complex.

The first priority in dropshipping is to set customer expectations. By knowing your vendors’ inventory availability and typical ship times, you can provide delivery estimates to customers while items are still in the shopping cart.

From there, your order management system should be in sync with your vendors’ systems so that you can track the process with accurate information. Transparency with your vendors leads to transparency with customers.

Whose Brand is it Anyway?

A total customer experience demands that the transaction ends where it started, with the retailer’s brand, from online store to package. According to a survey by Dotcom Distribution, 40% of shoppers said they would be somewhat more likely or much more likely to revisit an online retailer if their order arrived in “gift-like or premium package.” Branded packaging reinforces consumer impressions and increases the likelihood of repeat business.

Branded packing slips that vendors print out as they ship is the logical and cost-effective place to start. It’s worth investing in some curb appeal; branded tape and package labels are affordable ways to give delivery greater impact. Novelty boxes, at the higher end, and tissue wrap in company colors, reinforce image.

Other brand touchpoints include providing suppliers with package inserts, such as catalogs, sales flyers, thank you cards or even a small gift, like a few logo stickers.

We’re Having Issues

Dropshipping retailers are in the crossfire between customers who cancel orders and a carrier system where packages can get lost or damaged. In both cases, the retailer has zero control but total responsibility. Better communication will get you through these tough times.

When customers cancel orders, it helps to have agile suppliers. Worst case scenario is refunding a customer only to find that the order has already shipped. When a cancellation request arrives, set expectations immediately and let the customer know that you will request it but can only confirm when complete. This give you the room to go to your supply chain and get their confirmations in writing, first, before updating your customer.

On the other hand, when the customer receives damaged goods – or no goods at all – claims should reside between the vendor and its shipping partner and not impact shoppers. It’s well worth creating a standard policy ahead of time that stipulates how claims are handled across all vendors.

Many Happy Returns

Some $351 billion in sales were lost by retailers of all kinds in 2017 due to returns, according to the 2017 Consumer Returns in the Retail Industry Report by Appriss Retail. New try-before-you-buy clothing services, like Amazon’s Prime Wardrobe and Stitch Fix, that encourage shoppers to order up a bunch of options and return what they don’t like, only make returns a bigger factor.

What to do? Best case scenario is to return items to the vendor, keeping the pristine inventory-free model intact. Downsides include suppliers that are slow to credit returns, delaying refunds, and those that levy restocking fees or reject items that aren’t in perfect condition.

Your other option is to accept returns yourself, enabling a quicker refund and better customer experience. But then you are in the liquidation business. Either way, be prepared to handle returns.

When Partnerships Fall Short

It only takes one bad supplier to ruin your relationships with your customers so it is critical to build partnerships with quality suppliers.

Once you have identified good mates, draft a clearly stated list of expectations, covering all processes, shipping times, custom-branding capabilities, inventory updates, return policies and more. Of course, a respectful, cooperative tone will set the stage for a warm working relationship.

As orders come in, keep a vendor scorecard with metrics such as fulfillment performance, damage frequency, speed at resolving customer issues, as well as any customer feedback. If poorly performing vendors cannot improve quickly, it is important to move on before the vendor damages your brand.

Sina Djafari is the Founder and CEO of Duoplane