Dropshipping - Don't Do It!!

I get a lot of questions about dropshipping. Mostly the question is: "Do you drop ship". The simple answer is "NO!". But because there is so much interest in this topic I want to offer a bit of dialogue that I hope will be useful for those considering this sales-strategy.

As you can tell already, I am no fan of the dropshipping phenom. The bottom line is that it is a bad idea for the customer, and therfore it is a bad idea for you as a retailer, and I will give an example below. Why am I so negative on this idea? Because it even further degrades the relationship between the retailer and the customer. There is virtually no accountability. A customer is buying a product that you as the 'retailer' have never seen, whose authenticity and quality you cannot verify, and you have no control over the order fullfillment process. Hmmm... how many things can go wrong here?!

What if there is a problem with the order? Who is the customer going to call - YOU! And what will you do or say when she tells you her ipod does not work? Will you help her troubleshoot? Will you have her send it back to the unknown 'supplier' (dropshipper) and cross your fingers? Or what if her $299 tennis bracelet is really made of Cubic Zarconia (a worthless stone)? How would you even verify whether she is telliing the truth? Who will issue the customer a refund? Will you be able to tell with any certainty whether she is telling the truth?

CASE STUDY - Sandra and the cell phone drop shipper

This is a TRUE story with a fake name

Six months ago a customer discussed with me some options to ramp up her ebay business. She told me she identified a technology dropshipper. I warned her of the potential pitfalls... 4 months later she called me up for advice. She decided to go with the dropshipper and was grossing something like $50,000/ week for a couple months! But she was now broke. What happened? Turns out the drop shipper was not as credible as she believed. Everything was great for a few weeks, then the calls started coming in. Customer after customer calling with complaints including: "I ordered 3 phones and only got 1!", "My phone is broken!", "Where is my phone, its been 2 weeks since I paid!". And like a good e-commerce citizen she refunded (EVEN THOUGH most of the payment - she only got to keep $5 per phone - she had already sent to the dropshipper) all the distraught customers and had them return the phones to the drop shipper. Guess what happens next? The drop shipper stopped returning her calls. So she has no phones, not even broken ones, no money - in fact she lost money since she refunded money she did not have... all in all she was f---d!

You could argue that the dropshipper was the responsible party here, but in the eyes of the customer, and maybe the law, Sandra was reponsible to those customers as the re-seller. 100% RISK = SANDRA, 0% RISK = DROPSHIPPER. Not exactly a forumla for success. The Dropshipper really has nothing to loose and if he has a lot of merchandise and other customers, no incentive to make sure the end-customer is happy.

I forgot to mention, Sandra's paypal account was suspended and she was unable to pursue her main business for quite some time.

Drop shipping sounds like a great, low-overhead, minimal work, no money down kind of thing. But in this case the old adage holds: "If it sounds too good to be true, it probably is". Think I am making this up to promote my business? Just type "beware of dropshippers" into the google box below and you be the judge.

So what are the other options? Take your time and start your business the right way. Identify good suppliers for the products you want to sell, get to know them, and quality-test their products before making any large investments. And the most important thing about online sales is to develop a good marketing strategy that may involve search engine and website optimization, pay per click advertising, registering in free directories, email lists, etc.

Still want to try drop shipping? Its easy enough to find them with a google search, but be sure to do your homework and start slow!