Some advertisement platforms have been disabling ad accounts of companies using the dropshipping model for years, in an effort to enhance the online experience of social media users. The latest wave of ad shutdowns happened in September. It has forced e-commerce merchants to seek an alternative solution to the dropshipping model. In response, NextSmartShip, the order fulfillment company with multiple world-wide fulfillment centers, launched their “Free Storage Special” and a series of other offers to further reduce global eCommerce business owners’ logistics costs.
Ads Are Banned Because of Dropshipping
Dropshipping is a popular e-commerce business model that entails medium risks. Small companies embrace this model as it requires very little investment. Entrepreneurs also don’t have to worry about storage or fulfillment. They only have to think about their organic and paid advertising efforts. However, there are disadvantages to using the dropshipping method.
Apart from ads being banned, the dropshipping method hasn’t been a profitable model for a number of small e-commerce merchants, especially startups and e-commerce brand owners.
Research shows that nearly 90% of businesses that do dropshipping fail within their first 120 days, giving up due to frustration. There are many causes of dropshipping failures, including refunds, wrong niche selection, terrible customer support, or excessive spending on paid marketing.
Why E-Commerce Businesses Fail at Dropshipping
In a dropshipping model, the manufacturer not only creates but stores the products for the retailers. The e-commerce merchant is responsible for finding buyers from platforms like Facebook. They forward orders to the manufacturer and hold on to the profits while the manufacturer fulfills orders. It’s the dropshipper’s responsibility to manage inventory, pick, pack, and ship orders to the right consumers.
Perhaps the biggest problem with dropshipping is having thin profit margins. Since the dropshipper covers a lot of the overhead, the profit margins are thin. Let’s take products such as chargers and headphones for example. An e-commerce merchant can receive less than 1% profit for each sale.
Not to mention, dropshippers handle different e-commerce businesses. That means companies are often competing for sales with other companies who sell similar items at the same cost. Simply put, standing out is a challenge for companies who leverage this fulfillment model.
If any issues arise, the company has to act as middlemen between the customers and dropshipper to resolve the problems. Since these businesses often have to wait for the dropshipper to respond to issues, it can cause a lot of frustration. Dropshipping can render customer support inefficient and ineffective.
NextSmartShip Order Fulfillment: Alternative to Dropshipping
Another business model that online companies can explore is third-party fulfillment. Outsourcing the fulfillment process to an e-commerce fulfillment center who can manage large volumes of inventory and can handle multiple fulfillment centers in the USA, Europe, Australia and China is an excellent alternative to dropshipping.
NextSmartShip, an order fulfillment company with multiple fulfillment centers around the world, can fulfill orders for you while you focus on what you’re great at: selling your product.