{"id":1539450,"date":"2024-07-08T04:00:53","date_gmt":"2024-07-08T08:00:53","guid":{"rendered":"https:\/\/www.practicalecommerce.com\/?p=1539450"},"modified":"2024-07-07T12:09:35","modified_gmt":"2024-07-07T16:09:35","slug":"poor-marketing-kills-ecommerce-dropshipping","status":"publish","type":"post","link":"https:\/\/www.practicalecommerce.com\/poor-marketing-kills-ecommerce-dropshipping","title":{"rendered":"Poor Marketing Kills Ecommerce Dropshipping"},"content":{"rendered":"<p>Dropshipping is a good way to source products without much investment. Unfortunately, this seemingly turn-key model has little barrier to entry and thus attracts many competitors with razor-thin margins and no clear way to differentiate.<\/p>\n<p>Yet creating a successful dropshipping business is not impossible, provided the would-be entrepreneur understands the growth and profit challenges.<\/p>\n<h3>Dropshipping Boost<\/h3>\n<p>I once heard <a href=\"https:\/\/www.practicalecommerce.com\/t-shirt-seller-on-licensing-drop-shipping-more\">ecommerce dropshipping<\/a> described as &#8220;the perfect business model for anyone who wants all the stress and frustration of running a business without any of the pesky profits to worry about.&#8221;<\/p>\n<p>While this description is a little unfair to an industry with estimated sales of $351.8 billion in 2024, <a href=\"https:\/\/www.oberlo.com\/statistics\/dropshipping-market\">according<\/a> to Oberlo, a dropship provider, it also hints at the benefits of starting or scaling a business.<\/p>\n<div id=\"attachment_1539453\" style=\"width: 580px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1539453\" class=\"size-large wp-image-1539453\" src=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping-570x380.jpg\" alt=\"\" width=\"570\" height=\"380\" srcset=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping-570x380.jpg 570w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping-300x200.jpg 300w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping-360x240.jpg 360w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping-768x512.jpg 768w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-dropshipping.jpg 900w\" sizes=\"auto, (max-width: 570px) 100vw, 570px\" \/><p id=\"caption-attachment-1539453\" class=\"wp-caption-text\">As a business model, ecommerce dropshipping is attractive for a reason: it is relatively easy to start and very low risk.<\/p><\/div>\n<p>There are at least four reasons an entrepreneur might be attracted to dropshipping.<\/p>\n<ul>\n<li><strong>Little or no investment.<\/strong> There is no need to purchase inventory upfront.<\/li>\n<\/ul>\n<ul>\n<li><strong>Low risk.<\/strong> Merchants only pay for products they sell, minimizing the risk.<\/li>\n<\/ul>\n<ul>\n<li><strong>Access to products.<\/strong> Stores can offer a variety of products without worrying about storage or investment. When I led ecommerce for a retail chain, we would use drop shippers to add complementary products to our site, boosting average order value.<\/li>\n<\/ul>\n<ul>\n<li><strong>Flexibility.<\/strong> Sellers can change product offerings based on market trends without significant financial risk.<\/li>\n<\/ul>\n<p>All of these features focus on product sourcing and financial investment. The trade-off, however, is a marketing problem.<\/p>\n<h3>A Marketing Business<\/h3>\n<p>Selling drop-shipped items is a choice to focus on attracting and converting customers rather than developing and sourcing products.<\/p>\n<p>Effectively, when you start or scale a dropshipping business, you prefer solving <a href=\"https:\/\/www.practicalecommerce.com\/boom-founder-spend-30-of-revenue-on-ads\">marketing problems<\/a> rather than sourcing.<\/p>\n<p>And there will be marketing problems. The top three are likely customer acquisition limits, undifferentiated products, and customer relationships.<\/p>\n<h4>Not much CAC<\/h4>\n<p>Think for a moment about a traditional retailer that orders products from a manufacturer at wholesale prices, warehouses the items, and sells them for, say, a 25% margin.<\/p>\n<p>Thus, a $100 sale will result in a $25 gross profit. If the retailer wanted a <a class=\"editor-rtfLink\" href=\"https:\/\/www.practicalecommerce.com\/Using-ROAS-to-Measure-Advertising-Results\" target=\"_blank\" rel=\"noopener\">return on advertising spend<\/a> of 4:1, it could invest $6.25 to acquire a customer \u2014 that would be its target <a href=\"https:\/\/www.practicalecommerce.com\/9-ways-to-reduce-customer-acquisition-costs\">customer acquisition cost<\/a>.<\/p>\n<p>The drop shipping supply chain is longer and more expensive by comparison. More parties take a cut of the profit, and some are taking significant percentages because they carry the inventory risk.<\/p>\n<p>A typical margin for a store selling a drop-shipped item may be as low as 10%, according to Shopify. So, the same $100 sale will result in $10 of margin. A 4:1 ROAS puts this shop&#8217;s target CAC at $2.50.<\/p>\n<p>If a retailer and a dropship shop sell identical items \u2014 a real possibility \u2014 the marketing challenge is clear: the dropship store must acquire customers for less.<\/p>\n<h4>Same products<\/h4>\n<p>Selling an identical product exacerbates the already anemic CAC. Yet selling the same products is what most dropship-based stores do.<\/p>\n<div id=\"attachment_1539451\" style=\"width: 580px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1539451\" class=\"wp-image-1539451 size-large\" title=\"Screenshot of the &quot;Live Long &amp; Prosper&quot; t-shirt\" src=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-spock-570x321.jpg\" alt=\"Screenshot of the &quot;Live Long &amp; Prosper&quot; t-shirt\" width=\"570\" height=\"321\" srcset=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-spock-570x321.jpg 570w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-spock-300x169.jpg 300w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-spock-768x433.jpg 768w, https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2024\/07\/070524-spock.jpg 1000w\" sizes=\"auto, (max-width: 570px) 100vw, 570px\" \/><p id=\"caption-attachment-1539451\" class=\"wp-caption-text\">This t-shirt is available on a specialty t-shirt shop, AliExpress, and the Dsers-AliExpress Dropshipping app.<\/p><\/div>\n<p>Consider the Dsers-AliExpress Dropshipping, an app for Shopify. The product takes an item from AliExpress and adds it directly to a Shopify store. It will do this for any Shopify store, potentially placing the identical AliExpress item in dozens or even hundreds of shops.<\/p>\n<p>Hence it&#8217;s not enough to market a store&#8217;s products. Operating an ecommerce dropshipping business requires differentiating from many others.<\/p>\n        <div class=\"backlist-wrapper\">\n            <h3 class=\"recommended\"><div class=\"icon\"><\/div> Recommended<\/h3>\n            <a href=\"https:\/\/www.practicalecommerce.com\/practical-guide-starting-an-ecommerce-business?utm_source=back\" >\n                <div class=\"backlist-content\" >\n                    <div href=\"\" class=\"thumb-link\">\n                                                    <img decoding=\"async\" src=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2023\/01\/A-Practical-Guide-to-Starting-Ecommerce-Business.jpg\" alt=\"A Practical Guide to Starting an Ecommerce Business\" loading=\"lazy\" \/>\n                                            <\/div>\n                    <div class=\"backlist-detail\">\n                                                <h4>A Practical Guide to Starting an Ecommerce Business<\/h4>\n                                                    <p class=\"backlist-date\">January 2, 2023<\/p>\n                                            <\/div>\n                <\/div>\n            <\/a>\n        <\/div>\n        \n<h4>Customer relationships<\/h4>\n<p>Marketing tasks should not end when a sale is consummated. Some of the best tactics focus on <a href=\"https:\/\/www.practicalecommerce.com\/5-profit-boosters-from-repeat-buyers\">retaining and engaging<\/a> those buyers afterward.<\/p>\n<p>Thus building strong customer relationships is crucial, especially in a dropshipping business where the same products might be available from multiple sources at similar prices.<\/p>\n<p>That means investing time in content marketing, email marketing, retargeting, and social media marketing.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The dropshipping model, while tempting, has little barrier to entry and thus many competitors selling the same thing. <\/p>\n","protected":false},"author":391,"featured_media":1539454,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_wp_rev_ctl_limit":""},"categories":[58313],"tags":[],"class_list":["post-1539450","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inventory",""],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.2 (Yoast SEO v25.2) - 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