Dropshipping is a great way to make money online however, it is possible to lose money dropshipping. Although dropshipping is a low risk e-commerce business because you don’t have to buy products in bulk and keep inventory, nevertheless you can still lose money dropshipping and here are common ways Dropshippers lose money!
- Bad Research
If you do bad market research, select a non-marketable product and try to advertise it to an audience that has no interest or need for that product, you’ll end up losing money and time!
In Dropshipping, you learn from every experience however both time and money can be easily lost when you do poor research. You can read our Article on market Research for Dropshipping businesses.
You can also lose money on using paid dropshipping Research tools that don’t produce accurate market data.
- Testing non marketable product
Dropshippers can lose hundreds or even thousands of dollars testing a product that’s not marketable.
Although most Dropshippers will normally invest and lose some money. For example; they could loose money on ads that don’t convert during the testing phase when they are trying to promote a product to determine if it’s profitable or not!
Nevertheless, It’s important to understand how to test a dropshipping product and when to stop testing a product or when to scale a product!
If you don’t have this technical knowledge you can easily burn out a lot of money than necessary testing a product that won’t convert!
You can check out our article on how to test dropshipping products using Facebook ads.
Dropshippers can easily lose money on returned products! It’s important to read and understand your supplier’s return policy so you can properly craft your own return policy.
For example, if your supplier has made it clear that they don’t accept returns after 30 of Delivery and you don’t include that to your store’s policy and accept a return after 31 days of delivery you’ll have to bear the cost of refunding your customer or exchanging their product.
You can check out this Article that explains more on returns and refunds for dropshipping businesses.
A dropshipper can easily lose money when there is a lawsuit against them. In such cases, you’ll need to spend money on legal representation or even paying damages where there is an award of damages against the Dropshipper.
It important to understand the legal standing of your Dropshipping business and to be legally compliant.
There are common reasons why Dropshippers can get sued including Copyrights and Trademark infringement.
You can check out this Article for the most common reasons why Dropshippers get sued.
- Getting the wrong designs
Sometimes in Dropshipping you pay for a Design, maybe a banner or a logo. You get a copy of the Design and realize that it’s not so great or it doesn’t fit your brand! It’s not uncommon to burn out money revising a design and trying to perfect it.
To avoid this sort of situation, we recommend hiring graphic designer on fiverr who offers multiple or unlimited revisions for their designs.
- Picking the wrong domain name
Sometimes people choose very specific domain names and realize it’s not what they want! For example; they may want to be dropshipping leggings and choose the domain name; colorfulleggings.com and later on realize that they do not want to dropship leggings anymore and want to dropship kids toys and need to change their domain.
We recommend choosing a domain name that sounds general and can be used to sell any product. Look at domain names like Amazon, Ebay, Walmart etc. These names aren’t tied to any particular product. We recommend namecheap for buying domain names.
Chargeback is a situation where a customer requests your bank to take back the money which was credited to you via your payment gateway.
For example, if you Paypal payment gateway to receive money online and someone uses a stolen credit card to make a purchase from you, the actual owner of the credit card can file a chargeback to their bank or card issuer asking them to reverse the payment.
A chargeback can be requested for various reasons. To learn more about chargebacks and how to protect your ecommerce business from the pitfalls of chargebacks, check out this Article.