3 Emerging Threats of Dropshipping: How to Respond and Boost Your Business?

by Josh Biggs in Tips on 24th August 2021

Dropshipping is an excellent opportunity for people who want to earn money, particularly during this pandemic. If you currently have no business experience and are looking for an alternative way to make some extra cash on your own schedule, then dropshipping may be right up your alley!

It is hard to say what will happen in the future, but COVID seems like it could be here for a while. Consequently, more people are buying from screens than ever before!

A recent study by UNCTAD found that, “Following the pandemic, more than half of the survey’s respondents now shop online more frequently and rely on the Internet more for news, health-related information and digital entertainment.” 

Based on current trends, eCommerce reigns supreme, and dropshipping continues to grow as a profitable opportunity. This is evident in the “dramatic” rise in it’s market share, from 16% to 19 % in 2020. However, this doesn’t come without its downsides – profits can also hide potential threats if one isn’t careful enough about how they do things right off the bat. 

I have engaged in e-commerce for over ten years. As dropshipping grows, the risks become more obvious. This online business model can be lucrative when done right, but newbies often get misled or give up after failing once too many times. However, it is not only the novices who are facing the challenges, but also the experienced sellers.

Risks in Dropshipping Businesses

If you’re running a dropshipping online store, you may find making profit increasingly difficult at some point. In my experience, this is usually due to the increasing ad costs while also battling disappearing price advantages.

There are several risks that you need to watch out for. Your potential losses can be huge, and if you’re not proactive, it could spell disaster for your business. Here’s what you need to know about the risks involved in running a dropshipping business:

1. Increase In Ads Cost

An ad is an efficient tool to boost sales. However, it is becoming a headache among online store owners. The bidding rule of ad campaigns increases operating costs. It further cuts your potential profit.

Facebook has the most active users of any social media network. Looking at some relevant statistics, it paints a perfect picture of rising ads cost.

According to CNBC, Facebook reported $26.17 billion in revenue for the first quarter of 2021. Ads are to thank for this boost in revenue. In their words, “Facebook attributed the significant increase in revenue to a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered.”

If you are spending more on Facebook ads than before, you are not alone. Some sellers complain that their ad costs have tripled. And even more frustrating is that there hasn’t been a significant improvement in conversion rates as expected.

2. Shrinking Price Advantage 

Trust me; In the world of eCommerce, price is a powerful weapon. Customers have more options than ever in our time thanks to the surge of competition with lesser prices edging out higher ones. A price war may not be your best option because you can’t sell products at floor prices without baseline costs from suppliers who set product costs.

3. Customer Requirements Change

Besides the threats mentioned above, there are also many changes in customer requirements that need to be noted. As the industry develops, customers have higher quality standards for sellers. With competitors constantly trying to steal your market share, it’s difficult for companies without good branding to stay afloat for the long term.

How To Respond And Grow Your Business?

Have you ever thought about the way that tough circumstances can be solved by branding? This is a great strategy for your business to grow as well:

In an age where competition has never been tougher, entrepreneurs and business owners need to know how their company stands out from the rest. Branding could help solve this problem because companies can find new avenues through which they stand apart from competitors to get ahead in today’s marketplace while staying true to themselves at the same time.

How Does Strong Branding Help?

A good brand stands for all sorts of impressions – competitive products, stable quality, and great customer service. It brings values like recognition and reputation that are vital to your company’s success. The direct benefits include:

Lower Ad Expenses

Expenses on ads are indispensable. This makes “how to reduce ad costs” a concern. So, how does good branding save your money on ad expenses?

Without a strong brand, the product ads you pay for can only bring in one-time sales. It means that people buy without remembering your store or coming back to purchase again in the future. The result is higher ad costs and lower satisfaction with revenue.

A strong, memorable brand will take your company from one-off sales to long-term customers and even loyal fans that may buy exclusively from you in the future.

Good branding can be a powerful tool for your businesses as it creates connections with your target audience through unique messages and content, which is then reinforced by creative advertising campaigns on various platforms.

Possess Pricing Right

A brand’s added value becomes a distinct advantage that will set you apart from your competitors. People choose to shop at the store they trust, not for lower prices. That is to say; if you set a higher price than your competitors, it will not scare away customers.  They think your product is worth it. And you can price your items without worrying about losing the price advantage.

How Do You Build Your Brand?

Branding is a process that includes many different facets, and in order to market your product effectively, you must be prepared for all of them.

1. Focus on Selected Products

To be successful, you need to know what you want to sell. Is it realistic for you to sell all products? The answer is no because you may not have the capability or experience necessary to handle a large assortment of goods. Knowing when and which items are worth selling will allow you to do more with less while also doing quality work that will help build trust and loyalty with your customers.

2. Get Ready for Marketing Content

Branding is the way that companies communicate their identity to consumers. Your company’s position in business depends on what you want your customers to think when they see your brand name or logo, which is why it can be so important for a clear message of who and what you stand for as a brand.

By having a clear position, you can generate relevant content and a marketing plan that conforms to your mission and vision.

3. Make Use of Branded Materials

Consider this fact: When you sell branded products, people are more likely to buy your merchandise. And the good news is that by using dropshipping with a solid marketing campaign in place, you can skyrocket your sales numbers quickly! 

4. Choose A Reliable Branding Company

Building a successful dropshipping brand from scratch is never to be easy.  You need to pick an experienced and trustworthy company. EPROLO has gained trust from more than 30,000 users and helped hundreds of dropshippers create their brands. Services include sourcing, print on demand, branded products, customizing packaging material, order fulfillment, etc. What are you waiting for? Click here to join EPROLO Branding Project now!

Categories: Tips