The wrong and right branding for dropshipping

September 26, 2021
miami writer

About one-third of online stores are dropshippers. Dropshipping is a popular ecommerce business model for three reasons:

  1. Sellers don't need to buy or hold inventory
  2. Sellers don't have to ship the products
  3. It's easy to get started

On the downside, it's impossible to control product availability, quality, or delivery. Most new dropshippers give up quickly when they see how hard it is to make a profit.

In fact, 90% of dropshippers shut down a few months after launching.

New dropshippers need market intel

New dropshippers don't need to go hog wild over the perfect website. Most important by far are the products you carry and who supplies them.

  • A great product is useless if it is often out-of-stock
  • Customers expect same-week delivery (delivery from China has stretched into months)

Margins are too tight to cover costs

For a dropshipping business to thrive, the gross profit margin should be at least 40%-70%. In most cases, dropshipping gross profit margins are just 15%-20%.

This is because dropshipping suppliers offer much lower discounts than wholesalers, who sell to traditional retailers. Dropshippers also face stiff competition from many other dropshippers with the same products.

Small dropshippers can't stay competitive

Dropshipping is cutthroat.

New stores can't cut prices enough to stay competitive and remain profitable. Nor can they absorb chargebacks, which increase when (like now) logistics are a nightmare and deliveries are slow. Nor can they control product quality, which is often substandard and triggers returns.

Most dropshippers use the same suppliers. They don't stand out. Suppliers aren't concerned about the small guys. They only pay attention to large dropshippers.

Most of the people hyping dropshipping are either ecommerce platforms like Shopify and Oberlo (which is owned by Shopify) or people selling courses.

Dropshippers underestimate business costs

Gross profit margin is the difference between an item's wholesale and retail price. Net profit is your gross profit margin minus all your costs. In the end, your net profit is what matters. Revenue is a vanity metric.

Up to half of dropship purchases are returned

Shipping is important, coming and going. Nearly all shoppers want free shipping, and 79% say free returns are also important. (Source: PowerReviews 2021)

Suppliers typically do not pay for return shipping, even if the item is defective. Dropshippers wind up paying, on average, $10-$20 per returned item.

  • Returns are 20%-30% of dropshipping sales, and jump to 40% around the holidays.
  • Luxury goods have returns of 50% or more. High-income shoppers are most likely to expect free returns.

You may be able to convince a customer to keep an item in exchange for a partial refund. More often, the customer will want a full refund or a replacement. Either way, it comes out of your pocket.

Dropshippers need to advertise, like everyone else

Dropshipping removes the need to warehouse and ship products. But dropshippers still need to spend money on marketing. This includes social media, email, Google, and word-of-mouth.

Established ecommerce sites spend between 5%-12% of total revenue on marketing. Small businesses spend more. And, of course, it costs more to get started. (Source: The Good)

Based on the above, if you want to earn $5000 in revenues a month, you'll need to spend 15% ($750) a month on ads. This is the margin on most products, before deducting supplier fees, return shipping costs, transaction fees, etc.

Let's look at it another way. Oberlo's dropshipping calculator assumes it costs $0.35 to attract one visitor to your site. Only two people out of 100 will place an order (at best). If your average order value is $50, you need 100 orders to make $5,000 in revenue. To get 100 orders, you need 5000 visitors. That will cost you $1,750 under a best-case scenario. Remember, the typical margin is around 20% ($1,000). You've lost money before you begin.

Dropshipping branding is the best way to maximize the impact of your media dollars. When you do this, you can shave your ad spending.

Dropshipping branding begins with product research

Your products are the linchpin of your business. You need an organizing idea that sticks in the minds of consumers. Preferably, this is a niche that avoids competition.

  • You can sell dog-related items to dog-owners, like Dog Pawty.
  • Or street wear to teen girls, like Aesthentials.
  • Or a narrow niche product, like Bidet Genius.

It doesn't matter what you sell as long as 1) there is some sort of common thread, 2) there is market demand, and 3) you won't get swallowed up by the competition.

Market research can't guarantee success, but it will lessen your risk. The first phase of dropshipping branding will help you choose profitable products with plenty of potential buyers. The second phase of dropshipping branding looks at how much competition you'll have.

I'm happy to do the research for you or guide you through the process of doing it yourself. Either is good, as long as it gets done.

Miami Writer

Why dropshippers need branding

Good branding helps you justify higher prices. It also makes your store more memorable, so you can spend less on advertising.

Branding includes research, analysis, synthesis, and execution. When branding is done properly, a dropshipper can charge higher prices because there is a perception of superior quality.

A better customer experience is also grounds for charging more. In fact, 90% of customers will pay more for good customer service. (Source: Forbes) Boiled down, good customer service depends on making buying from you as convenient as possible in every way.

Knowing more about the products you carry is part of customer service.

Dropshipping without a website

A website is your best opportunity to express a brand. But a website isn't necessary if you sell over other channels.

You can dropship on some social media platforms.

  • You can set up a shop on Facebook or Instagram. (Facebook owns Instagram).
  • Other social media is best for marketing, not as a sales platform. This includes Pinterest, YouTube, and TikTok. You can promote your products on any of them, but can't sell without a link to a page with a shopping cart

You can dropship on marketplaces as long as you follow their guidelines.

  • Amazon has strict rules for dropshippers. It specifically prohibits using Walmart as a supplier. But it's possible to use them.
  • You can dropship custom-printed products on Etsy. For example, Printify Print on Demand allows you to design and sell mugs, tee-shirts, backpacks, and more.
  • eBay specifically allows dropshipping only when you source goods from a wholesale supplier. You can't sell Oberlo products on eBay. But you can resell cosmetics wholesaled by Estée Lauder.

A website is the biggest upfront investment in drop-shipping. Your e-commerce platform should have integrations with your supplier to automate order processing and fulfillment. This allows you to focus your efforts and spending on marketing, while staying up-to-date on backend processing.

Social media popularity does not equal revenue

It is perfectly possible to gain traction on Facebook and other social media, without making money.

Hello Matcha no longer has an active website. Its FB page stalled in 2015 with 110 followers. Its Instagram page has over 5,000 followers, but's also cold. There is a Mexico-based company under the same name, but it's inactive.

Even with a dozen websites, Hello Matcha would face hellacious competition from matcha.com, a branded seller of Japanese matcha. First, the domain name is unbeatable. Secondly, founder Andre Fasciola has partnered with the well-known Andrew Weil, MD. Launched in 2017, matcha.com spent $60,000 on its website and packaging. Since launching, the company has relied on podcasts, LinkedIn, Quora, partner blogs, and micro-influencers. They also use YouTube, TikTok, IG, and other free channels. Email has been critically important. They have grown about 300% per year and website traffic has increased more than 100% per year. Revenues in summer 2020 were $390,000 per month. Not bad.

As a dropshipper, you're going up against the likes of matcha.com. Smart people with experience and money. Be scared. Very scared.

Dropshipping with a website

Top dropshipping platforms for larger stores include:

  • Shopify - Top choice due to many dropshipping integrations
  • WooCommerce (WordPress) - For larger stores with ability to customize
  • Magento - A good choice for large sites, but requires knowledge of code
  • Big Commerce - Many integrations, including Printify, Easyship and more

Top dropshipping platforms for creators include:

  • Squarespace - For dropshipping (with Printful) personalized or custom tees, mugs, etc.
  • Big Cartel - for dropshipping (with Printful) tees, mugs, canvases
  • Shopify - for dropshipping products from Etsy, but sellers may not be able to meet demand

Top dropshipping platforms for beginners:

  • Shift4Shop (3dcart) - For small stores
  • Ecwid - For small stores connecting to Alibaba, Spocket, Printful and some more
  • Wix- Very easy, dropship custom swag with Shirtsy or connect to Asia with Modalyst

Not recommended for dropshipping

  • Square Online – Fantastic for local businesses, but lacks dropshipping integrations
  • Webflow – Powerful web design, best for brand-driven sites but no dropshipping integrations