But what if a supplier breaches your contract? Well, your response should depend on a few things.
For one, consider how your supplier had been from the beginning of your partnership until before the breach took place. Was the supplier reliable or have there been recurring problems? Does the breach look like it’s intentionally done, or is it possible that the supplier is just having some short-term issues?
Secondly, consider how big or minor the consequence of the breach is. If it resulted in a big loss on your part, then you might want to take some legal actions and demand compensation. If the result is not as significant, then you can perhaps talk to the supplier first and clarify why the problem happened.
It’s almost never wise to head straight to legal actions every time your supplier fails to meet your expectations. Such an approach could be costly and stressful.
Plus, keep in mind that there could be suppliers out there who talk to each other and might even be disclosing information about retailers who are problematic, too demanding, and worth avoiding. You wouldn’t want to be someone whom suppliers would passionately avoid, right?
If you’re after long-term partnerships, understand that all businesses (your suppliers included) face short-term problems from time to time. With that, it’s advisable to first understand your suppliers’ situation before opting for legal actions.
2. Inventory management
In the context of dropshipping, inventory management refers to syncing your store’s inventory records with those of your suppliers.
Having a system for monitoring your suppliers’ stocks is the best way to make sure that you aren’t selling unavailable products. It’s also a good way of avoiding stockouts; when you see stocks running low, you could immediately reach out to your supplier and confirm when they’ll replenish their goods.
If your supplier tends to run low on stocks due to high demand, a good inventory management practice you could consider is asking your supplier for safety stocks.
Inventory management could be as easy as setting up spreadsheets that you and your supplier can update as needed. However, you will need a more sophisticated system if you’re working with multiple suppliers or a whole lot of products. The key is to make sure that your system simplifies things and doesn’t complicate them.
Some sales channels could also help you with inventory management. For instance, Shopify has an Inventory feature that allows you to export and import inventory with a CSV file and hide out-of-stock items, among others.
You may also explore different inventory management software or systems and see which one can cater to your needs best.
3. Order fulfillment
As a dropshipper, your order fulfillment process will be like this: you’ll need to inform your supplier about a customer’s order, wait for the supplier to process the order and send the order details, fulfill the order through your sales channel, and then notify your customer about the shipment and the parcel’s tracking number.
Sounds simple, right?
Well, not really. Doing these steps manually over and over again—especially during peak seasons—makes you highly prone to error. You could end up misspelling your customers’ information or ordering the wrong products for them.
It’s absolutely okay to do this manually, of course, especially at the beginning of your dropship journey. However, once you begin getting tons of orders, it will be advisable to consider more efficient ways of sending the order details to your supplier and then fulfilling them in your digital store.
4. Shipping and tracking
Buyers love cheap and efficient deliveries. Who wouldn’t, right?
But in a dropshipping business, you as a retailer wouldn’t have a lot of control over shipping fees and the completeness of tracking details. This is why it’s crucial that you clarify all shipping and tracking-related details with your suppliers even before you begin your partnership.
If you want to ensure low shipping rates and easy order tracking, it’s recommended that you work with suppliers who use ePacket shipping.
What is ePacket shipping? It’s basically a fast and relatively cheap international shipping method that third-party logistics providers from China and Hong Kong offer. ePacket shipping time usually doesn’t exceed 30 days, so that’s an additional perk for dropshippers selling to various countries.
Keep in mind, however, that ePacket isn’t available for all countries nor applicable to all types of goods. Be sure to double-check ePacket shipping guidelines and policies to minimize shipping and tracking issues later on.
5. Returns and refunds
Returns and refunds are normal parts of a retail business, and you can prepare to handle them well by creating a clear Return & Refund policy and making your policy page easily accessible for your store visitors.
Having this policy is also a good way to earn your visitors’ trust. In fact, statistics show that 67% of shoppers check a store’s return policy before they purchase. What this shows is that having a clear policy improves shoppers’ confidence, especially when they’re buying from you for the first time.
At a minimum, a Return & Refund policy should answer:
- which goods are eligible for return and refund
- how many days after receiving a product can a customer request a return or refund
- what information or proof of wrong/damaged product is needed
- what product/parcel conditions should be intact during return (e.g., original packaging, price tag, etc.)
- who will shoulder the return shipping fee
In some cases, it’s also good to offer product replacement. Some sellers offer free replacement while allowing buyers to keep the product they’ve already received in order to regain the buyers’ trust and increase the chance that they’ll still give positive reviews.
Returns and refunds could seem intimidating at first, but you’d be glad to know that most dropship suppliers aren’t new to handling them. You and your suppliers could agree on a return and refund system and then include that in your dropship contract.
While a refund request involves you and your customer, a chargeback mainly involves you and your customers’ bank.
What leads some shoppers to demand a chargeback? It’s usually because they see a seller as a fraud or because the product they received did not meet their expectations.
Chargeback occurs when a buyer shops with a credit card and then contacts their card issuer about a dispute involving their purchase. If the bank accepts the dispute and initiates a chargeback, you will be charged the total order cost plus a certain chargeback fee.
Chargebacks are an expensive issue to have, which is why you should plan how to avoid and manage them beforehand. Below are a few tips for avoiding and managing chargeback notices.
Write a clear return and refund policy
Yes, this policy would be useful for minimizing chargebacks. How? Filing a dispute to claim a chargeback is usually a hassle, so giving shoppers more convenient options to get their money’s value—via free return, hassle-free refund, or product replacement—can discourage them from taking the chargeback route.
Product return, refund, and replacement are usually cheaper than a chargeback, so they are worth offering to your unsatisfied customers.
Set up open communication lines
Does your store have a contact page or does it provide at least one or two ways for shoppers to contact you?
Be sure to have open communication lines, so that customers can easily reach out to you instead of heading straight to their bank or spewing rants on your store’s reviews section. If you have the resources, you may also invest in conversational marketing tools, such as chatbots or live chats.
Most of the time, you and your customer can arrive at a win-win agreement if you give them a space to express their concern and get to know the arrangements your store can offer. So make communication easy, and make sure that your store visitors know that you’re open to hearing their concerns.
Publish accurate product descriptions
It could be tempting to exaggerate your product descriptions in order to attract purchases. However, if you raise your customers’ expectations only to underdeliver later, then what you’re really doing is setting your business up for failure.
Disappointed or unsatisfied customers will likely result in ugly reviews and tons of costly chargebacks—problems that you can avoid if you stick to good business ethics.
Provide realistic delivery dates
Some customers file disputes prematurely when their order is taking too long to arrive. With that, you’d want to provide realistic delivery dates and avoid promising fast shipping when you know it’s not guaranteed.
If you’re concerned that long delivery time could push back potential customers, you may craft compelling offers that could compensate for the waiting period, like free shipping and freebies.
7. Security and fraud issues
Security and fraud issues could threaten several aspects of a dropship business. The sources of these threats could come from fake suppliers, unsecured websites, hackers, and even scammy buyers.
Below are some of the most common security and fraud issues that you should be cautious of.
The ease of online product sourcing comes with some disadvantages, especially if you don’t intentionally watch out for signs of fraud.
For dropship beginners, it’s advisable to stick with finding suppliers in well-known marketplaces, like AliExpress and Alibaba, to avoid scams. These sites require sellers to submit a copy of their business license or other proof of legitimacy, so it’s unlikely that you’ll encounter scammers on these platforms.
If you’re considering suppliers who have their own domains, do watch out for some of the common signs of fake supplier sites, like the lack of SSL certificates, unavailability of office/warehouse addresses and business email addresses, messy web pages, and poorly written policies or Terms and Conditions pages.
Online store hacking
According to Inc., small businesses are attractive targets for hackers because they generally have weak online security and poor encryption technology.
To protect your eCommerce website, here are some tips that you could act on even if you don’t have a lot of experience in dealing with security issues:
- Stick to a trusted eCommerce platform, like Shopify and BigCommerce
- Purchase and maintain an SSL certificate
- Secure and regularly change your store’s password
- Keep your eCommerce apps and software up to date
It also helps to be wary of the information you ask your customers. For instance, if it isn’t necessary to ask for their birthdate, then don’t do so. The more information you keep on your site, the more safety issues can occur in the event that your site gets hacked.
Credit card fraud
This type of fraud occurs when a person orders from you and then uses stolen credit card data to pay. This might sound harmless for you as a store owner, but once the real credit card holder takes notice and reports the unauthorized transaction, you are going to have to refund the product cost even if the order was successfully delivered.
Some usual signs of credit card fraud include:
- Mismatch between the billing address and the buyer’s IP address
- Multiple and consecutive or almost simultaneous orders from the same IP address
- Orders from a location where you don’t usually get orders or advertise to
- Bulk order of similar products
As technologies grow more and more sophisticated, it’s safe to say that online fraud will also become more rampant in the years to come.
With that, do your best to stay updated on eCommerce security and fraud issues, as well as the strategies that you can take to protect your store.
Invest in What You Can Control
You already know how dropshipping works and what roles you’ll play as a retailer. You’re also now aware of the processes that you wouldn’t have control over, plus the external risks and threats that your store could potentially face in the future.
Considering all these, what would really help you establish a successful dropshipping business is doing all that you can with the business elements that you can control.
Among others, you can start crafting plans or standards for the following controllable factors:
Provide Outstanding Customer Support
No matter how awesome your products are, you’ll still struggle in gaining loyal customers and establishing a successful dropshipping business without exceptional customer support.
With that said, it’s crucial that you establish some rules or standards, especially as your business grows and as you gain more and more customers whom you’ll need to satisfy with positive shopping experiences.
According to recent statistics, 73% of customers tend to love or become supportive of a brand if they were met by friendly customer service representatives. So make the most of customer support and always strive to improve your customer service rating.
Once your store starts to demand a lot of time and effort for providing customer support, you may choose to outsource the job while maintaining the standards as well as the brand tone and personality that you’ve already started to use.
Use Analytics to Guide Optimizations
You may generate your store and your campaign analytics from the sales and marketing channels that you use. These analytics will let you know the performance of your store or your advertisements. Additionally, they could also offer insights about what you can improve, remove, or add to the strategies you’re currently using.
Looking at a bunch of data could feel intimidating at first, but you’ll slowly get used to analyzing and understanding them as you monitor your business.
Embrace Continuous Improvement
The eCommerce landscape continues to evolve, and not all best dropshipping practices today will remain the best after a few months or years.
How to adapt? Continuous improvement is the key.
Don’t stop learning, even after years in the business. More importantly, avoid the tendency to just trust in your experience and ignore the trends. Remember that new technologies and systems are constantly disrupting the eCommerce landscape.
It’s also highly valuable that you work with mentors or join communities where you and other dropshippers can discuss your successes, issues, and best practices.
Success is rarely an easy goal to attain. However, you can enjoy the process as you establish your business, probe and address issues, and continue to improve on the areas that you can optimize.