Are you about to start dropshipping but wondering if you should really go through with it…?
Maybe you think dropshipping could lose you some money?
Well… You are not wrong.
Dropshipping will lose you money.
Absolutely no one has started a dropshipping store (or any kind of store/business for that matter) without losing money.
On my own first dropshipping venture back in 2017, I invested $1600 (my entire monthly salary at that time) in Facebook Ads.
Back then I had absolutely no knowledge of how ecommerce works or Facebook Ads work.
I simply copied the advertisements from a competitor and expected to see similar results…
Long story short, I lost most of that money. (I think I had about $300 in sales that month)
So yess, most likely, you will lose money on dropshipping.
Luckily for me though, I didn’t quit right there. I learned my lesson and decided I should take a step back and learn more about the ins and outs first but that’s a story for another day.
You’re probably here to figure out whether or not dropshipping is for you. So I’ll sum up every way I’ve lost money from dropshipping.
Here it goes…
5 Ways I Lost Money With Dropshipping
#1 Lost $1600 on Bad Facebook Advertisements
As I said in the introduction, I lost $1600 on Facebook Ads on my first dropshipping store. I lost this money because I had no idea what I was doing and was simply copying a competitor I thought was doing well.
I imagine this is a common mistake amongst dropshippers who are too eager to turn on their money machine’ and expect quick and easy results.
Now I’m not going to pretend that’s the only time I ever lost money on Facebook Ads.
You’ve likely heard of ‘warming up a Facebook Pixel’ this is a process where you send Facebook Traffic to a brand new store.
Facebook hasn’t yet optimized yet for your target audience and thus you’ll lose money on these type of ads every time.
However, if your product and ads are good enough, you should break even at some point and profits come after that … Sometimes.
TL;DR Facebook Ads are tricky, at first, you will always lose money with this. Especially if you go in without proper research.
#2 Lost Money on Customer Chargebacks
I have no idea how much money I have lost on customer chargebacks, all I know is that the number is very high.
And that’s part of the game.
Some dropshipping orders will go lost, take forever to arrive or arrive damaged. Some customers will not even bother to ever message your customer service and go straight to their banks to get a chargeback.
This happens and it will happen to you.
You’ll lose the money you made, the money you paid for the product and you’ll have to pay a fine on top of things.
The first chargeback will make your blood boil. But again, it’s part of the game.
One lesson to learn here: ALWAYS provide PRIME customer service. I cannot stress this enough.
Your customer service should be AMAZING. You (or your virtual assistants) should reply quickly, be helpful and always keep your cool.
If they demand a refund for whatever reason, I always give it to them, which brings me to the next one…
TL;DR Chargebacks happen and you WILL lose money on them.
#3 Lost Money on Angry Customers
When you’re dropshipping products from Chinese suppliers, orders take a long time to arrive.
Even if you specifically state how long the order will take to get delivered on your shipping page and product page, some customers simply won’t see it.
Some customers will always expect every store to be like Amazon and these will get extremely angry when they realise they aren’t getting their package this week, or the next.
Some customers will even order days before Christmas and message you saying it’s a gift…
I’ve lost a lot of money on customers like these because I almost always refund them in some form or another.
Some customers are happy if you refund their shipping fees, others are happy with a partial refund and others are happy simply because you explain the situation and you’re nice to them.
But a lot of them won’t be happy until you give them a complete refund and I always give it to them.
Why? Because I’m running a dropshipping business, not a scam.
If I ignored every single angry customer I’ve ever had, I would’ve had so many angry reviews and chargebacks, none of my dropshipping stores would have ever succeeded.
TL;DR Treat your customers with respect, always keep your cool and refund angry customers.
#4 Lost Money on Customer Returns
I’ve lost a of money in dropshipping from customers who have returned items.
This too, is part of the game.
Every now and then you’ll end up with a customer who wants to return their order.
Especially if you decide to go down the fashion niche…
Asian sizes are very different from American sizes and while I did my best to add readable size charts to every product page, many customers never bothered to look.
But returns isn’t just an issue in the fashion niche…
I’ve had suppliers ship out broken products and even completely wrong products to my customers.
In those cases, I would have them return the products either to my address or a PO box and just eat the loss.
TIP: If this is a seller mistake and you’re using AliExpress, you can dispute the order and in most cases, you’ll win if you provide enough information.
TL;DR Expect to lose money on customer returns when dropshipping
#5 Lost money on Bad Dropshipping Suppliers
Most of my early-day dropshipping was done through AliExpress and while I stand by the platform and believe there are many good suppliers, there are also many bad ones.
…I’ve had my fair share of the bad ones.
For example I’ve had suppliers who didn’t ship out orders until 2 or more weeks AFTER ordering.
In those cases, they would provide a fake tracking number and later tell me ‘the tracking number has changed to …’ or come up with an excuse like ‘the order was lost here’s your new tracking number..’
Some suppliers will not read the little message you leave them where you explain that you’re dropshipping and ship products in a package that includes info about their AliExpress store…
I’ve seen my fair share of bad suppliers and definitely lost a substantial amount of money through those.
TL;DR There are many good Dropshipping suppliers but also many bad ones.
#5 Lost money on Instagram Influencers
One of my first dropshipping stores was in the female fashion niche (terrible niche, too much competition, don’t even consider it).
This was at a time where I was really trying to build a following on Instagram and gave a lot of free products to micro-influencers on Instagram.
These were girls with anywhere from 10k-100k followers on the platform. I would message them asking if they would like to model a couple of items for me and tag our brand in them.
Many of them agreed and gave me their address and while many of them did eventually post, a lot of them I never heard from again.
Out of every 10 influencers I sent clothes to only 3 would actually post.
I even had girls who would post without tagging us and when I messaged them they would reply ‘the package came unbranded, I didn’t know they came from you’.
That’s when I figured out sending unbranded packages from AliExpress to Instagram influencers, didn’t work that well…
Don’t get me wrong though, I believe in influencer marketing and it can be extremely profitable but when you don’t pay your influencers, you’ll wind up with a lot of flakes.
TL;DR Don’t send AliExpress packages to microinfluencers on Instagram
How To Avoid Losing Money With Dropshipping
Do Your Research
As you can tell, most of my dropshipping mistakes were made because I simply didn’t do thorough research.
For example, I should never have dropped $1600 on Facebook Ads without knowing my product, my target audience and so on.
I should have researched the competition first and I should have learned exactly how Facebook Ads work.
But I didn’t and I lost a lot of money because of it.
That’s why I urge you to do thorough research before getting started.
Here are some tips…
- Do competitor analysis before hopping on a niche or product
- Study Facebook Ads: watch youtube videos, look for case studies, and read books such as Cashvertising and confessions of an advertising man
- Create your own ad copies and advertisements
- Always write custom product descriptions and short, attractive titles
- Never copy someone else
Sell Quality Products
Some products simply shouldn’t be dropshipped. There are many products on AliExpress that are bad quality and will result in returns, refunds and chargebacks.
You should always check the reviews first. How are customers liking the product? What are they complaining about?
If a product has bad reviews, just stay away, even if it looks like it would sell well. If customers don’t like the product they get, you will lose money.
Switch Over To A Dropshipping Agent or Service
AliExpress is a perfect starting ground, I know. I love AliExpress because they simply have every product you can imagine on there.
And they instantly create products for every new trend.
AliExpress is the perfect place to test products, find a winning product, test audiences and so on.
But you should move on at some point.
There are two ways you can go about this, you either hire a dropshipping agent or you use a dropshipping service.
A dropshipping agent will be able to take care of everything for you and make the fulfillment process very smooth but they aren’t easy to find (at least good ones), they have high requirements (again, at least good ones) and they are located in China.
If you’re in for a challenge, read my article on how to get a dropshipping agent, it’s definitely worth knowing a thing or two about, even if you don’t plan on hiring one right now.
The easier approach is to use a dropshipping service. There are a bunch of free options such as CJDropshipping that come to mind.
You can read our CJDropshipping review here.
But while CJ does cut down delivery times and has better customer service, they are far from the best option.
Some paid services such as Zendrop and uDroppy come closer, and can even help you out with private labeling and custom packaging to create a truly branded dropshipping experience, but they come at a steep monthly price tag and definitely aren’t flawless.
Check our our reviews for uDroppy and Zendrop:
Now It’s Your Turn
Are you still excited to get started with dropshipping after reading this?
I promise it’s still worth it… If you work hard enough.
Anyway if you’re still on board, here are some useful links to get you started!