B2B Dropshipping: 7 Common Mistakes Newbies Need to Be Wary of

Eman LIU

Dropshipping is a popular e-commerce business model where sellers don’t keep any inventory in-house and don’t need to worry about the costs of storing products or paying for shipping. Instead, they partner with a dropship supplier who fulfills the customer’s orders on the seller’s behalf.

But which segment of the market is dropshipping aimed at? Is it for business-to-business (B2B) or business-to-consumer (B2C) buyers? Read on to find out.

Understanding B2B and B2C

B2B (sometimes referred to as business-to-business) and B2C (business-to-consumer) are the two major categories of commerce.

Business-to-Business (B2B): In this type of commerce, two or more businesses work together in an agreement or partnership to facilitate transactions e.g. Wholesaler and retailer
Business-to-Consumer (B2C): In this type of commerce, businesses sell a product or service directly to the consumer, cutting out any other intermediaries e.g. Amazon and eBay.

Dropshipping – B2B or B2C?

The dropshipping business model is a hybrid of the two types of commerce.

The seller is the one who interacts directly with customers. They are the ones responsible for marketing and promoting the products, managing customer service inquiries and collecting payments. The supplier is the one who fulfills the orders on the seller’s behalf.

This hybrid model means that dropshipping is both a B2B and B2C business. It’s a B2B model in the sense that there is a partnership between the supplier and the seller. But it’s also a B2C model in the sense that the seller directly interacts with the customers, who are the end users of the product.

Top 7 common mistakes made by newbies and their potential solutions

1. Choosing The Wrong Dropshipping Products And Suppliers

When starting as a dropshipper, your first step is picking a niche for your business. It’s best to base this decision on thorough market and product research. While this is true, getting too caught up in niches could harm your business.

If you narrow your niche too much, it can limit your business name and branding options. Let me explain with an example: Say you start by selling women’s tops and name your store “Tops for Ladies.” But if you want to expand to selling women’s trousers or formal wear later on, you’d have to rethink your brand name. It also does not leave any space for growth.

Think about nail polish. If you focus only on that, you might sell some, but your options are pretty limited. Instead, if you broaden your scope to include all kinds of nail care products, you can offer more choices. This way, you’ll attract more customers and probably sell more.

The idea is not to pick super broad products. It’s better to choose product categories where you have some room to move around and offer different things.

Picking the wrong suppliers can also prove to negatively impact your store. These suppliers can cause problems by selling products that are faulty or not good quality. This leads to lots of returns and refunds, which hurts your profits and makes dropshipping look bad.

But it’s not just you who suffer. Customers get affected too. They end up with products that don’t work or aren’t what they expected. This makes them mad and disappointed, and they often leave bad reviews. It makes them lose trust in the brand and not want to buy from you again.

Solution

Take your time to research potential products and suppliers thoroughly. Analyze market trends, competition, and consumer demand to identify profitable products.

Ask suppliers for product samples to check their quality. Make sure they meet your standards and are high-quality to prevent customer complaints and returns.

Verify the legitimacy and reliability of potential suppliers by checking their business licenses, certifications, and customer reviews. Look for red flags such as inconsistent communication, hidden fees, or unreliable shipping practices.

2. Poor Product Inventory Management

As a dropshipper, keeping track of inventory can be quite tough since you can not control what your suppliers have in stock. If you order something and it turns out to be out of stock, it can make customers lose trust in your business. This hurts your brand’s reputation, especially in a competitive industry like this.

One of the reasons dropshipping is appealing is that you don’t have to hold onto inventory. But at the same time, it’s also a big reason why many dropshipping businesses don’t make it.

Having too much stock (overstocking) can result in financial losses because you might not sell everything, and you’ll have to pay a lot to store it. On the other hand, having too little stock (understocking) can lead to unhappy customers and missed sales opportunities for both the supplier and the dropshipper.

Solution

Build good relationships with your suppliers so they can consistently provide stock on time. Keep them informed about your inventory levels and expected demand by communicating regularly.

Maintain safety stock levels for fast-moving products in case of unexpected spike in demand or supplier delays. Having a safety net can help prevent stockouts and ensure continuity of sales.

Work with automation tools and technologies to streamline inventory management processes, such as automatic reorder alerts, barcode scanning, and integration with supplier systems.

3. Poor Construction And Promotion Of Sales Channels

A poorly designed store can diminish the credibility of your brand. If your website looks unprofessional, potential customers may question the legitimacy of your business and hesitate to make a purchase. This lack of trust can result in lost sales and harm your reputation in the long run.

For example, if your online store or sales channels have a clunky interface, confusing navigation, or slow loading times, it can frustrate visitors and deter them from completing a purchase. A seamless and intuitive user experience is necessary for retaining customers and encouraging repeat business.

There’s also the issue of poorly organizing or presenting your products on your site. It can make it challenging for customers to find what they’re looking for. This can lead to missed sales opportunities as customers may become frustrated and abandon their shopping journey.

If your store or sales channels are badly designed, they might not properly show what your brand is about and what makes it special. Without a clear brand presence, it’s hard to be noticed among other businesses and to build a base of loyal customers.

Solution

If you have your own website, ensure it is well-designed, user-friendly, and optimized for conversions. Invest in professional web design, SEO, and mobile optimization to attract and retain customers.
Create a strong presence on social media where your audience hangs out. Share interesting posts, interact with your followers, and use ads to reach new customers.

4. Omission Of Logistics And Customer Service Follow-Up

Customers want their orders to arrive on time and to get help quickly if they have any problems or questions. If you don’t offer good support, you could end up with bad reviews, and unhappy customers, and they might not come back to buy from you again.

If you also don’t pay enough attention to your warehousing and shipping logistics, you may face shipping delays, mistakes, or packages getting lost. When shipping isn’t consistent or reliable, it can annoy customers and make you look bad as a seller. This can make it challenging to handle returns, exchanges, or refunds effectively.

Speaking of refunds, a part of customer service is putting clear policies and procedures in place for managing customer inquiries and resolving issues related to product quality, damaged items, or order discrepancies.

Solution

Provide order tracking information to your customers so they can monitor the progress of their shipments. Use tracking numbers and carrier updates to keep customers informed about the status of their orders and proactively address any delivery delays or issues.

Implement post-purchase follow-up procedures to gather feedback from customers and address any post-sale issues or concerns. Send follow-up emails or surveys to collect feedback on the shopping experience, product quality, and customer satisfaction.

5. Inadequate Fund Management

Effective fund management is needed if you want to scale up your dropshipping business. Without proper budgeting and financial planning, you may struggle to allocate resources efficiently to power growth initiatives, such as expanding product offerings, investing in marketing campaigns, or optimizing your website’s functionality.

If beginners fail to manage their funds effectively, they may encounter cash flow problems, such as insufficient funds to fulfil orders or pay suppliers. This can lead to delayed shipments, unhappy customers, and damage to the business’s reputation.

This can hinder the business’s ability to capitalize on growth opportunities and achieve its full potential.

Solution

Conduct a thorough analysis of your business costs to identify areas where you can reduce expenses and improve efficiency. Look for opportunities to negotiate better terms with suppliers, optimize shipping costs, and streamline operational processes to minimize overheads.

Set aside a portion of your funds as an emergency fund to cover unexpected expenses or financial setbacks. Having a financial buffer can help protect your business during challenging times and mitigate the impact of unforeseen events.

Consider seeking professional financial advice from accountants, financial planners, or business advisors to help you manage your funds wisely.

6. Insufficient Attention To Legal Compliance

Dropshipping businesses are subject to various legal requirements and regulations, including consumer protection laws, data privacy regulations, tax laws, and intellectual property rights. As a beginner, you must familiarize yourself with these laws.

Failure to verify product compliance can result in selling unsafe or prohibited products, leading to regulatory enforcement actions or product recalls.

Using images, logos, or trademarks that belong to someone else without permission can get you in trouble for breaking intellectual property laws. You should make sure you have the right licenses or permissions for any intellectual property you use in your marketing, product listings, or website.

You may need to enter into contracts with your suppliers, manufacturers, payment processors, and other partners. You need to review and understand these contracts thoroughly, ensuring that everyone knows their rights and responsibilities and follows the agreed terms.

Solution

Take the time to research and understand the legal requirements and regulations applicable to dropshipping businesses in your jurisdiction. This includes business registration, tax obligations, product safety standards, and consumer protection laws.

Create comprehensive terms of service and privacy policy documents for your website to outline your business practices, terms of sale, and data handling policies. Ensure these documents are easily accessible to your customers and updated regularly.

7. Over-reliance On A Particular Sales Platform

If you only sell on one platform, you’re limiting who can see your products. While big sites like Shopify, Amazon, or eBay have lots of customers, there are other places you could sell, like social media or your website, that you might not be using.

Over-reliance on one platform can also limit your ability to diversify your revenue streams. Diversification is essential for mitigating risks associated with fluctuations in sales, changes in consumer behavior, or disruptions to a particular platform.

Solution

Invest in creating your own e-commerce website to establish a direct connection with your customers and have full control over your brand and customer experience. Optimize your website for search engines (SEO) and user experience to attract organic traffic and drive sales.

Bottom Line

To summarise, the dropshipping business model is a unique hybrid of both a B2B and B2C model. The supplier provides the fulfillment services for the seller, who is then able to focus on marketing and customer service to make a successful business.

What are the benefits of B2B dropshipping?

Low Setup Costs: Dropshipping is an inexpensive business model since all you need to launch a business is an internet connection and a laptop – no warehouse or inventory necessary.
Low Risk: Since there is no inventory investment, there is little financial risk associated with running a B2B dropshipping business.
Low Overhead: Operational and administrative expenses are much lower with dropshipping since you don’t need to hire staff to manage inventory and fulfillment.
Flexibility: B2B dropshipping businesses can offer a wide range of products since they don’t need to keep them in stock. This also makes it easier to scale up or down as needed and adapt to market trends or customer demand.
Geographic Reach: Dropshipping allows you to reach customers around the world, as orders can be placed and shipped directly from your supplier to your customer.

What is the difference between B2B dropshipping and direct-to-consumer dropshipping?

B2B dropshipping involves selling products to other businesses who, in turn, resell the products to their customers. Direct-to-consumer dropshipping involves selling products directly to the consumer, usually with no intermediary.

B2B dropshipping allows a business to target a specific market, while direct-to-consumer dropshipping allows a business to target customers across a broad consumer base.

What are the advantages and disadvantages of B2B dropshipping and direct-to-consumer dropshipping?