If you have an ecommerce business utilising the drop shipping business model, then you must be aware of the benefits associated with it. They include not having to stock merchandise, having a low overhead and the ability to exit a business quickly to mention but a few.
Still, like any good business consultant or student will tell you, every business has its strengths and weaknesses. We sometimes tend to focus so much on the strengths and opportunities a business presents without paying attention to the weaknesses and threats related to it.
Failure to do this can lead to building your e-commerce business on a very shaky foundation.
As you plan to start your or grow your online retail store, consider the 5 points highlighted below. They should flash a warning signal in your mind to either walk away or arm yourself with more tools to master and conquer that particular niche.
5 Warning Signals to Consider before Starting Your E-commerce Business
1. Low Profit Margins
Unless you’re a Wal-Mart or TESCO (who can make a 5 cent profit on most items they sell and still announce multi-billion dollar profits at the end of the year), make sure that you’ll be getting a decent profit on every product you sell in your drop shipping business. If the margins are too low, then walk away.
2. Over-Saturated Market
Always do your research before jumping into any market. I have to be honest and tell you that some markets are way too saturated and competitive for a newbie with limited marketing funds to attack and dominate.
3. Few Suppliers
I always advise my clients to have at least 2 suppliers before starting their business or quickly look for another if they’ve already started. Life happens and you don’t want to be in a position where your sole supplier goes out of business.
4. No Passion for Your Products
Business can be a hard and lonely place. Your love for your products or customers you serve will keep you going on those lonely days. If you feel like you don’t have any interest or love for a business, walk away as it’ll show in your interaction with customers and suppliers.
5. Negative Market Research Statistics
Some people overlook their research findings. You do this at your detriment. You might have all the love and passion for a particular business but if your research tells you that the market is over-saturated, too competitive, requires a big marketing budget etc, then move to another market niche.
I have had successful businesses but I have to also admit that I have had some losers. Looking back, one of the reasons for some of my ‘loser ventures,’ was not properly analyzing the weaknesses in that business or niche.
Drop shipping is a wonderful business model but there is a lot you have to learn to be profitable and I’d like to know what other warning signals readers of this blog should look out for when starting their e-commerce business.
Thank you.
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