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Why does dropshipping fail?

Author: Thomas S.


The business model seemed like a great idea: you set up an online shop, offer various products and external suppliers ship them to your customers. The strategy had low financial risks because there was no need to set up a warehouse and buy goods in stock. 
Prosperity or even wealth without risk – a dream came true. 
However, the realities of economic life are different: 
A supposedly risk-free and at the same time extremely profitable Business model attracts many imitators. The result: competitive pressure increases and margins fall. Online retailers are barely making any profits - the dream of quick prosperity seems to be over. 
Further difficulties lie in the business model itself: 
In your online shop you sell your supplier's products and receive a commission for every successful sale. This means you are not an independent dealer, but rather a sales partner of a much larger company that operates in the background. 
The producers and suppliers that local online retailers work with are predominantly located in China. There, the costs of producing and storing products are low, meaning online retailers have been able to make high profits on the domestic market. 
However, for retailers who rely on delivery directly from the manufacturer, the operational structures of their partners in distant China are hardly visible. Practical experience has shown that it is often difficult to establish contact with a company abroad if problems arise. 
Suppliers in China have little interest in disclosing their production processes and entering into a transparent exchange with their partners in Germany. For the large corporations in the background it is a mass business. If some online retailers terminate the cooperation, this is not immediately problematic for the success of the Asian companies. For these reasons, they have little interest in working towards the satisfaction of their partners. 
This creates further problems: 
Online retailers provide their customers with products that do not meet their wishes and do not meet the retailer's quality standards. It is difficult for customers and retailers alike to organize returns because they involve a lot of work - provided there is a place in a distant foreign country that will accept the defective goods. 
Due to the distance, fast deliveries are impossible: customers have to wait at least ten days until they have the desired product in their hands. 
Given the increased demand for sustainable products, online retailers who cooperate with suppliers in China face serious challenges if there is no transparency on the part of the suppliers. 
The consequences that arise from the various problems: dissatisfied customers and frustrated online retailers whose margins collapse. 

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