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Six Ways That Students Can Go Bankrupt Dropshipping

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A laptop placed on a wooden floor displaying a screen saying, "Online Shopping," along with a miniature cart with presents on it.
Source: Oberlo

Quite often college students feel as though they need more money. This is because many have expenses that they need to pay for such as food, rent, and debt. So much money already goes into paying for school itself that it often feels like there isn’t enough money to spend on other things.

Therefore, many college students will try to look for ways to make some money and one of the easier and more popular ways of doing so is dropshipping. However, this could be a very dangerous path for the typical unaware college student looking to make a quick buck, and here’s why.

Firstly, what exactly is dropshipping? Well, the concept of dropshipping is actually quite simple. Basically, someone will create their own online store and list various items on their store for other people to shop from. For example, if I find a hoodie on another website for $20, I can list that same hoodie for $40 in my store.

When someone places an order for the hoodie from my store, I will place an order on the original website, and have the hoodie delivered to the person who ordered it from my store. The original store will then ship the hoodie to the buyer, and I will have made $20 profit off this sale.

Now, one would probably ask “Why wouldn’t the buyer just buy from the original store and save $20?” The main reason is simply that the internet is just too big. One of the most popular retailer sites for dropshippers is called AliExpress.

On that website alone, there are over a hundred million items being sold. So, for example, if you are looking for one particular shirt, you can imagine how difficult it is to find that particular shirt. Therefore, in order to save time, people will just order from the dropshipper’s website and that is how they make money.

As easy and as simple as this sounds, there are also a lot of potential risks attached to dropshipping. Here are a few potential risks that come with it.

A diagram in blue background demonstrating the steps of dropshipping and how they connect to one another with white dotted arrows.
Source: Pixabay

1. Deceitful Suppliers

There are many suppliers out there that take advantage of college students looking to start a dropshipping business. They recognize that college students are young and inexperienced in the business world. They then use this to their advantage by taking the money from the students themselves but not supplying the goods to the buyer.

Look out for suppliers who:

a) ask for subscription fees

b) are slow to communicate 

c) run their own retail establishment alongside dropshipping and

d) require bulk orders in advance

If a supplier hits any one of these red flags, it’s probably a good idea to back out and look for a new one.

2. Unsatisfied Customers

Sometimes, customers may be unhappy with their purchase. For example, the shipping might take too long, or the product isn’t what they thought it would be. In those cases, they may leave bad reviews on the dropshipper’s website which will in turn cause him or her to lose customers as they see other people deem that website untrustworthy.

After all, you must remember that if a customer is unsatisfied with the product they will take it out on the dropshipper and not the supplier. They don’t know who the supplier is. The only contact they have is the dropshipper so if something goes wrong it is the dropshipper who gets blamed and not the supplier.

3. Thin Profit Margins

Because this is such a popular way to make money, there are a lot of people involved in the dropshipping industry. And more people means more competition. Dropshipping is convenient because it’s fairly easy to get started with and doesn’t take a lot of money to keep running.

However, because the competition is so high, it is really difficult to make a decent amount of money out of dropshipping. In order to rise above the competition, it is very important to have a recognizable “brand” along with a good history that shows you are trustworthy enough to work with.

It’s important to remember that dropshipping is not a get rich quick kind of business. It takes ages to build your site and attract customers before you really start to see the profit roll in. And in that time, it is also very possible for dropshippers to lose a lot of money and never reach a point where they can call their dropshipping business a success.

Therefore, this is quite a “high risk high reward” situation. However, the chance of actually receiving that high reward is not very high so it’s probably a good idea to not start one in the first place unless you are absolutely sure of the direction you want to take your business in. You must know exactly what you are doing otherwise you are more than likely to end up disappointed.

4. Choosing a Platform

The next problem with dropshipping is the platform. There are a couple of options that one can choose from when starting a dropshipping site.

Firstly, they can make a seller account on popular sites like Amazon or Ebay. However, the issue with this is that there are thousands of accounts like that out there and you will just be one amongst the sea of sellers.

The second option is to make your own website. This is probably the better option but it still leaves the issue of how people are going to find your site.

Either way, you basically have to hope that people “fall” upon your site. If that sounds hard enough, not only do they have to fall upon your site but they also have to be interested enough to buy something from the site! This again just shows how difficult it truly is to be successful in the dropshipping industry.

5. Returns

Sometimes, if the customer is unhappy with the product they will return it to get a refund. However, because the dropshipper is the seller, the product will be returned to them. Because the retailers sell the products to them as a seller, they won’t accept returns or refunds.

So basically, not only do the dropshippers lose the money which they were supposed to have made but they also don’t get the money back for buying the product from the retailer.

After this happens a few times, it will be pretty easy to see why bankruptcy is a genuine concern when dealing with dropshipping.

6. Competition with other dropshipping sites

The struggle to find the right price for a product is one that all dropshippers go through. On one hand, they want to ensure that the price is high enough where they make a decent profit. This means that the whole process is worth continuing on with.

However, they also can’t make it too high because buyers will just go on another dropshipper’s website and buy the exact same product for a lower price. That means dropshippers have to find a balance between those two extremes. It is quite often very difficult to get that balance right.

Whilst I understand the need to make money as a college student, there are many better ways other than dropshipping. Dropshipping may sound easy and convenient to do but there is also so much that can go wrong as mentioned earlier.

That being said, I’m not saying you shouldn’t become a dropshipper at all. Rather, make sure you understand the risks first and also make sure you are fully aware of the whole business plan. Plan ahead and don’t get fooled by people who will look to take advantage of your inexperience.

Although it is a very tough business to become successful in, it is not impossible. However, as I said earlier, you need to know exactly what you are doing or you will be in financial trouble before you know it.