What are the risks of drop shipping?

Here are some key risks of drop shipping as explained by Jordan Harbinger:

1. Low Margins: Drop shipping usually offers margins of only 10-30%, whereas holding inventory offers margins around 50%. Payments include a drop ship fee and shipping costs, reducing profitability significantly 1.

2. Saturated Markets: Popular products can quickly become over-saturated, making it difficult to compete. Selling identical products as many others leads to stiff competition and price wars 2.

3. Quality Control Issues: Products sourced from places like AliExpress may come with poor quality control. This can lead to high return rates, customer dissatisfaction, and potential damage to your brand’s reputation 3.

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     1

     Dropshipping Reality Check

     00:22:33
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     2

     Drop Shipping Insights

     00:20:11
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     3

     Drop Shipping Scams

     00:16:36
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     4

     Dropshipping Scams Exposed

     00:26:05

4. Long Shipping Times: International shipping, often from China, means customers may wait 30-50 days for their items, leading to poor customer service experiences and complaints 3.

5. Dependency on Suppliers: You rely entirely on suppliers for stock and shipping. If they run out of stock or have delays, your business suffers 1.

6. High Competition: As mentioned, if the same product is being sold by multiple drop shippers, market saturation quickly happens. Large e-commerce platforms like Amazon make it hard for small drop shippers to compete 1.

7. Scams: Many courses and promises of quick riches are scams. Often, these revolve around selling high-priced programs that overstate the ease and profitability of drop shipping 2.

8. Lack of Traffic: Building enough traffic to your store without holding inventory can be very challenging. Competing in saturated markets with low profit margins makes it difficult to afford effective advertising 4.