How NOT to create a Dropshipping Business
Yes, you read it correctly. This blog will explain how not to create a dropshipping store. We learned how to fail in a very structured manner, and here we are telling you what you absolutely shouldn’t do while creating a dropshipping store. Let us first define dropshipping as it was explained to us,
An entrepreneur sets up a website/storefront/ group/ online
website to sell certain products, but they don’t keep any of those products in stock.
Instead, when a customer orders a product, the dropshipper purchases the products from a third party, and has them shipped directly to the customer.
Lol, my life! What a simple thing to do right? Ehhhh! wait until you reach the end of this blog; You and we, both will be in tears by then (ours won’t be because of excessive laughter though).
We are just a bunch of business students who were given a task to create a dropshipping project from scratch and scale it up in 4 weeks. I would have put the numbers here but they don’t sound very exotic to lure you into dropshipping (It wasn’t that bad for 4 weeks though). We have documented the whole journey here in this blog. This blog is not just words, pictures, and funny one-time read; it has our blood, sweat, success, disappointment, and a lot of effort, I mean A LOT.
Let me show you what I’m talking about…
What to Sell? 🤯
Quoting a very famous quote from one of our beloved professor,
Shit sells in India, you should know how to sell it.
It’s true, but not really. We spent almost 30% of our time window on figuring out, What to sell? However, It was required, choosing what to sell is the whole make-or-break game for dropshipping. You choose a shitty product and all your investment goes pfttttt! but if you hit the bullseye in this one, you can make big bucks without the hassle of running a full-fledged business.
After days of procrastination, contemplation, and internal wars in the team, we concluded that we will sell handmade organic health products. Simple reason, because WE FOUND A VENDOR nearby; emotional reason, our nurture biases came into play when we thought of selling the desi lifestyle that our family had adapted for years to STAY healthy.
You are, what you eat!
Change the very basic ingredients of your kitchen and you are already 20% more healthy. And what are the basic Ingredients? GHEE, SUGAR, and SALT. For some reason, we got caught in the emotion of sharing our homely values with others and we forgot all our marketing lessons. (Written apologies to our Marketing Professor).
Mistake: We became emotionally attached to the product choice.
The Vendor Saga 🤦♂️
If you sell what you do, you are a Vendor. If you sell why you do it, you’re a Brand. -Simon Sinek
And the vendor we found was a brand in himself, It’s one thing to do business and it’s a different thing to do business with ethics. The vendor saga is a never-ending love-hate relationship in any dropshipping business, for that matter any of the business. It was a euphoric moment for us when one of our team members found a genuine vendor in Gurugram. We thought our lives became much easy. Now the only job is to get orders and do business in lakhs. Poor us, couldn’t see the madness through the glitter. Every visit with the vendor, we have spent hours sitting and listening to the parampara, pratishtha, and anushashan. This did teach us many things about how everyone does business with different intent and approaches, but it was a hassle to take out time for long vendor meetings from our jam-packed schedules.
Will it sell? 🤷♂️
Now, that we have a product and vendor both, we started our research and in a way, we started to find out reasons to validate our product choice (this is exactly the NOT part). We looked at some google trends and spoke to some of our families and friends. Families could validate the dire need to go back to roots and eat homemade, unadulterated food. But our friends on the other side didn’t think they cared as much about which Ghee or salt is being used while cooking. We strongly felt that our market is very niche (families who deeply value handmade organic food items) and they would be ready to pay as much as 2000 for 1Kg of Desi Cow Ghee. Apart from these, we saw a general trend indicating that people really want to go desi but only if it’s convenient. So we thought, what an easy task, let’s get this going.
Mistake: Spend more time analyzing this phase, don’t rush, and have numbers to back up your decisions
Testing the waters 🔬
Immediately after confirming, what are we going to sell, we placed a test order to check the quality, time for delivery, and service. We were good on most of the fronts but we didn’t know if any of us is going to use that as we stay in a hostel. So we started selling some in our immediate customer base. This was not supposed to be a surprise that none of our friends from the hostel bought our Honey and Ghee. They are college students, why the heck will they buy ghee, they eat in mess and swiggy it most of the time. And even if they cook for themselves they wouldn’t care about which brand of ghee are they buying.
PIVOOOTTT 😬
Ah! Shit. Here we go again, starting to find another product that sells easily in the hostel, and this time we didn’t go through the pain, we just started selling the same thing that we were eating, Soya Bites. Healthy Indian snacks, homemade and 100% baked. We were sure that this item will sell well, so we included a couple of more healthy options along with this one.
Designing 👌
Since, we already decided to sell something that would require a rigorous trust-building exercise, branding, and packaging we thought would play a very strong role in achieving the same. We were not wrong. People buy things that look neat and pretty. Shit sells in India if you pack it neatly. So next many days we spent designing the logo (which we are very proud of) and creating labeling and doing photoshoots of our products. Which did come out to be pretty aesthetic. We were so proud of creating this brand because, after designs and photoshoots, we started looking at our project as a BRAND. However, it did take us a considerable amount of time to launch our products formally in the market. (A rookie mistake, launch fast and iterate)
Mistake: Keep it simple, easy and for the sake of god, don’t spend eternity correcting your designs
Where do we sell? 🔍
The most important question after What to sell? This is where we were clear that we most definitely are getting business via WhatsApp because most of our target audience for the organic products were spending most of their time on WhatsApp (Our Mothers were prime examples). Our primary choice of platform was clearly WhatsApp Business but apart from that, to build the brand identity and build the trust of the online community, we had to create a Website and Instagram platform as well. Because if they search us online and don’t find any trace of us, they might think we are frauds.
Platform of Choice: WhatsApp Business, Catalog Website, Instagram
Mistake: Didn’t optimize other platforms to their full extent
Apart from the platform choice, there are other logistics that you will have to figure out first before you start to sell.
Payments 🤑
Let’s get to the part where you get “money is credited” messages :P It’s the most delightful part of this journey where you see the transactions in your bank account and it all starts making sense. (Be watchful though, it’s not always credit). There are various payment solutions available through which you can accept payments but you have to look out for that 1 option that makes your customer's life easy. Nobody’s gonna buy your product if you ask them to do NEFT for a pack of snacks. UPI is one of the most accessible, easy, and highly adapted forms of payment that Indians have adapted. Now, it’s up to you how you want to use them, whether you want to keep a QR code, UPI-ID, or phone number. But make it easy for them to do impulse purchases, the minimum number of taps! For our WhatsApp business, we had UPI ID links, Phone numbers added in our Greeting message, and Business description. This helps to set up a whole channel without investing a single rupee in platform fees.
Procurement & Delivery Logistics 🛒
Again one of the headaches which will make or break your business. If you get this part automated, your life will be breezy and higher chance that you will continue your dropshipping business for a longer period of time.
For us, it was a task to get products from the vendor and change the labeling and packaging and then ship it to the end customer. You see there was a high involvement of us in this process. It takes a lot of time and effort to do the intermediation part. If you can automate the delivery from your vendor as soon as you get the order, you have made the correct decision with your product. Try to automate this part of the process as much as possible. If at all you need to do the deliveries by yourself, take the help of third-party logistics services like ShipRocket, WeFast, DTDC, or any other local delivery services.
AVOID THIS: avoid your involvement in procurement and delivery as much as possible and DO NOT HOLD INVENTORY
Pricing 💰💰
This is another important component when you are doing a dropshipping business because other folks might be selling the same thing at a competitive price range, forget about others, your Vendor is selling it at a price he’s giving it to you. Why should people buy from you? There are many proven pricing strategies that you can use to price your product but generally, in dropshipping, you should go with the simple approach. Don’t add to your existing problems. We used a Variable Cost-plus pricing strategy. You can just google other pricing strategies to find the most suitable for yourself.
First Marketing Efforts (Pre-Launch) 📈
You chose the product, you found a vendor, you did market research, you created branding, you chose your platform and you did your pricing, what next? Let’s get this going. To launch your product you can do any. online/offline campaign to introduce your product to the market. This will definitely set the pace and most will give you judgment on the minor tweaks that the market is asking for. For us, we went ahead and set up a stall in our hostel mess around dinner time, so we get footfall of students who were coming for dinner. We did set up a neat stall, with pretty branding materials and most importantly, some of our test products for tasting because we were selling food items. This helped us a lot to gauge the response of people to understand how are they responding to what we created and what we are selling. On the first day itself, we re-confirmed our hypothesis about hostel students not buying Desi Ghee and Honey. They were bachelors living in the hostel, partying every other night, they were more interested in the snacks category than anything else.
Mistake: We sold 70 units in 2 hours and made a sale of 7000 INR. (We were happy, but shouldn't have been, we sold many small items instead of selling a few big items, thus low on profit)
Pain in the ass: Bookkeeping 📚
Literally, this is going to be a huge pain in the ass and the reason why you could fail even if you’ve got the rest of the things correct. If you are financially challenged then take help from someone, and understand your bank statements and other finance economics related to your business. At the end of the month if you are not able to read your business’s financial standings (profit/loss) then you are in grave danger, you might be digging the grave for your business without knowing. Ignorance is not bliss in the case of finance.
Set up a separate entity bank account, do all vendor payments and expenditures via the same account, take payments in this same account, and try to keep your business in terms of digital transactions as much as possible. It will help you in the end to reduce your efforts to tally your accounts.
Talk to the Data 💽
We are living in a world where data speaks more than humans do. Why is it that the business shouldn’t speak to you? You have data about your inventory, sales, customer details, payments, social media data, and marketing statistics; now all you have to do is put these puzzle pieces together to find out what’s the picture behind all this data. It will tell you basic things like how much are you selling per month and revenue but if you dig deeper, it will also tell you who exactly are your customers and why are they buying what you are selling. Are they buying again? Where are they from? Are they buying because you made a heck of a marketing advertisement on Instagram or are they just referrals from WhatsApp?
This data will help you to make vital decisions for the business and will give you a business strategy for tomorrow. This is a great article that tells you what exactly you should be tracking. Get talking!
Keep the ball rolling 🏃♀️
Now that you are out in the market and you did your ground test, you know what’s gonna work out and what didn’t, now the job is to keep the ball rolling. For us, it was WhatsApp marketing via peers, friends, and family, rolling out a catalog on Instagram, and pushing paid advertisements. We did this to a certain extent but one of the major problems you face when you are working in the food category and small ticket size items (products with a small price range), is you get flooded with orders, which will keep you busy but it will add only little value to your overall economical numbers. We did sell many units but our overall revenue and profit were very low. If you are having small ticket size, try to push your efforts towards making bulk deals, because that’s where the profit numbers will make sense for your business. This could be any individual or organizational orders or supermarket deals (in our category). We did a poor job at maintaining this pace as dropshipping was our side quest and we were occupied with a lot of other priority things. Don’t make this mistake, sell one thing but with utmost devotion.
Mistake: Busy with small ticket size orders, didn’t make any efforts to sell money-making products.
Coming back: How NOT to create a Dropshipping Business
We created our dropshipping business StayDesi in less than 4 weeks, we barely made any profits but more importantly, we survived and now we know better than ever as to how are we gonna take this opportunity forward. I’m not saying it’s impossible but it’s gonna be a close game. Do not get disheartened if you have already done some mistakes like we did because we are still standing, It’s gonna be all right.
Now that you know what you are not supposed to do, here’s a link to a blog on HOW TO CREATE A DROPSHIPPING BUSINESS.
Strongest is the one who is still standing till the end. -@mbabhikuchbhi
On the closing note, we would just tell you to go through the end notes of each section of the blog. For you, it might be just words for now but for us, these are the wounds of the burns we’ve got in the last month. Don’t do things that we did in this blog, I wish you All the best, and May the almighty give you the will to survive, and if you are still standing on your feet, may he bless you to thrive in your adventures
You have our blessings!
