I've recently seen huge increase in self-professed 'gurus' or 'experts' on YouTube showing off about their dropshipping successes. They go on about expensive sports cars they bought or an exotic holiday they just got back from – because it's obviously way more fun to talk about that than about PayPal accounts being frozen, credit card chargebacks, and customers asking for refunds.
The truth is I've been guilty of doing the same thing but let me get one thing straight: dropshipping is not a perfect online business. As a newcomer you might jump in and find success but then you'll come across a negative aspect and get blindsided because nobody told you about these potential issues.
Fortunately though these things are easy to overcome and you can also do things to prevent them from happening in the first place. So I'm going to address the three most important issues and explain how you can solve them if they happen and what you can do to prepare for them. Let's jump straight in.
1. Getting banned by PayPal
A lot of people say that PayPal hates dropshipping but this isn't true. There's always a horror story out there about someone's PayPal account, with tens of thousands of dollars in it, suddenly being banned.
So what if you have bills to pay? PayPal don't care. But as I said, this isn't because PayPal hates dropshipping; it's because they hate dodgy businesses who lie to customers or cheat them. And guess what, I see new dropshippers being shady about delivery times when sending stuff out from China.
If you are dropshipping from Chinese suppliers like Aliexpress, then there is no way around the average shipping time of up to four weeks for the items to arrive. But don't think that long delivery times will affect your sales - something new sellers unfortunately assume will. They think that if they're open and honest about it then no one will buy from them, so they do their best to hide it. They don't put a disclaimer on their product page. They may put a tiny disclaimer on the shopping cart page but that's about it. Bad move.
You should be putting the shipping times disclaimer very clearly on your product page and I recommend that you make this large and bold enough to make sure that your potential customer sees it. I also recommend that you put the disclaimer in your order confirmation e-mail informing the customer that delivery can take up to four weeks and to please be patient.
If your customer realises it will take up to four weeks then you'll get a lot fewer e-mails asking where their item is. But you also want to do it because you'll get less payment disputes from people, again, wondering where their item is. If you've been upfront and transparent about them with the shipping times, then you'll win the disputes because it's those disputes that get PayPal accounts banned. Just be open and honest from the start.
No one likes to talk about chargebacks because getting a chargeback is a PITA. Credit and debit card companies will let their customers get their money back (chargeback) if they dispute a payment because they didn't receive their item, it wasn't as described, or they were the victim of fraud.
But it's not a one way street so you, as the merchant, will be able to respond to the chargeback. You can send evidence to prove that what the customer is claiming is untrue. Customers usually do a chargeback for either one of two reasons:
- They don't recognise the charge
- They are simply unhappy and feel cheated
If a customer doesn't recognise a charge on their bill they will, of course, believe that they were a victim of a fraudulent transaction. Thankfully this is very easy to avoid.
If you're using Shopify, then make sure the "Customer billing statement" box has the same name as your store:
- From your Shopify admin, go to Settings > Payment providers.
- In the Shopify Payments section, click Edit.
- Under the "Customer billing statement" box, click edit:
- Enter the billing statement and your phone number.
- Click Save.
Unfortunately, the most difficult one to deal with is when your customer is unhappy with the item or service. Time after time, I find that most chargebacks are due to long shipping times. In a world of next day and same day delivery services customers will not expecting long shipping times. So again, it needs to be said that if you're upfront and honest about delivery timescales and ensure that your customer is aware of them, then you'll be getting a lot less chargebacks.
Having said that, you should still expect an occassional chargeback. Any business that takes online payments, whether it be credit cards or PayPal, should expect to have to deal with chargebacks.
If a customer comes back and claims a chargeback for the long delivery times, then you will absolutely win that chargeback if you were transparent about it before they placed their order. You didn't hide it. You didn't trick them. They were not lied to. You were open and honest. You can provide a link and screenshots to your product description page which clearly had a disclaimer about the delivery times. You can provide a copy of your confirmation e-mail in which you, again, had the disclaimer about the delivery times. And if you are using ePacket as your shipping option, which I highly recommend, then you will have a tracking code that you can provide which will show that the item is on its way.
But let's be honest. Even if you are going to be winning them, dealing with chargebacks is a pain. Luckily, there is something that you can do to avoid getting them in the first place.
The best way for you to avoid things such as chargebacks and PayPal disputes is to do what Amazon and eBay sellers do when they're trying to avoid negative feedback. You should encourage communication between you and your customers. In the eBay and Amazon world, getting positive reviews is critical and one of the main ways to get reviews is by sending an e-mail to your customers asking them to leave feedback. But because Amazon's terms and conditions say that you can't ask them to leave a positive review, you have to ask them to leave a honest review.
Now, this is usually fine until you end up asking an unhappy customer to leave an honest review. They end up leaving a negative review which is the exact opposite of what we want. So what do you do? You should encourage communication between you and customers that are not happy. In your order confirmation and feedback e-mails, you should add in a line like this:
"If you're having problems, please contact us before leaving a negative review. We care about each and every customer."
So do the exact same thing with your Shopify store. Set it up so that your automated notifications such as your shipping confirmation e-mail have a line in there about if they are unhappy or having any problems, could they please e-mail you. Plus, it's a great idea in that e-mail to let them know that item is on its way and to please be patient. The vast majority of customers just want to know that you are still there and that you care. So if you do get contacted by a customer, let them know that yes, the shipping time is normal, yes, the item is on its way, and yes, you do care.
Refunds are just a part of doing business. It doesn't matter what your business is. You could be mowing grass for your neighbours. You could be manufacturing high-tech smartphones. You could even be running a dropshipping business. It doesn't matter. People asking for refunds are just a part of any business.
Luckily, those customers are uncommon and rare. So what do you do about them? The answer is actually quite simple. I recommend that you have a clear refund policy and only allow refunds for items that were not received, returned in good condition within a given timescale, or are faulty or broken. Remember that in some countries it is written in law that you must allow people a certain number of days (usually 7-14) to change their mind and return an item for a refund. If you don't do this then they' have a valid chargeback claim. I also recommend that you link to your refund policy page in the footer of your site so it will be on every single page.
Before I end this post I want to mention one thing. There is another reason why dropshipping 'gurus' and 'experts' don't talk about these things and it isn't just because they're uncomfortable topics.
It's because even though these issues have simple solutions, there are a lot of people out there who'll get discouraged and become very negative when they find out that dropshipping isn't a perfect easy business.
It's like when people learn about sales tax. They find out it's a complicated thing to do and say "Nope, too hard."
The truth though is that these sorts of people are never really going to start a business. They're always going to be stuck in their 9 to 5 jobs. Doing a 9 to 5 job (or now more likely a 8 to 6 job) is an easy option. OK, it's not easy but it's tiring and uninspiring. They're also not as safe as you think with companies going bust every day. But because every day is the same - you go to work and you know what you're going to get paid, it seems a safe choice. And if you want be one of those sorts of people, that's absolutely fine.
Most of my friends are those types of people. I've got nothing against that. But the truth is, is that the people who succeed and the people who get rich are the ones that see challenges as opportunities. Successful individuals will see those afraid of starting a business because someone's PayPal account got frozen as "Oh, great. One less competitor for me."
They know, like me, that there are solutions to all problems. With a bit of research and a little bit of problem-solving, you can generally find an answer to anything so why it let it stop you? Go out there, find out what mistakes other people were making that were getting their PayPal accounts frozen, and then don't make them. So really, the question I have for you is what type of person will you be?
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