Over the years, one mistake has killed many dropshipping businesses. It may seem simple to overlook for some people, but it’s not. Whether you’re a beginner or an experienced dropshipper, this mistake needs to be fixed ASAP. To secure long-term success, you must remove this hindrance in your path—over-reliance on a single supplier!
In this blog, I’ll explain why it’s a massive risk to your business. Plus, I’ll discuss the right strategies to fix and prevent this mistake from destroying your business. Let’s get started!
Why Depending on One Supplier is a Massive Risk
Relying too much on a single supplier will have a negative domino effect on your business. The main problem is stock issues. Remember, as dropshippers, we don’t have any control over product inventory. So, if that single supplier you’re relying on faces major issues, your whole business operation will be disrupted.
Here are the common issues suppliers experience that can destroy your business:
To avoid all of these, there’s a need to diversify your suppliers. Don’t rely on just one supplier.
The Toyota Accelerator Pedal Recall in 2009-2010
One valuable example of a business facing losses due to single-supplier dependency is Toyota. Back in 2009 and 2010, Toyota did a massive recall of its vehicles due to accelerator pedal defects. It all boils down to a supplier issue. A part made by CTS Corp., an American supplier of accelerator pedals, caused malfunctions.
A moving part near the joint at the top of the accelerator arm caused the pedal to stick and not return to its original position. That problem was traced back to a change in the supplier’s manufacturing process.
Since all of Toyota’s accelerator pedals for U.S. units were sourced from CTS Corp., they had to recall millions of vehicles in 2009 and 2010. These included 2007-2010 Camrys, 2009-2010 Corollas, 2009-10 Matrixes, 2005-2010 Avalons, the 2010 Highlander, and 2007-2010 Tundras.
This cost the company about $2 billion—$1.1 billion spent on recalls and a loss of about $800 million in sales. But since Toyota is a big brand, it didn’t shut down completely. However, it did significantly affect their finances.
Now, Toyota survived because it’s a giant brand, but imagine if that were your business. If your only supplier makes a critical mistake, you’re stuck. No inventory, no revenue, and you have a reputation crisis you might not recover from.
How to Fix It: Build a Multi-Supplier Strategy
The best way to solve this mistake is through supplier diversification. Instead of just one supplier, you should have two to three more as backups for your key products. This way, if you encounter an issue with one of them, you still have other sources. Sales will continue to come through, and your customers will stay happy.
Below are some tips on how to negotiate with more suppliers and build relationships:
Contact Them By Calling
When reaching out to potential suppliers, I always recommend calling them instead of sending an email. It’s easier to reach the right person through a call. Plus, it’s more personal and shows your sincerity about working with them. During the call, you can also ask them for their e-mail address if that’s your preferred long-term communication method.
Don’t Tell Them You’re a Dropshipper
Furthermore, don’t refer to yourself as a dropshipper. Introduce yourself as an online retailer. Revealing this can potentially lead to higher prices or suppliers refusing to work with you altogether. Make sure to use a professional email address as well when communicating with suppliers in the future.
Talk the Talk
Show that you know what you’re getting yourself into. Make sure you understand your niche. At the same time, I always recommend building your store before contacting suppliers. If you already have one and are only expanding your supplier list, make sure it looks professional and works properly. This will strengthen your chances of securing suppliers.
Ask Questions
When applying to potential suppliers, don’t be afraid to ask questions, especially if you’re applying to suppliers outside of the US. Ask relevant questions upfront. It’s better to clarify everything now than to figure it out later while working with them.
Complete Everything ASAP
If a supplier approves your application, they will ask you to fill out some forms. Complete these forms as soon as they send them. This will keep that momentum going so you can start working with them as soon as possible.
How to Keep Your Store Running Even When Stock Runs Low
Your business doesn’t have to pause just because your product is out of stock. There are two main ways you can keep your store running.
Implement Pre-Orders
Once you start noticing low inventory, adjust your store and product pages. Indicate that the product is out of stock and allow your customers to pre-order it. This way, you can still get those sales. But don’t forget to indicate the estimated restock date. This will help manage your customers' expectations.
Offer Alternative Products
Another strategy is to offer alternatives to your customers. These are products from other suppliers that are comparable to the out-of-stock product that they initially wanted to buy. This will work well for customers who urgently need the product. This way, you can make sure you get the sales. It will also help highlight your other products.
The Right Way to Manage Your Inventory & Forecast Demand
If you don’t want to ever worry about running out of stock, you need to manage your inventory. There are inventory tracking tools available that you can use to monitor the numbers. You can also use these to analyze supplier and buying trends, allowing you to predict when to prepare your inventory. For example, you can see when sales and inventory fluctuate, especially during special seasons.
If you’re using Shopify for your store, there’s a Shopify app you can use to manage and update your inventory. I recommend using the Stock Synch app since it’s affordable and even has a free option. It will connect your store and your suppliers in different ways.Conclusion
Depending on a single supplier is the #1 mistake you can make as a business owner. Here’s a recap of all the reasons why:
So, make sure you have multiple suppliers for your products. It will save your business.
If you want to learn more about getting the right suppliers, join my webinar and our DSL community!
