Poor Marketing Kills Ecommerce Dropshipping

Dropshipping is a good way to source products without much investment. Unfortunately, this seemingly turn-key model has little barrier to entry and thus attracts many competitors with razor-thin margins and no clear way to differentiate.

Yet creating a successful dropshipping business is not impossible, provided the would-be entrepreneur understands the growth and profit challenges.

Dropshipping Boost

I once heard ecommerce dropshipping described as “the perfect business model for anyone who wants all the stress and frustration of running a business without any of the pesky profits to worry about.”

While this description is a little unfair to an industry with estimated sales of $351.8 billion in 2024, according to Oberlo, a dropship provider, it also hints at the benefits of starting or scaling a business.

As a business model, ecommerce dropshipping is attractive for a reason: it is relatively easy to start and very low risk.

There are at least four reasons an entrepreneur might be attracted to dropshipping.

• Little or no investment. There is no need to purchase inventory upfront.

• Low risk. Merchants only pay for products they sell, minimizing the risk.

• Access to products. Stores can offer a variety of products without worrying about storage or investment. When I led ecommerce for a retail chain, we would use drop shippers to add complementary products to our site, boosting average order value.

• Flexibility. Sellers can change product offerings based on market trends without significant financial risk.

All of these features focus on product sourcing and financial investment. The trade-off, however, is a marketing problem.

A Marketing Business

Selling drop-shipped items is a choice to focus on attracting and converting customers rather than developing and sourcing products.

Effectively, when you start or scale a dropshipping business, you prefer solving marketing problems rather than sourcing.

And there will be marketing problems. The top three are likely customer acquisition limits, undifferentiated products, and customer relationships.

Not much CAC

Think for a moment about a traditional retailer that orders products from a manufacturer at wholesale prices, warehouses the items, and sells them for, say, a 25% margin.

Thus, a $100 sale will result in a $25 gross profit. If the retailer wanted a return on advertising spend of 4:1, it could invest $6.25 to acquire a customer — that would be its target customer acquisition cost.

The drop shipping supply chain is longer and more expensive by comparison. More parties take a cut of the profit, and some are taking significant percentages because they carry the inventory risk.

A typical margin for a store selling a drop-shipped item may be as low as 10%, according to Shopify. So, the same $100 sale will result in $10 of margin. A 4:1 ROAS puts this shop’s target CAC at $2.50.

If a retailer and a dropship shop sell identical items — a real possibility — the marketing challenge is clear: the dropship store must acquire customers for less.

Same products

Selling an identical product exacerbates the already anemic CAC. Yet selling the same products is what most dropship-based stores do.

This t-shirt is available on a specialty t-shirt shop, AliExpress, and the Dsers-AliExpress Dropshipping app.

Consider the Dsers-AliExpress Dropshipping, an app for Shopify. The product takes an item from AliExpress and adds it directly to a Shopify store. It will do this for any Shopify store, potentially placing the identical AliExpress item in dozens or even hundreds of shops.

Hence it’s not enough to market a store’s products. Operating an ecommerce dropshipping business requires differentiating from many others.

Customer relationships

Marketing tasks should not end when a sale is consummated. Some of the best tactics focus on retaining and engaging those buyers afterward.

Thus building strong customer relationships is crucial, especially in a dropshipping business where the same products might be available from multiple sources at similar prices.

That means investing time in content marketing, email marketing, retargeting, and social media marketing.

4-5-4 Calendar Aids Retail Planning

Since the 1930s, retailers have used the 4-5-4 fiscal calendar to streamline and improve forecasting. This somewhat peculiar planning method could help modern retailers and direct-to-consumer brands.

Ending the year on the same weekday simplifies comparisons across timeframes, aiding in strategic decision-making.

Here’s how.

4-5-4 Calendar

The 4-5-4 retail calendar is a scheduling framework that divides the year into months of four weeks, five weeks, and four weeks in a repeated pattern, ensuring each fiscal month starts and ends on the same weekday. This design aligns sales data across similar periods.

In the United States, the National Retail Federation maintains a 4-5-4 retail calendar for its members.

The NRF’s 4-5-4 retail calendar for 2024-to-2026 divides the year into consistent three-month quarters, wherein the months have four, five, and four weeks, respectively. Click image to enlarge.

4-5-4 Advantages

The 4-5-4 calendar structures the fiscal year into consistent, comparable periods.

The ability to compare date ranges — particularly weeks — facilitates smoother planning and estimates of consumer demand.

I spent nearly 10 years as the director of marketing and ecommerce for an omnichannel retailer. We depended on a 4-5-4 calendar so heavily that I was surprised recently when the respected owner of an ecommerce business told me he’d never heard of it.

Planning. For purchasing and marketing departments, the 4-5-4 calendar is a roadmap through retail’s inherent highs and lows.

The calendar recognizes the predictable swings in consumer shopping, optimizing, if you will, for those critical high-traffic windows, such as major holidays and seasonal shifts.

Imagine planning for the Christmas shopping season, which includes Black Friday. On the Gregorian calendar, Black Friday shifts between November 23 and 29, depending on the year.

This variability makes it challenging to accurately compare year-over-year sales for November because the number of post-Black Friday shopping days in that month can differ.

Enter the 4-5-4 calendar, which groups weeks into a consistent pattern, wherein each fiscal month starts and ends on the same day of the week every year. With this setup, Black Friday falls in the last week of November with exactly one shopping day afterward. In the Gregorian calendar, the number of shopping days after Black Friday varies from one to three.

With the 4-5-4 calendar, Black Friday occurs in the last week of November and is followed by exactly one shopping day that month, simplifying annual performance comparisons. Image: NRF.

This 4-5-4 consistency allows for direct, apples-to-apples comparisons of the critical holiday shopping period from one year to the next. Merchants can accurately measure the impact of Black Friday promotions and the subsequent shopping days until the end of November without the distortions caused by Thanksgiving Day’s floating date. Easter presents similar challenges.

Procurement and marketing teams can forecast demand, plan inventory, and set marketing strategies more precisely.

Analysis. Adopting the 4-5-4 calendar introduces a level of standardization that is helpful for the analytical rigor required in retailing and ecommerce.

This standardization simplifies conducting quarter-over-quarter and year-over-year analyses in most cases. However, there is a snag. Since a year is a bit longer than 52 weeks, the 4-5-4 calendar has a “leap year” where a 53rd week is added. Thus, the comparison fails every five or six years. Nonetheless, it’s far more standardized than the Gregorian alternative.

Bottom line, merchants can compare performance metrics such as sales, website traffic, and inventory turnover without the shifting number of shopping days.

4-5-4 Challenges

The 4-5-4 calendar presents challenges in training, technology, and financial responsibilities.

• Training and education. The 4-5-4 system requires training — explaining what it is, how it works, and how to use it. Accounting folks will likely pick it up quicker than marketers.

• Technological integration. Transitioning to a 4-5-4 fiscal calendar may require substantial adjustments to retail management software, analytics tools, and back-office systems — although the shift is an opportunity to audit current technologies.

• Financial responsibilities. A 4-5-4 methodology can affect obligations that align with the Gregorian calendar, such as tax reporting and compliance. Businesses must plan how their fiscal reporting will interface with tax and other requirements, possibly necessitating adjustments to accounting practices or additional reconciliation steps. Tax professionals experienced with non-standard fiscal periods can provide crucial insights.

Best Option?

Budgetary tools such as the 4-5-4 retail calendar have been around for years. If planning and comparisons pose no challenge for your business, focus elsewhere. Otherwise, switching the calendar might be just what you need.