Walmart Dropshipping is Dead Switch to Arbitrage for Success

21 / Jul

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Before diving into a dropshipping business on Walmart, read this article to make an informed decision. Here, we share our real-life experience, having generated millions of dollars in business through the Walmart dropshipping model. We have managed over 100 Walmart stores, achieving massive business and profits, so it’s crucial to listen to our insights before proceeding.

Our Experience with Walmart Dropshipping

As a Walmart automation business service provider, we thrived on the dropshipping model but have since completely changed our approach. It has become increasingly difficult to sustain a dropshipping business on Walmart. Here’s why.

Concept of Dropshipping

In a traditional retail model, stores purchase products in bulk from suppliers or manufacturers, store them in a warehouse, and then sell and ship them to customers as orders come in. Dropshipping, however, eliminates the need for the retailer to stock inventory. Instead, when a customer places an order, the retailer purchases the item from a third-party supplier, who then ships it directly to the customer.

Why the Dropshipping Model Was Popular

During the COVID-19 pandemic, dropshipping experienced a golden era. Marketplaces were under immense pressure to maintain their supply chains. Workers were unable to work, while customer demand skyrocketed as people needed essential items delivered to their homes.

Walmart struggled to maintain its dropshipping policies, prioritizing order delivery over enforcing restrictions or suspensions. This period allowed drop shippers to operate without barriers. With most brand sellers halting production and customer demand at an all-time high, drop shippers accepted thousands of orders, making massive profits without holding any stock. They tried to fulfill orders with any available retailers and often apologized to customers if they couldn’t. There were instances where customers ordered item A but received a cheaper item B, with no one to track or take action against such practices.

The Current Dropshipping Situation

Now, things have returned to normal. Walmart employees are active, and they have a strong support team for both sellers and customers. They carefully address every customer query, and any single policy violation can lead to immediate action and account suspension.

You cannot afford to disappoint clients, even if it means taking a loss. Keeping your customers happy in every situation is essential.

Issues Involved in the Dropshipping Model

There are numerous issues with the dropshipping model that you cannot ignore, especially if you plan to do dropshipping in an e-commerce marketplace:

  1. Stock Availability:
    • You don’t have access to available stock. Your supplier can run out of stock after you’ve made sales, leading to high order cancellation rates. This negatively impacts your store’s health and moves you closer to suspension.
  2. Product Quality Control:
    • You can’t ensure product quality. After selling 100 orders, you may start seeing returns, refund requests, or negative reviews from customers.
  3. Tracking Numbers:
    • You can’t provide real tracking numbers to customers because most retailers use their own carriers. Using other retailers’ tracking numbers in your Walmart store results in a high rate of invalid tracking numbers.
  4. Customer Experience:
    • Customers may be disappointed when they see they ordered from Walmart but receive items from other retailers with lower-priced invoices. This significantly impacts your store’s health. Even a few claims like this can lead to account suspension.

Financial Risks of the Dropshipping Model

While the dropshipping model has low financial risks in terms of inventory, you may lose the ability to sell on Walmart in the future. Without purchasing inventory upfront, you avoid the risk of unsold stock. However, there is a high chance of getting suspended from Walmart, losing a lifetime selling opportunity.

If Walmart suspends your account, they will hold your funds for 180 days, which is the main risk. Additionally, if you cannot fulfill orders on time or cancel orders, Walmart will keep their referral fee (approximately 15%), leading to further financial losses.

Alternative Business Model: Arbitrage

To stay updated and adapt to changing times, consider switching to the Arbitrage business model on Walmart. This model addresses the issues faced in dropshipping.

What is the Arbitrage Business Model?

Arbitrage is similar to dropshipping but allows you to overcome the problems associated with dropshipping. It can also be called a two-step dropshipping model. Here’s how it works:

  • Product Research: Find products at lower prices from other retailers.
  • Small Quantity Purchase: Buy a few quantities (even 2-3) and list them on Walmart.
  • Order Fulfillment: After getting sales, repack the items, attach a Walmart invoice, and ship them to customers.

In the arbitrage model, you never have to buy in bulk and have easy access to returns according to your supplier’s return policy.

Differences Between Dropshipping and Arbitrage

Aspect Dropshipping Arbitrage
Stock Availability You don’t have access to available stock. Your supplier can run out of stock after you’ve made sales. You have stock available, so you can maintain inventory properly and correctly.
Tracking ID You can’t use other retailers’ tracking IDs. You have real tracking information as you handle the product delivery to the carrier.
Product Quality You can’t ensure product quality. You can ensure product quality because you purchase the items before starting sales.
Packaging and Invoice Customers may receive items in third-party boxes with other retailers’ invoices, leading to potential claims. Customers won’t see other retailers’ boxes or invoices if you remove them and attach your invoice instead.
Customer Service You can’t respond to customer queries correctly regarding product details and shipping delivery. You have accurate product details and shipping information, allowing you to respond to customer queries effectively.

Success with the Arbitrage Business Model at Walmart

This new business trend is growing on Walmart and Amazon. Most drop shippers are getting suspended, and the rest are switching to the arbitrage model quickly.

We manage many Walmart and Amazon stores using the arbitrage business model, and all are performing very well. Make your decision quickly before the market becomes oversaturated.

Final Thoughts

E-commerce is growing every year, offering numerous opportunities for a successful business. There are countless strategies for doing business in e-commerce. Keep experimenting with different business models and strategies until you find the right path to success.

QA

Q1: Why is Walmart dropshipping considered dead in 2024?

A1: Increased competition, strict Walmart policies, and challenges in maintaining product quality and inventory have made dropshipping unsustainable.

Q2: What are the main challenges of dropshipping on Walmart?

A2: Lack of inventory control, poor product quality, invalid tracking numbers, customer dissatisfaction, and high risk of account suspension.

Q3: How does the arbitrage business model differ from dropshipping?

A3: Arbitrage involves maintaining your stock, ensuring product quality, providing real tracking info, using your packaging and invoices, and better customer service.

Q4: Why is arbitrage considered a better option than dropshipping on Walmart in 2024?

A4: Arbitrage offers better inventory control, product quality, accurate tracking, improved customer satisfaction, and reduced suspension risk.

Q5: What are the financial risks associated with dropshipping on Walmart?

A5: Potential account suspension and held funds, plus loss of referral fees from canceled orders.

Q6: How can one transition from dropshipping to arbitrage on Walmart?

A6: Research products, buy small quantities, list them on Walmart, fulfill orders, and monitor store performance.

Q7: What steps can be taken to succeed with the arbitrage business model on Walmart?

A7: Select reliable suppliers, maintain inventory, ensure product quality, use your packaging and invoices, and offer excellent customer service.

Q8: What is the concept of dropshipping and how does it work?

A8: Dropshipping involves selling products without keeping them in stock; a third-party supplier ships directly to the customer.

Q9: Why was the dropshipping model particularly popular during the COVID-19 pandemic?

A9: High demand and relaxed policy enforcement allowed dropshippers to operate freely during the pandemic.

Q10: What is the future outlook for e-commerce business models in 2024 and beyond?

A10: The shift is towards sustainable and customer-centric models like arbitrage, adapting to market conditions and customer expectations.