What Is Dropshipping?
Dropshipping is a way for a business to fulfill customer orders without the need to own inventory. Instead, drop shippers buy the actual product from third party suppliers (wholesalers or manufacturers), who fill orders. This business model differs from regular retail in that the drop shipper acts as the middleman.
Dropshipping isn’t much different from eCommerce.
Sure, has great potential like what you may have heard from eCommerce gurus, but at the end of the day, no magic bullet overcomes the massive pitfalls of this business model.
Let’s get something clear:
There is NOTHING passive about Dropshipping, no matter how well most course creators sell the dream.
If you want that travel-the-world-making-money-while-you-sleep-lifestyle, Dropshipping may not be for you.
To run a successful Dropshipping business, you need to be constantly on the lookout for new products.
Scouring the internet for hot trends and trying to find the next fidget spinner will take hours out of your day.
Not to mention, it’s not enough to just have the hot new product…
You also need to get the customers.
That means ads…
Lots and lots of ads…
Testing, tweaking, targeting, spending thousands if not tens of thousands of dollars before breaking even.
Not to mention, Facebook hates eCommerce in general, meaning one of your top traffic sources could shut you down at any time.
All of this leads to a very stressful life, not a lot of money, and a lot of time wasted.
Time that could be better spent so you can actually live the life you want.
Now, what if there was a way you could build a passive income stream that’s actually passive?
An income stream that doesn’t require:
- Physical Products
- Low Margins
- Long Wait Times
- Angry Customers
- Thousands of dollars testing different ad campaigns
An income stream that brings in consistent revenues every single month (from a couple thousand dollars to well over $10,000)?
An income stream you could actually build in your spare time, and grow as large or as small as you want to, without having to spend hours a day running ads, researching products, and trying not to get banned by whatever platforms you’re using?
If that sounds like something you’d be interested in, check out Digital Real Estate.
This is nothing like eCommerce, and that’s probably a good thing.
However, if you’d still like to know more about Why Dropshipping Sucks, keep reading…
Different Models Of Drop Shipping And Why They Suck!
The traditional days of dropshipping are over. You can dropship with Ebay, Amazon, Shopify, and even your own hand built website.
But no matter what, dropshipping businesses you decide to run just remember…THEY ALL SUCK!
Shopify Drop Shipping
Shopify has taken the ecommerce space by storm by giving people a platform to sell their own dropshipping products or start their own apparel brand.
In fact, several online store owners created their dropshipping stores based off the high conversion rate templates Shopify offers.
How much does it cost to start a shopify dropshipping business?
At face value…not much at all.
You can build the website yourself for virtually free, other costs will just be your domain name and hosting. Hosting can be about $30 per month and the domain name is usually $12 for the year.
And, if you want to run the dropshipping business really lean, you don’t have to buy products in bulk when you start.
Shopify also just takes 2.9% + 30 cents of every sale, NOT profit margins. Be sure to account for this.
Sooo what’s the catch?
Well, you know how when someone says “it’s too good to be true then it probably is”?
Same thing here.
What most people don’t know about dropshipping, especially from your own website, is that you will have to spend a ton in advertising.
We’re talking SEO, Facebook ads, Google ads, the whole nine yards.
The short answer is… NEVER!
Well… just because you build a website doesn’t mean everyone is going to see it. The dropshipping space is extremely competitive.
If you go the SEO route, which you should if you plan on staying in the business long term, you’re going to be competing to rank for national keywords.
And this doesn’t come cheap.
SEO for an eCommerce website, from a reputable company that gets results can cost anywhere from $5,000-$20,000 PER MONTH!
…And That REALLY Sucks!
But again, let’s just say you’re trying to make a quick buck, after all, you’re running this business lean… only buying products as you need.
You could just run ads on Facebook and Google.
But those aren’t cheap either!
Most Drop Shippers spend thousands a month in ads.
Because they know that if they don’t, they won’t get clicks. And if they don’t get clicks, they won’t get sales.
At this point you’re probably thinking “wait…so most of my budget is going to be going towards Facebook ads that might not even get me sales”
Yep, you’re exactly right.
So, are there any good things about Shopify dropshipping?
Well, there sites really do look nice. And they do have good sales numbers.
But…what are options do you have for drop shipping?
Ebay Drop Shipping Store
Well, Ebay is pretty much the OG ecommerce platform when it comes to products to sell online.
Just talk to Gary Vee. Ebay makes it pretty easy for you to put up listings for your products and plenty of people have gotten rich off of it.
However, the business model is no longer viable in our opinion.
The main issue here is profit margin.
Ebay charges a whopping 10% of your orders that come through them.
Can you see the issue that would arise?
Dropshippers operate on margins.
They’ll buy something from a supplier at $10 and sell for say $15.
Thanks to WHOLESALERS (and this isn’t ebay specific, but dropshipping as a whole) prices on products have had to be cut significantly and operate on much more small margins than that because they’re trying to squeeze dropshipper hopefuls like you out of the business.
If you hate being forced to CUT your prices to stay competitive and would rather SET and HOLD your own prices to save your margins, then this business model is what you’ve been missing out on!
So now think of it like this.
Not only do you have your margins being cut, but guess what? You still have to spend thousands on social media ads every single month.
On top of that, you have to create quality content for the ads of these products so it sticks out to your ideal customer.
The bottom line is that Ebay Dropshipping is dead for newbies, but the “gurus” will never tell you that because they will try to squeeze every nickel and dime out of you so you’ll buy their courses.
So what about Amazon, it can’t be as bad as Ebay can it?
Amazon Dropshipping Businesses
Dropshipping on Amazon has the perks of the name.
Ebay has this advantage as well, but not nearly to the degree Amazon does and it’s why so many people choose to sell things off of Amazon.
In fact, 49% of all online e commerce transactions take place on Amazon.
So that all sounds great right?
You’ve got the odds in your favor, people know the name, they trust the name… but where’s the catch?
Amazon’s fees are 15%.
So let’s just say that normally your profit margins are STELLAR and you’re managing to pull off 30%…
That automatically drops in half when you start selling with Amazon, so be ready.
Want to be able to give good ole’ Jeff Bezos the middle finger and pick your own profits? Check out how you can kick his butt here!
Secondly, it’s hard as hell to get your product seen.
Just like google SEO, which is honestly easier in our opinion, you have a bit of Amazon SEO you need to do to get your product on the first page of search results.
Those are extremely hard to fake. You can’t fake reviews, you can’t fake star ratings, solid product descriptions, it’s just extremely difficult.
On top of all that and to make matters even worse…Amazon constantly changes their rules for sellers.
What does this mean?
You could wake up to a suspended store and whatever SINGLE source of income you had…all gone in the blink of an eye.
Unfortunately this is not a rare occurrence and happens daily.
Amazon support also sucks with issues like this as well, they’re really milking the whole pandemic thing to excuse themselves for subpar response times.
Now sure, if the stars align…or are just slightly off, you can make some money off of dropshipping with Amazon, but just ask yourself:
Is it worth all the stress?
Dropshipping Pros And Cons
- Low Barrier Of Entry: You can literally start a dropshipping online business overnight.
- Work From Home: You really can work entirely from home and never have a boss.
- Multiple Suppliers: You’ll have no shortage of suppliers to work with for several products.
- Automation: You can automate almost every process of dropshipping to free up your time.
- Low Profit Margin: As you can tell from earlier in the article, China is squeezing profit margins to extremely low levels.
- High Competition: Because of low barriers to entry, everyone hops in the market and there are literally millions of people selling the same products.
- High Advertising Costs: Whether you do SEO or Paid Ads, your costs are going to be in the thousands each month. Odds are you will spend more money advertising for your products than actually buying products.
- High Shipping Costs And Delayed Shipping Times: Thanks to the pandemic, there are all sorts of new protocols that have been put into place. This means more costs passed onto you.
- Volume: You need to make a high volume of sales just to turn a profit. In fact, you might as well just try affiliate marketing instead (sarcasm) because your profit will be just about the same at the end of the day.
Clearly the list of cons outweighs the pros…but now let’s take a deeper look into some frequently asked questions regarding dropshipping.
See More: Top 5 Reasons Dropshippers Fail
What Do People On Reddit Have To Say?
One Redditor asked in the following thread…
“Is Dropshipping still a viable business to get into?I have noticed that dropshipping has changed a lot over the last couple of years. Despite that i still want to give it ago and try and make some money and turn it into a long term business. i just don’t know how to get started and be successful with it after so much change and all the scammers can online that make it look like a get rich quick scheme.”– AboveAvgHuman
“Have had substantial experience and success with FBM Amazon dropshipping (40k profit in less than 4 months). I believe that dropshipping is very much alive but has many aspects/strategies that are outdated or over-saturated. Never gave much time to the shopify (or equivalent) methods because of this, and I’ve convinced many others to try the same. Dropshipping is far from dead, but the game has definitely changed.”– Mirratrix
“Above all, dropshipping is hard. Really hard. And even if you work hard there is no guarantee you will succeed.
If you want to do it, there is a framework that I and my clients have used countless times and it’s what I’ve found to be the closest to a “safe bet” (still hard, but it increases your chances).
– Find a niche. Not like “pets” or “home”. But something more specific. Some examples of stores that I work with personally: security shoes, hip hop jewelry, military watches and many, many others.
– Search for good suppliers within your niche, ideally work with as few as possible (1-3)
– Build your store. This is a BIG one. Most drop shippers spend 2 days on that because they can’t wait with advertising. That’s a safe way to destroy your business before it even started.
With 1,000s of new stores popping up every day, make sure you invest time into your store. And yes, aesthetics matter. That is because a nice, well-designed store immediately creates a feeling of trust and legitimacy. Forget tons of fake urgency, sales notifications, popups, badges. That’s not conversion boosting. Maybe it was in 2014.
– Run ads. We mostly work with Google (spent $6M on there and it works), because it’s a great traffic source for the framework mentioned above.
The goal of this entire strategy is to become an authority in a given sub-niche.
The stores I mentioned above do between $200k-$600k a month right now. All of them have been around for at least 1.5 years.
Most people think that if you sell only a specific item or group of items you are limiting yourself too much. That’s nonsense. I’m rather a big fish in a small pond than a tiny, almost nonexistent fish in a huge pond.”
What happens if the shipping company or supplier loses, or fails to fulfill the order?
This is probably something you don’t want to hear…but you are still responsible for it. Customers will be the ones coming to you complaining because you said you had the product. If they are not happy, they will leave a bad review…or even report you. On top of that, Amazon, Shopify, Ebay, or whichever of the ecommerce businesses you choose work with can take down your store because of it.
How much does a dropshipping site cost?
Realistically, you are looking at paying anywhere from $1,000-$10,000 JUST to have the site built. For Things like SEO you are looking at easily $1,000 per month additionally.
How much will I have to pay in ads for dropshipping?
If you press the gurus really hard, they will tell you that they spent thousands of dollars on ads up front to get sales in the door. And now, even with 6 figure businesses, they still pay thousands each month in paid ads.
What are the industry average profit margins for dropshipping?
Most dropshippers get a 10-30% profit margin. However Ebay and Amazon quickly cut that in half and wholesalers are squeezing that close to 0.
If a business with 90% profit margins that CAN’T BE TOUCHED by Wholesalers sounds interesting to you…check it out here!
Are there alternatives to Dropshipping?
Yes, there are plenty of other business models to choose from other than Dropshipping if you want to make money online. Here are just a few:
What Is Our #1 Recommendation To Make Money Online In 2023?
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This is only possible if you have an income stream that’s not tied to your time.
2) You Own & Control EVERYTHING: With Dropshipping, you don’t really own anything. You have no control over the quality of products. You don’t even own the products because they go straight from the supplier to the customer.
Yes, if you’ve got a Shopify store, you technically own that. But if every ad platform suits you down, you’ve got a store with no customers. Which is literally worthless.
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But, you still have all the headaches of a physical products business.
Since most dropshipped products come from China, you already have a 2-3 week wait time from when a customer places an order.
But right now, with global supply chain issues, your customers would be lucky to get anything in less than a month.
Imagine finally landing your first customer after months of experimenting, and then getting hit with a refund request or chargeback because they had to wait 6 weeks to get their order.
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If you wanted to double your income with eCommerce, you’d have to double your inventory, your profit margins, OR your average order value. And, guaranteed that’s a lot harder than a few clicks and a few minutes of your life.
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You could continue researching, never making a decision.
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