Tons of people are claiming to be making thousands a week with the drop shipping business model. They retail physical products without ever having to maintain an inventory or process one order. My experience with it was more bitter than sweet. To be fair, it does have its upsides, and its negatives as well. For a very brief time, I did experiment with drop shipping. It didn’t go well for me. If you talk to others who are making a killing in this space, their story will be a lot different.
The best I can do is to give you my opinion based on what I saw in the drop-shipping model. I started experimenting with it about five years ago. I watched a video of a guy who was supposedly making a killing off it. He was selling a course. It was cheap. I bought it. To give you a brief overview of the system if you are not familiar, it goes something like this. You pick out a niche of products whose vendors are willing to drop ship the items directly from their warehouse to your end customer.
This eliminates the need for you to have your inventory. You just need to set up an online store. Then you figure out your margins and shipping additions. Finally, you set up the automation to process the incoming orders and pass them directly on to the vendors. It sounds simple, but like everything, it does come with its ups and downs.
Drop Shipping Positive #1; You don’t need to build a platform, you just need to start a store
The beautiful thing about the world of drop shipping is that you don’t need to build a platform like a blog or a brand, before selling anything. That’s what makes these so easy to get started. You just need to offer the product people are looking for at a price they are willing to pay. Sounds simple enough, right?
Bloggers spend a long time creating an audience and then selling them an affiliate product. With drop shipping, you can create a store, get some products to sell by signing up with some companies, start pushing some traffic to it, and start seeing sales within a week. The only real barrier is how hard you want to work, and the time it takes to get approved by some companies to sell their products.
Drop Shipping Positive #2; You don’t physically need to process the transaction
The sales transaction can be completely automated. If you use a store system like Shopify, they walk you through the entire process of hooking your store up to be completely automatic. The customer places the order. The payment is processed. The order is then sent to the distributor, and the distributor ships it directly to the customers. You might get a notification of the sale if you wish one, but it all happens without you ever needing to get involved.
Drop Shipping Positive #3; You can stock many different brands in the same store
Since you’re not writing to promote one particular brand as you would on a blog, you are free to stock your store with as many different brands and styles as you see fit. If the customer doesn’t like one brand, they pick another. You still get the sale either way. Put hundreds of brands in your store. The more options you give the customer once they get to your store the better chance you have of making the sale. If you are paying for traffic to come to your store, you need to concentrate on converting that customer at any cost.
By offering your customers more options, you ensure that the money you spend on traffic doesn’t go to waste.
Drop Shipping Negative #1; You are responsible for your customer service
Since you are running your store, you are responsible for customer service, and this includes returns. Some people use services to automate their customer service. Others use a ticket system that they monitor themselves. This is one area that is not often talked about by the people selling programs on how to set up drop shipping stores.
This is the very thing that turned me off from having a drop shipping store. Not only do you need to keep a close eye on margins, but you also have to handle all customer service problems. You are responsible if the product you are selling is of poor quality and it creates a bunch of customer service calls. You then need to figure out if the wholesaler will take the product back and give you a refund. There are a lot of risks involved when dealing with physical products.
Drop Shipping Negative #2; You need to continually watch margins and price increases
The product line I used had extremely tight margins. Many of my competitors offered free shipping over a certain amount, so I did. This cut into my margins even further. It was a continual juggle to keep an eye on other stores selling similar products to make sure my products remained competitively priced. Then, I had to monitor the prices at the wholesaler to be aware of price fluctuations there.
When picking your product line, do as much research as you can into your competition. If several people are offering the same thing you are, there is a good chance the margins will eventually get squeezed to the point of not making much money. At this point, don’t even think about buying traffic because that will put you in the red. (unprofitability)
Drop Shipping Negative #3; You are competing with Amazon and other massive online retailers
The same thing we see happening with brick-and-mortar stores when a Walmart or a Walgreens comes to town is happening online in the presence of Amazon. A retailer who at one time only concentrated on books now seems to own even the most obscure markets. They are a brand who are known for fast, reliable shipping and excellent customer service. Their sales system is simple and very easy to use.
And, for anyone still leery of using their credit card online, their brand offers somewhat of a beacon of recognizable safety. When doing research for a store, Amazon’s and Walmart’s websites need to be one of your first sites to check out. You don’t want to spend a ton of time invested in a product only to find out Amazon owns that particular market.
Even though my experience didn’t work, that doesn’t mean it won’t work. Many people are claiming to be making it work and crushing it along the way. Maybe I didn’t pick the right niche. Maybe the margins were a little wider in other niches. Maybe I just didn’t give it enough time. Maybe someday I will try again if I stumble on an idea where everything seems to fit together a little better.
I’ll make sure the margins are a little wider. And, I have a little more time to properly research everything and have enough startup capital to buy decent advertising. If you have any experience with drop shipping, let me know in the comments section. If you’d like to subscribe to my mailing list, the signup form is in the sidebar to the right.
Be Safe,
Kevin