5 Lies You’ve Been Told About Dropshipping - Don't Be Fooled!

are you thinking about starting a Drop Shipping Store well the idea of running an online business without holding any inventory or dealing with shipping seems like a dream come true but before you dive head first into the world of Drop Shipping there are some harsh truths that you need to know the drop shipping industry is played with outright lies that lure unsuspecting entrepreneurs into the Trap of false promises and unrealistic expectations so in this video we're going to expose the five biggest lies about Drop Shipping that could cost you time money and a whole lot of frustration by the way I'm not necessarily trying to talk you out of Drop Shipping but I want to arm you with the truth so that you can approach this business model with realistic expectations and a solid strategy now the first outright lie about dropshipping is that it's a fully Automated Business now while it's true that you don't have to worry about inventory and fulfillment you do have to worry about perhaps the number one headache that most e-commerce entrepreneurs face which is customer service compared to a normal online store doing customer service for a drop ship store is infinitely worse because you have no control let's say your drop ship supplier ships out a package late or ships the wrong item to the customer well guess what it is technically your fault and the worst part is that you have to act as the go between between your supplier and your customer it is your responsibility to report the error to your supplier resolve the issue and keep your customer happy all while having no control over the matter and if you have a supplier who consistently ships out orders late makes mistakes or ships out defective merchandise it's going to be a huge headache for you also many drop ship suppliers do not offer EDI which stands for electronic data interchange EDI is a system that allows the supplier to convey real-time inventory information to your e-commerce platform and pass along order information now if your drop ship supplier doesn't support EDI you're going to have to manually email your orders to the supplier at the end of every business day and believe it or not many drop shipping stores still operate this way in fact this is exactly how my friend Andrew udarian used to run his seven figure e-commerce store selling CB radios and Equipment not every drop shipping supplier is fully automated then there's the issue of returns even though drop shippers take care of product fulfillment you are responsible for processing returns and providing customer service for defective merchandise and here's how a typical return is handled for drop ship merchandise the customer contacts you for a refund you then ask your supplier for an RMA or a return authorization number your customer then needs to send the product in its original packaging back to your supplier with the RMA number clearly marked the supplier then refunds the wholesale cost back to your account once the package is received and then you refund your customer after you've been refunded by your supplier there's a lot of steps here some drop ship suppliers will charge you a restocking fee which you must pay or pass on to your customer now the next outright lie about Drop Shipping is that the profit margins are high well the truth is that Drop Shipping carries the lowest margins out of all the e-commerce business models remember as a drop shipper you're just a middleman selling the exact same merchandise as hundreds of other retailers and whenever there are many merchants selling the exact same thing it's always a race to the bottom in terms of Price Plus you have to pay a premium for the convenience of not holding inventory in a typical Drop Shipping Arrangement you will not get the same pricing for your goods as say someone who decides to buy inventory from the same supplier also you usually have to pay a Drop Shipping fee on a per order basis as well now the profit margins become exponentially worse if you decide to use multiple drop ship suppliers in your store for example let's say you sell three different products that are sourced from three different Dropship suppliers if a customer buys all three products in a single order here's how the order is fulfilled your shopping cart will route product one to drop shipper one product two to drop shipper two and product three to drop shipper 3 your customer will receive three separate packages in the mail and because three packages are shipped you must pay the cost of shipping for three packages in the mail and here's the kicker you can't really charge the customer 3x to shipping cost because from their perspective they are buying all three items from your store and when all a sudden and done your margins will end up being around 10 to 30% gross and at those margins you can't really afford to advertise online it's up to you to create your own traffic to your online store store organically through SEO or social media by the way if you're enjoying this video so far make sure you sign up for my free 6-day e-commerce mini course below I go over all the different e-commerce business models and you'll learn the right way to get started selling online another outright lie in regards to drop shipping is that it's easy sure it's easy to start a drop ship online store and yes you can literally start a Drop Shipping business for less than three bucks the hard part isn't getting started the hard part isn't finding Drop Shipping suppliers either the hard part is actually making sales there are many factors that make it hard to generate sales for a Drop Shipping Store the first factor is that your prices are going to be higher than everyone else's remember you are paying a premium for the privilege of not carrying inventory or handling order fulfillment let's say you sell a widget that retails for 100 bucks as a drop shipper your price will likely be around $70 however someone who decides to carry inventory for that same product will only have to pay $50 as a result a traditional online store that carries inventory will have a pricing advantage against you whereas your lowest Break Even price is 70 bucks your competition can lower prices even further and still make a profit as a drop shipper you're also going to be going up against private label Sellers as well the cost for a private label seller for a similar product will only be around 33 bucks which puts even further pricing pressure on your products and when all said and done you will not be able to charge the lowest price for your products and this is going to NE negatively affect your sales and finally at only 10 to 30% gross margins you will not be able to advertise profitably as a result your only option for traffic is going to be social media and search engine optimization which leads me to the next outright lie about Drop Shipping making money with Drop Shipping is not quick in fact it's the opposite of quick it takes time to build up an audience and actually make sales now I have many students in my class who make money Drop Shipping but for many of them it took one and a half years or more to build up enough traffic to make six figures per year if you want to get traffic from Google and the search engines you have to produce content or blog if you want to get traffic from social media you pretty much have to post every day no matter how you frame it traffic generation is going to be a slog now the fifth and final lie about Drop Shipping is that it's a business model that can last the test of time now whenever I think about a business that I want to start I spend a lot of time thinking about the value that I can add to my customer's life why should someone buy from my store over someone else's why does my business even exist think about Drop Shipping for a moment what value does a Drop Shipping Store provide don't think too hard because the answer is not much a drop shipper is nothing more than a middleman a step along the way of a transaction that is an empty markup remember because you are selling someone else's products they're going to be hundreds if not thousands of other retailers selling your exact same products you're not going to be competitive on price and you'll just blend in with the rest this is why most Drop Shipping businesses do not last very long it's fun and exciting to start because it's so cheap and easy heck you might even generate some sales along the way but it's definitely not a good long-term business model unless you can provide value to your customer that goes beyond just your products your business isn't going to last very long and the worst part is that you are dependent on someone else for the reputation of your business all it takes as one bad supplier to ruin your entire operation now a while back my friend John rampton ran a s figure Drop Shipping business on Amazon he would create listings on Amazon and when an order came in one of his many suppliers would fill the order and he just sat back and collected money it was a multi-million dollar business run by himself and it seemed like he'd struck the Holy Grail of Ecommerce but then something terrible happened one holiday season his supplier shipped out hundreds of packages late and Amazon decided to suspend his account now he eventually got his account back but a couple months later one of his other suppliers inventory system had a bug and he ended up selling hundreds of products that were out of stock and this time Amazon banned him for good in just 24 hours he lost everything now so far in this video everything that I've said about Drop Shipping has been negative but Drop Shipping can be a great business model if done correctly for example Wayfair is one of the largest HomeGoods companies in the US that is almost 100% drop shipped their main value ad is that they offer a huge array of products across various categories their extensive catalog allows drop shippers to offer a wide W of products without holding inventory appealing to a huge customer base they also have strong relationships with a bunch of suppliers and run their own Logistics and fulfillment as well now on a smaller scale my friend Andrew udarian made his CB radio Drop Shipping Store Successful by providing excellent customer support and making content guides about his products his entire staff were experts on CBS and he gained the trust of his customers by helping them over the phone he also Al ranked on Google for most of the CB radio Search terms now if you want to start an e-commerce store and you don't have that much money to invest the best way to proceed is to start out Drop Shipping in a niche that you are very familiar with curate the products that you sell very carefully and then create content that attracts a type of customer that would buy your products and then once you start making some sales pay attention to which products are selling well in your shop remember Drop Shipping should never be your end goal just the beginning and once you know what sells you should immediately private label your own version of that product and then sell it under your own Brand This Way your margins will go from 10 to 30% to 66 to 90% And you'll make a lot more money per sale use Drop Shipping as a way to test different products that you might want to carry inventory for in your shop at very low risk if something you list doesn't sell no sweat just take it off and put something else up but don't go into Drop Shipping thinking that it's going to make you a boatload of cash chances are you will never make life-changing money with Drop Shipping but it can be a stepping stone to a much more profitable business now that you know the lies of Drop Shipping make sure you watch this video here for all the little details about what it takes to run one and I guarantee that you'll learn a ton

Channel: MyWifeQuitHerJob Ecommerce Channel

Views: 2,828

Keywords: shopify dropshipping, dropshipping for beginners, how to start dropshipping, dropshipping tutorial, make money online, dropshipping shopify, how to start a dropshipping business, how to start a dropshipping store, drop shipping, shopify dropshipping tutorial, dropshipping scam, dropshipping business, dropshipping products, is dropshipping worth it, how to start an online business, dropshipping failure, dropshipping fail, amazon dropshipping, how to make money online

Id: RCzuuhrHteE

Length: 10min 46sec (646 seconds)

Published: Sat Jun 29 2024