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Why dropshipping is bullshit... (and why you should avoid it).

MJ DeMarco

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Interesting article and kinda reflects what I've been saying for over a decade. And also why I don't like too many drop-shipping threads around here.

While drop shipping is a nice "I need some experience" it is largely no different than joining an MLM -- crowded with wannabees, fake gurus, and people trying to make a quick buck.

You are better off focusing on your own product.

In crowded spaces, average execution gets you nothing.

33436

‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping

33435
 
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Vigilante

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2 years from now, retail arbitrage will also cease to be a thing. Marketplaces have cracked down on the lack of authenticity, and brands are more empowered to protect their own authorized distribution. Internet "lawyers" cite a somewhat ficticious "first sale doctrine" which has no basis of settled law from any real litigation, which always forms the basis for precedent.

Drop shipping now is plagued with Chinese manufacturers competing directly with the middle men for direct to consumer distribution, and shipping delays now plague the fake vendors. I had a real shipment of imported goods held up by DHL as they prioritized COVID related shipments to the United States for nearly three weeks. Drop shipping violates the commandment of CONTROL. You're likely to make a delivery commitment to a venue and end user with zero capacity to control fulfillment.
 

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There is a recent drop-shipping thread (i won't name who's) swimming around here filled with guru BS and stupid tactics, like finding "winning products" etc. It will probably end up as an upsell to OP's $997 facebook ads course.

I had a feeling I was a part of "Shopify dropshipping hacks" Facebook group or something like that when I was reading that thread. Surprised it's even on this forum.

I have tried both: dropshipping and having my own product, and am more inclined towards the second for many reasons.
 
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The-J

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"He's aware that even the most successful dropshipping store will eventually run out of steam: when the cost of Facebook advertising increases beyond your marketing spend, you're done."

This is what people fail to realize. Facebook advertising costs have been going up every single year since the launch of the ad platform, and it's not going to stop going up until the ad inventory itself becomes less valuable.

The appeal of dropshipping is a plug-and-play way to make money. Start a Shopify trial, install Oberlo, choose a hot product, and make a Facebook ad. And it worked... for some people. But what happens when someone copies your product? What happens when, like the girl in the article, your manufacturer can't dropship anymore? What happens when Facebook ad costs go up? And all that is IF you get initial success.

Then you want to sell your business, right? But who the hell will want to buy it? Your dropship connections are worth nothing.

You know what I've noticed? Former dropshippers starting Facebook marketing agencies. The one differentiated skill that they have is now offered to others as a service. As a result, the Facebook marketing agency space has become crowded. Every 23 year old kid who made a little money in dropshipping is now starting one after their dropshipping store stopped earning money. That's not a problem for the agencies that actually deliver results, but it is a problem for the agency space in general: it's the new crowded space that people are making courses for. For only $1997 I'll teach you how to start a Facebook marketing agency! STOP Dropshipping and do this instead!

Then that bubble will burst and the people who learned some skill doing it will start selling that next. A lot of the dropshippers of 2013 owned SEO niche sites in 2010. A lot of those people did PPC arbitrage in 2007. You can go back pretty far and see where the "money chasers" were. And that's not a jab at people who did it; it's just a pattern I noticed. Luckily the cream always rises above: those who put in excellent effort and have a true advantage will survive.
 

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Drop shipping now is plagued with Chinese manufacturers competing directly with the middle men for direct to consumer distribution
Not sure about the States, but Amazon UK is dominated by Chinese sellers doing FBA.

It seems it's the death knell for both drop shippers & FBA for generic products.
 
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Do you guys reckon that an imported product from China sold on Amazon FBA is as bad as dropshipping? Im currently importing (and soon selling) a product, consisting of a combination of two generic products to form a "set", with my own logo.

But I feel this model may be a "just a bit better than dropshipping" as barrier to entry is low and control is minimal. And therefore may not be something to be in for the long haul.

The best way seems to create an own patented product, if one is to go the physical product route.

What do you guys think?


Btw, I now realize this post may come off as me trying to hijack the thread in a self centered way. It's not my intention, I mainly posted the message because I thought the FBA business model is very similar to dropshipping.
 
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@Jiersk

Here's the question. If you find success, how hard would it be for ME to copy you? Can I do the same thing? Can I buy the same products, put my logo on it, undercut you by a buck, drop a PPC ad on Amazon, and steal the business?

The price erosion is the problem. I just imported some products from Asia, but my supplier won't sell you. You can get SIMILAR but not identical products from somewhere else. However, I will outmarket you.

If I called your manufacturer, would they sell me the same thing? If YES, I will just wait until you are successful, and then decide if I want to crush you or not based on my own tolerance for ROI.

That's what happened with the Chinese infiltration of Amazon. They competed with their own bulk customers, undercutting them and killing the market in several categories. What if your supplier decides to compete with you? Can your supplier themselves put you out of business?
 

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I turned $50 to nearly $60 000 in revenue / $10 000 profit in 2017 when I was 19 from dropshipping. I had $0.06 CPC, $1 ATCs and $2-3 cost per purchase for a $23 product that cost me $6.70.

I then sold a magnetic windshield cover in November/December 2017, I remember there was some sort of unusual winter in some states so I figured people were panicking.

One of my ads got me 7 sales with a $5 daily budget on the first day. It was insane. Like $500 revenue with a $430 profit or thereabouts, this lasted for 2 weeks.

I tried doing the same a few months ago. I still got great stats on many products. However, the cost per purchase is now insanely high and margins are slim.. you have to get into this with a lot of money. And it's not worth it.

There's so much stress and pain in running a dropshipping business model, I don't even want to talk about it. I'd rather cold call all day.
 
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@Vigilante Yea I actually fully agree with your reasoning. Tbh I personaly think it may only get worse for FBA'ers etc... Might sound weird coming from someone who is actually currently putting his energie into starting an FBA business.

Other ideas I have seem to me to be more solid (judged on adherence of CENTS). But I first want to see if I can sell out my small inventory (and then some! Lol).

Thanks for your input!

Article was a nice read btw.
 

Phikey

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I am 100% against the fake gurus selling the thousand dollar courses on drop shipping but the problem here is not with the business model but how these guys go about it. These guys are all competing in an incredibly competitive world and selling the same products. They have no control at all over their products and they’re basically playing marketing arbitrage. I.e. finding a product on alibaba express and making sure their price is able to cover their ad spend. They add no value to the customer except finding it in a location that the customer hasn’t looked.
This is a terrible business model, not sustainable, and doesn’t build anything lasting.

But it’s not a problem with dropshipping at all.

You can create a successful ecom store with dropshipping where you maintain control, solve a clear problem with your target audience, and you don’t have the competition coming in and selling your products.

This year I built a drop shipping store by cold calling suppliers in my country and setting up relationships where they send out my products from their warehouse. They can put my labels on their products and they’re basically just acting as a warehouse for me -pretty much the same as having a 3PL company. We can set up distribution agreements so other sellers can’t come in and take the products - but even if this wasn’t in place, these products aren’t on alibaba or seen through the spy tools people use to steal products from other stores.

My focus is then on building the brand and making sure the buying experience is as good as possible. I create the content, build up the reviews, the audience and the community.

Yes, it’s still drop shipping, but the supplier is just taking care of fulfilment which is basically the pure definition of dropshipping. I think all these guys selling these courses as basically tarnished this business model and given it a bad name. They’re selling this dream that it’s easy to make a tonne of money doing this when that’s a whole different world.

With my marketing agency we have a lot of dropshipping clients and they are not doing anything that’s taught in these courses. They’re all building brands and the dropshipping side is just a way to fuflil the orders. A lot of their suppliers don’t even have their own retail stores - they usually ship in big pallets to other retailers but these clients have set up specific dropshipping relationships so the suppliers sends out individual orders from their warehouse. This is how you do dropshipping well - you take the best bits of it while remove the crap.

Anyway, feel free to disagree and I totally agree with this thread and the crap out there in the courses and the make money rich stuff. It totally violates the CENTS framework but I don’t think we can throw the baby out with the bath water. You can make this work really well in your favour and basically use dropshipping similar to 3PL but you need to do it right.
 

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Then you want to sell your business, right? But who the hell will want to buy it? Your dropship connections are worth nothing.

I think you are being too generous, dropshippers don't think that far ahead.
 
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D

Deleted78083

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That's what happened with the Chinese infiltration of Amazon. They competed with their own bulk customers, undercutting them and killing the market in several categories. What if your supplier decides to compete with you? Can your supplier themselves put you out of business?
That's the exact reason why i have never even tried dropshipping, and wholesale in general. At that some point, the middleman gets cut, unless the middle man brings actual value.
 

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You can make this work really well in your favour and basically use dropshipping similar to 3PL but you need to do it right.

Still an absurd level of risk to purposely take on, in my opinion. The manufacturer holds all the power. One day they can just say "nah" and you're done. It's the same with private labelling arrangements and Amazon FBA.

As an aside: I really don't think "hey I'm making money with it" is a very good argument. I'd highly recommend you look into other ways to get product made NOW, and prepare your business. Same with your dropshipping clients.
 

James Klymus

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I'm a little embarassed to admit that a lot of this resonated with me, because those stories sound a lot like me. Made some money drop shipping > stopped making money so tired to be a guru and sell a course > stopped doing that and wanted to start a marketing agency.

I will agree with the people that say aliexpress dropshipping sucks. I think most people assume you're talking about aliexpress when you say the phrase drop shipping. This method sucks long term because people WILL see that your product is selling and they WILL "rip you off". This is exactly what happened to me.

When I was at the peak success of my drop shipping store, I actually decided to bring some inventory in house (literally in my house) and I shipped the product my self to cut down on shipping times. People still copied my product, because it was widely available on aliexpress, and when I ordered inventory, I didn't make any changes to the product to differentiate my self. So I was left with hundreds of units of products that I couldn't move.

I still turned a profit, and I did rack up some experience points like MJ says. I sold over $100,000 worth of products, hired VA's to help, and learned how to use facebook advertising. And I got paid to learn all of that. Those are skills I can use to start any business I want.

As ad costs and competition go up, it makes it harder to make money, right away at least. Most people just look at how much it costs them to get a sale on a product, but if you were able to build an audience and cultivate a relationship with them, You would then have a long term customer. But if that was the case, I would want to send them a product I know is top quality, and not some cheap Chinese gadget.

Of course, most people in drop shipping are fly by night types, and don't want to put in the work to cultivate a relationship with an audience, and deliver top quality products. Which funny enough, is the only way to run a legitimate business that lasts more than a few months.

If you focus on more than just trying to get a sale from a cold FB ad, you're already ahead of the competition. It's like the salesman who will do and say anything to get someone to buy a dubious product. Sure you made $100 today, but you could have made $1000 over the next 5 years if you treated your customers well.
 
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Phikey

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Still an absurd level of risk to purposely take on, in my opinion. The manufacturer holds all the power. One day they can just say "nah" and you're done. It's the same with private labelling arrangements and Amazon FBA.

Yep, there’s definitely risk there with drop shipping but it should be looked at in context. Drop shipping as a long term strategy? Probably not a good idea. Importing or building the product yourself is so much better from many standpoints.
But what drop shipping does allow you to do is to quickly test the market and your messaging.
You can build a brand and a store with dropshipping to test out demand for a product within a niche, learn more about your target market, and dial in your marketing and message for that demand. Later you can import that same product, cut out the importers and local suppliers and you take back that control. Even better if you use dropshipping to deeply learn the needs of your target audience and then DESIGN a new product now that you have that INSIDERS knowledge.

I‘m not going to throw out dropshipping because it’s risky or because these fake gurus are convincing people it will make them millionaires. It has its place and can be used effectively in your ecom journey.
 

Chip01

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I am 100% against the fake gurus selling the thousand dollar courses on drop shipping but the problem here is not with the business model but how these guys go about it. These guys are all competing in an incredibly competitive world and selling the same products. They have no control at all over their products and they’re basically playing marketing arbitrage. I.e. finding a product on alibaba express and making sure their price is able to cover their ad spend. They add no value to the customer except finding it in a location that the customer hasn’t looked.
This is a terrible business model, not sustainable, and doesn’t build anything lasting.

But it’s not a problem with dropshipping at all.

You can create a successful ecom store with dropshipping where you maintain control, solve a clear problem with your target audience, and you don’t have the competition coming in and selling your products.

This year I built a drop shipping store by cold calling suppliers in my country and setting up relationships where they send out my products from their warehouse. They can put my labels on their products and they’re basically just acting as a warehouse for me -pretty much the same as having a 3PL company. We can set up distribution agreements so other sellers can’t come in and take the products - but even if this wasn’t in place, these products aren’t on alibaba or seen through the spy tools people use to steal products from other stores.

My focus is then on building the brand and making sure the buying experience is as good as possible. I create the content, build up the reviews, the audience and the community.

Yes, it’s still drop shipping, but the supplier is just taking care of fulfilment which is basically the pure definition of dropshipping. I think all these guys selling these courses as basically tarnished this business model and given it a bad name. They’re selling this dream that it’s easy to make a tonne of money doing this when that’s a whole different world.

With my marketing agency we have a lot of dropshipping clients and they are not doing anything that’s taught in these courses. They’re all building brands and the dropshipping side is just a way to fuflil the orders. A lot of their suppliers don’t even have their own retail stores - they usually ship in big pallets to other retailers but these clients have set up specific dropshipping relationships so the suppliers sends out individual orders from their warehouse. This is how you do dropshipping well - you take the best bits of it while remove the crap.

Anyway, feel free to disagree and I totally agree with this thread and the crap out there in the courses and the make money rich stuff. It totally violates the CENTS framework but I don’t think we can throw the baby out with the bath water. You can make this work really well in your favour and basically use dropshipping similar to 3PL but you need to do it right.

I agree with this.

"Dropshippers" have a bad name, yes. However, look up Gymshark. They began using a dropshipping model. Search 'Ben Francis' on YouTube

MJs post kind of touches on this but... if you have you're own product and want to dropship (and can make a deal with supplier etc) go for it.

What you're all referring to is money chasers, not true dropshippers. Dropshipping can be viable if used correctly. Just don't follow some YouTube guru who doesn't even own his own company for 'tips'...
 
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G

GuestUser4aMPs1

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FFS Dropshipping is a fulfillment method, not a business model.

I've used a manufacturer to dropship product, but ONLY because...
–It was a USA based manufacturer.
–They have 100's of SKUs to get going within this niche
(Also, developing my own product out of the gate would take a TON of time).
–Niche is largely untapped and doesn't need any substantial product alterations.

Plan's to roll the profit into creating our own SKUs and ditch the manufacturer for another one with lower COGs.
 
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Visionary96

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I agree with this.

"Dropshippers" have a bad name, yes. However, look up Gymshark. They began using a dropshipping model. Search 'Ben Francis' on YouTube

MJs post kind of touches on this but... if you have you're own product and want to dropship (and can make a deal with supplier etc) go for it.

What you're all referring to is money chasers, not true dropshippers. Dropshipping can be viable if used correctly. Just don't follow some YouTube guru who doesn't even own his own company for 'tips'...

agreed.
 
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Sanj Modha

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FFS Dropshipping is a fulfillment method, not a business model.

I've used a manufacturer to dropship product, but ONLY because...
–It was a USA based manufacturer.
–They have 100's of SKUs to get going within this niche.
–Niche is largely untapped and doesn't need any substantial product alterations.

Plan's to roll the profit into creating our own SKUs and ditch the manufacturer for another one with lower COGs.

Nailed it.

There are 2 types of dropshipping:

1 - Sourcing products from China/Aliexpress manufacturers and asking them to fulfil orders for you.
2 - Sourcing products in the country you sell in and getting the supplier to fulfil orders for you.

#1 sucks balls. I did it and it was a nightmare. We had DOAs (sold consumer products), lost PayPal accounts, lost a Stripe account, and it's just a shitty experience for your customer.

But...if you find the products and fulfil them from the same country - it's VERY lucrative. I know POD sellers making millions and they never touch the product.
 

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There is a recent drop-shipping thread (i won't name who's) swimming around here filled with guru BS and stupid tactics, like finding "winning products" etc. It will probably end up as an upsell to OP's $997 facebook ads course.

I had a feeling I was a part of "Shopify dropshipping hacks" Facebook group or something like that when I was reading that thread. Surprised it's even on this forum.

I have tried both: dropshipping and having my own product, and am more inclined towards the second for many reasons.



:hilarious::playful:

[x] Global pandemic
[x] Fb ads
[x] Ig ads
[x] Shopify

Every online entrepreneurs dream.

I'd imagine MJ is sitting back, sipping scotch whilst puffing on a cigar (shame on him for smoking) whilst assessing the situation from afar... waiting to pull the trigger.

lolz.jpg
 
Last edited:

amp0193

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”Canggu is a place where people go to feel rich.”

:rofl:


When you aren’t actually rich, but want to feel like you are, go to Bali.


There is real value though to living in a place with extremely low cost of living while you build your business.
 
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Greg Behnke

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2 years from now, retail arbitrage will also cease to be a thing. Marketplaces have cracked down on the lack of authenticity, and brands are more empowered to protect their own authorized distribution. Internet "lawyers" cite a somewhat ficticious "first sale doctrine" which has no basis of settled law from any real litigation, which always forms the basis for precedent.

Drop shipping now is plagued with Chinese manufacturers competing directly with the middle men for direct to consumer distribution, and shipping delays now plague the fake vendors. I had a real shipment of imported goods held up by DHL as they prioritized COVID related shipments to the United States for nearly three weeks. Drop shipping violates the commandment of CONTROL. You're likely to make a delivery commitment to a venue and end user with zero capacity to control fulfillment.
I wouldn't consider dropshipping and retail arbitrage even remotely the same. They are in the same industry of selling physical products but that is about where it ends. With RA there are significantly more ways to make money through bundling, buying and holding, and choosing your selling platforms. There will continue to be inefficient markets. RA has been declared dead for a decade. It keeps surviving because in order for Amazon to work the way it is designed, they need 3rd party sellers/suppliers to bring scarce goods to the market. Amazon will never be able to source every product in existence.
 

Vigilante

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I wouldn't consider dropshipping and retail arbitrage even remotely the same. They are in the same industry of selling physical products but that is about where it ends. With RA there are significantly more ways to make money through bundling, buying and holding, and choosing your selling platforms. There will continue to be inefficient markets. RA has been declared dead for a decade. It keeps surviving because in order for Amazon to work the way it is designed, they need 3rd party sellers/suppliers to bring scarce goods to the market. Amazon will never be able to source every product in existence.

They're NOT the same. When I re-read that, I saw the same confusing connection I made, but at the end of the day I didn't give a shit. Break it up into paragraphs. I stand by every sentence, but jambled two subjects together that are really two separate subjects.
 

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:hilarious::playful:

[x] Global pandemic
[x] Fb ads
[x] Ig ads
[x] Shopify

Every online entrepreneurs dream.

I'd imagine MJ is sitting back, sipping scotch whilst puffing on a cigar (shame on him for smoking) whilst assessing the situation from afar... waiting to pull the trigger.

View attachment 33447

Couldn't possibly be that thread, unless he wasn't satisfied with the $997 course LOL
There is a recent drop-shipping thread (i won't name who's) swimming around here filled with guru BS and stupid tactics, like finding "winning products" etc. It will probably end up as an upsell to OP's $997 facebook ads course.
I had a feeling I was a part of "Shopify dropshipping hacks" Facebook group or something like that when I was reading that thread. Surprised it's even on this forum.
Vad's comments from said thread:
@Sanj Modha

Hey man, excited to see this new thread and your progress
I was wondering how do you deal with shipping times and profit margins at this time with this new brand? The shipping is ridiculously expensive nowadays
So, what would be your advice for beginners in terms of the product price and desired margin?
What price range would you suggest to choose for beginners when selecting a product to sell?
Hey @Sanj Modha,

What exactly do you mean when you say “branding”?

Is it creating a nice website, logo and slapping that logo on a product and package?
Do you improve the products you sell in any way or add value? Or do you sell existing products and brand it?
but clearly your approach, which is less hands-on, works for you. I am interested to see more.

Following the thread.
 
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sparechange

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Couldn't possibly be that thread, unless he wasn't satisfied with the $997 course LOL


Vad's comments from said thread:

Who knows, he might be a spy working for MJ
 

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