What is dropshipping and is it worth it in 2020?
There are so many ways to make money online -- I mean hundreds. Over the past ten years I have tried them all, earning myself over six figures in profit.
Each side hustle has its own dynamics and its own pros and cons. I’ve talked a lot over my online outlets such as affiliate marketing, being an influencer, and creating videos via YouTube but there’s one I still haven’t completely broken down: dropshipping.
What exactly is dropshipping?
Take a coffee mug, for example. Retail giants buy coffee mugs in massive quantities from a distributor. They are likely only spending 50 cents on each unit but are selling them for 5 to 10 dollars in order to make a profit. Seems like a grand idea, right? But what happens when you're stuck with thousands of unsold inventory? Chain stores have the resources to deal with hefty profit deficits, but everyday hustlers like me and you most likely aren't prepared to take on that risky of an investment.
That’s where dropshipping comes in.
Instead of ordering in bulk, dropshippers make a deal with the manufacturer to buy each unit for more than what a bulk purchaser would pay, but less than what a retail store would charge. The manufacturer agrees to ship the product directly to your customer as opposed to them shipping it to you and then you mailing it to the customer. In the end, this means a more efficient and quicker distribution process that allows the dropshipper to still make a decent profit.
How Do I Do It?
First, you will need to find a product that you are interested in and believe will sell well. Make sure to do your research using Google Trends! (I talk more about the importance of this in this post).
Next, you want to make a deal with the manufacturer. Remember that they are doing you a service and that you are also helping them bring in a little extra cash. Create a fair deal that both of you will profit from.
Once you have your deal, it's time to make a website and run some ads. I cannot stress the importance of ads enough! You must publicize your product in order for people to buy it. Creating a clean and targeted ad is the key to sales. (I included some examples of past ads that I’ve run in this post as well.)
Then, just wait for sales to roll in. Once they do, you will place your order with the manufacturer, being sure to include the customers shipping information. Use x amount of your profit from the order to pay the manufacturer for the unit and pocket what is left.
The Benefits of Dropshipping
Like I said before, dropshipping eliminates the chance of you (A.K.A the seller) from having hundreds of unsold units sitting in your basement or garage.
When I first started e-commerce, I did not know what dropshipping was. I wanted to build a dance clothing store. So, as a naive 21 year old, I bought $3,000 worth of sweatpants, sweatshirts, and other dancewear. And then I built my website and tried to sell my inventory. By the age of 29 I still had boxes of clothing from that original bulk order. Eight years later I finally decided to go to Goodwill and drop off the rest of what never sold.
If I would have known about dropshipping back then, I probably would have seen success much earlier on. Now I know to only pay for inventory after somebody has placed an order. Intuitive, right?
Is Dropshipping Unethical?
In short, no. This is how every single store works. Target, Walmart, you name it -- they all buy products at or near wholesale price and mark it up to make a profit. Almost every retail store or brand you shop from does not actually manufacture the products they sell. Instead, the people who are really good at making the product make it and the people who are really good at selling the product sell it. Rarely are they the same person (with a few exceptions).
One of those outliers is Amazon. When Amazon started out, it used to be a place where any other business could list their product. They soon caught on and realized that they could make the same exact simple products that were selling well and list them themselves, hence the creation of Amazon Basics.
So, is dropshipping dead, or can it actually be a legit side hustle?
Like I said before, I’ve made over six figures in profit from my various online businesses. Regarding drop shipping, let's take a look at one of my past campaigns (2017) that blew up overnight and racked up to a couple thousand dollars within the following week.
The campaign was for a fad item called the “dad bag” which is essentially a fanny pack for men. (Here’s your reminder that people will literally buy anything!). In just 3 days I sold 157 units with a gross profit of $5,255. After subtracting my ad and product costs, my net earnings came out to be $2,107. Not bad, right?
Dropshipping in 2020
The main difference between then and now is that most dropshippers today source from China. They get their products overseas and bring them into American market. Here's a few things to note about this:
- The U.S. market is not always the best. You can always explore selling in the U.K. or different countries, but you have to keep in mind that there will be different taxes, different rules, and different tariffs.
- When you drop ship into China (many dropshippers, including myself, use Aliexpress), you must educate your customer before they order. You are not Amazon Prime and its more than likely that they will not receive their order in two days, or even within the week of their order placement. Again, as long as you explain this to them and are honest, they will continue to buy from you. However, if you trick them into thinking they will get their product sooner, you are guaranteed to have refunds.
- There is an economic war going on between the U.S. and China. Although they have been butting heads for the past few years, it is just now starting to become public knowledge. There are threats of extreme tariffs, exclusion of businesses from the market, and blocking resources in order to downplay China’s global dominance. That being said, if you are relying on China as your primary product source, I would be scared. This doesn't mean that dropshipping has to die. Instead, it proves that you can find better suppliers and manufacturers from different places.
One thing that really changed the game for me when I started recognizing how many refunds I was getting, or having to give back I should say. Even though I communicated with my customer the elongated time frame, many still ended up impatiently canceling their order. Lucky for me there was a quick fix -- dropship U.S. products.
There is one specific online place that I want to point out to you right now, Etsy. Etsy is full of creators with really great, genuine, high quality products. But like I mentioned before, there is often a disconnect between the creator and the buyer. That's where the seller (A.K.A. the dropshipper) comes in. The creators create, the sellers sell, and both parties make a profit.
There was a time that I was really into selling high end decor. I stuck with U.S. made products from Etsy because shipping heavy items can be scary, especially overseas. After searching and testing, I finally came across an item that I was really interested in selling -- wine barrel fire pits. I made a deal with the creator along the lines of if I could sell, he would dropship them.
As opposed to sending traffic directly to the creators store, I created my own website and listed their product and images. Then, when an order came in, I would quickly go and pass along the information to the owner on Etsy.
Now here's the catch; I wasn't selling thousands, or even hundreds. I was simply selling one or two a month. Each pit marketed for $2,500. I spent roughly $500 in ads and profited about $1,000 after the sale went through. It is outcomes like this that make dropshipping highly favorable.
Before I wrap this up, I do want to leave you with one overseas country to do your research on -- Portugal. . I have visited this country and have seen first hand how high quality yet affordable their goods are. Portugal is outstanding in terms of the materials they use in clothing, accessories, and bags. Plus “made in Portugal” has a nicer ring to it than “made in China”, doesn't it?
I cannot predict the future and I surely do not know what types of governmental tariffs will happen. What I do know though is that dropshipping is a legitimate business model. It is the best way for any one who wants to sell physical products but doesn't have a lot of money to test an idea without going broke.
As your business progresses, I urge you to forecast the amount of orders you will have coming in. Dropshipping is simply a starter business. If you are getting 10 orders a day, you know that in a month's time, you will most likely sell 300 in total. This way you can take the money you've made from dropshipping, invest in a private label, and buy in bulk. You will be making more money while saving some simultaneously.
Dropshipping has been done time and time again, and while I don't believe it will ever go away, where you source your products will. People are always looking to buy, but you must do your research first.
So, in summary, dropshipping is not dead. In fact, it's here to stay and it will for a very long time.
Peace and God bless.
I make new content every single week, so be sure to subscribe to my Youtube and follow my Instagram @brambilabong and TikTok at @AdrianBrambila. I also have tons of resources and courses on my website that you won’t want to miss. Head over to www.adrianbrambila.com to learn more about what I do and how I live a financially free life.