Dropshipping changed my life and has made me the success I am today. If it weren't for me starting my first dropshipping store a few years ago, there would be a huge chance I'd still be broke today. Last year I made close to six figures in profit just with my dropshipping businesses, and on top of that, it's allowed me to make a ton more through other streams of income that wouldn't have been possible if it wasn't for the capital, confidence, and experience I've gotten from starting my dropship store.
But even with all of that being said and all of the benefits, there are a tons downsides to the drop shipping business model as well. In this post, I'm going to break down exactly what the bad sides are, include who definitely shouldn't start a dropship store, and more importantly who should and why it may still be the best business model for most people as their first online business venture. It's still the best way to start your first online business, especially for digital nomads and those who wish to be location independent. Keep reading for my 2018 guide to all things dropshipping.
Best Business Model for 2018?
It's almost funny that when I first got into dropshipping in 2013 people online would say it was too late and that it was dead. That first store not only replaced my full-time corporate income for the next couple of years,
it eventually sold for $60,000
Then people told me I got lucky and that it couldn't happen again especially not in 2015, it worried me I started a second store with Larissa, my girlfriend at the time and
that too has been a success
and continued to bring both of us income every month. Now that it's 2018, it's a bit ironic that the same people online that said dropshipping was dead in 2013 are now preaching it as the hot new business model. Well, those people can chase all of the trends they want, I'm going to continue to do what works.
Why Dropship in 2018?
The reason why I still recommend the dropshipping route for most people I met or talk to online as their first online business is because it's still the most straightforward, proven, and is a relatively low cost to startup. There are very few businesses you can start in just a few months and for less than a few thousand dollars.
Even with more people getting into the space and more competitors, there is more opportunity than ever with new products being invested and released every day, software that makes the process more accessible, and new ways to advertise, get customers and get paid. But the main reason why I recommend dropshipping as your first business venture is because it's the easiest and cheapest way to get into physical products and e-commerce without having to deal with inventory. Dropshipping allows you to have access to hundreds of thousands of dollars worth of stock without pre-buying or warehousing any of your own.
Why Physical Products?
Even though I'm a huge fan of digitally deliverable products, it's actually a terrible way for most people to start. The honest truth is that starting any business is difficult and most people aren't meant to be hugely successful entrepreneurs. Most people don't have the hard work, dedication, or even the willingness to do what it takes it become a successful business owner. That being said, if you can't sell someone a piece of furniture that they're looking to buy anyways, there's no way in hell you'll be able to find and convince someone to buy a digital product that they didn't even know they needed in the first place.
If I told you to sell any of the furniture items in the photo above, I'm sure most of you could do it. There are plenty of places online that people are already looking to buy couches, tables, and chairs, and all you have to do is list it there, take good photos, and match the lowest priced competitor. If you wanted to go the extra mile, you could offer free shipping, excellent customer service or another incentive for them to buy it from you rather than someone else. Now, if I told you to sell an ebook, or even worse, for you to go out and create something out of thin air such as software, online tools or something else that only exists in the online cloud, how would you go about selling it? Where would you find your customers, and how would you even price it? Have you ever noticed that some digital products sell for upwards of $500, while something seemingly similar can sell for as low as $1?
The reason why physical products are king to start with is that it's easier to wrap your head around selling when it's your first business. Honestly, if you can't sell someone a table that everyone in the world knows is worth $299, there's no way you'll be able to sell someone a digital product or piece or be successful creating a piece of software to sell for the same price.
Why Dropshipping over FBA?
There's a ton of hype right now about Amazon FBA (fulfilled by Amazon), and there is a good reason for it. A lot of people are making a ton of money from selling items on Amazon. Similar to drop shipping, you don't need a warehouse, and you can be location independent as you can run your business from anywhere. But the reason why I still prefer and recommend the dropshipping model for most people is that there are less upfront cost and a lower time frame to start being profitable compared to Amazon.
Even though it's possible to get away with just ordering few thousand dollars worth of products for your first run with Amazon and some people save time by completely skipping ordering a sample or any quality assurance, in reality the people who are actually successful are willing to spend $10,000 and a few months more on their products to do it right.
The other reason why I prefer starting a dropshipping store over an Amazon FBA business is that you aren't tied to one platform. The reason why we use Shopify, take payments through Stripe, work with the suppliers we use and advertise through Google and Facebook is that those are currently the best options and not because we have to use any of them in particular. If any of that changes in 2018 we'll switch over to what's working better. With Amazon FBA, you can't do that. You're 100% controlled by Amazon, and you are completely locked into their world. When everything is working in your favor, it's incredible, but if Amazon decides to make any small change, you could get in trouble.
Downsides of Dropshipping
I'd love to say that dropshipping is perfect, but it's not. All businesses are a ton of hard work, dedication and a certain level of investment and skill. The most significant downsides to dropshipping are the low barrier to entry. Since anyone can use templates like Shopify to create an online store in less than a week, other people can copy your niche and try to compete with you quite quickly. This is the main reason why most dropshippers are so secretive about their niches and website URLs.
Other downsides that people often repeat online aren't real downsides but sound like they could be. One argument is that there are lower margins with drop shipping than with other forms of e-commerce. The reason why it's not a downside is the fact that there are no upfront costs for inventory so technically your margins are 1,000%. It'd be nice to have to higher than 25-35% margins, but it's not an actual downside when you're not paying upfront for inventory. Other people say that all of the right niches are already taken. These are the same people who first heard of dropshipping years ago, but never took action then, and are just looking for excuses on why they shouldn't put in the effort to start now. While it's true that there are a lot more competitors, the fact is the e-commerce industry is growing every year.
Two years ago I never even heard of Wayfair or Hayneedle which are both dropshipping based e-commerce businesses. Last year Wayfair made $179.1 million in profit which is 24% margins. The smaller company, Hayneedle just got bought for $90 Million. As more and more people start buying things online instead of retail stores, the more opportunities there will be with dropshipping.
Who Should Dropship?
I'll start with who shouldn't start a dropshipping store in 2018. If you have a successful business or valuable skill that you can bring online, there's no reason you should abandon that, start over, and learn everything from scratch. For example, if you are a programmer, go partner up with a successful online marketer and create a cool app or tool or continue to sell your services online. If you live in a country that doesn't currently buy things online and you don't want the difficulties and added hardship of trying to be the first, you shouldn't get into dropshipping. Honestly, I wish dropshipping was already established in places like Thailand where I live or South Africa where Larissa lives, but it's not. Being the first to successful crack e-commerce in these countries or India will inevitably produce billionaires, but that's most likely not going to be you or me.
If you live in a country where people are already comfortable with buying things online, using their credit card online, and receiving packages via FedEx, then dropshipping will work for you as long as you follow the right formula. Those countries as of January 2018 are the U.S, Canada, Australia and most of Western Europe especially Holland, Sweden, and a few others. Two years ago everyone complained that dropshipping didn't work in Australia, yet now it's the country that has the most successful
members due to them being first movers and the lack of competition.
How to Start Dropshipping
The first thing you need to do if you want to start a successful dropshipping business is to decide how much time, effort and money you are willing and able to put in. The path to starting a successful dropship store should only take you two months, but nothing in life is guaranteed, and it may end up taking you twice as long especially if you have other work or life obligations.
If you want to do it correctly and give yourself the best chance of success, make sure you have 2-3 months to dedicate 30 hours a week to learning and implementing. Aside from the cost of education and mentorship, starting your actual dropshipping store will only cost you $200-$400 including the ads you'll need to run to get started.
Best of Luck in 2018
Regardless of the path you take, I sincerely hope everyone starts some type of online business in 2018. The benefits are enormous, and until you start, you won't even realize how many doors of opportunity it opens for you. Being a location independent business owner allows you to save a ton of money on rent, living expenses, and even taxes. Being able to fly to Thailand, Australia or Europe to attend a business conference means you can write off your business class flight, transportation, and hotel room. It's a fantastic feeling to have the freedom of being able to choose where we live, work and spend our time.
What do you think?
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