The UGLY Truth About Dropshipping That No Guru Will Tell You

in this video i'm going to answer the most commonly asked questions about drop shipping including the questions that most people won't give you a straight answer on so here's the ugly truth about drop shipping now drop shipping has a reputation for being a get rich quick scheme because it sounds way too easy you don't need to store inventory you don't need to ship or fulfill orders you don't need much money to get started and you can run a dropship store from anywhere in the world now while all these statements are technically true a common misconception

is that running a successful dropship store is easy but in reality success with drop shipping has many pros and cons and isn't as straightforward as you are led to believe so in this video i answer all the in-depth questions related to drop shipping to provide you with a complete view of what it takes to run a profitable dropship store now what is drop shipping drop shipping is an ecommerce business model where an online store does not carry inventory for the products it sells when an order is made the online store purchases the products from a

wholesale supplier who then ships the order directly to the end customer so as a result the online store owner does not have to deal with physical inventory or perform any shipping and handling there are no upfront inventory cost because all products are purchased on demand now is drop shipping legal and legit it is 100 legal as long as you use legitimate dropship suppliers so for example if you sell disney merchandise on your online store and your supplier dropship's fake disney merchandise on your behalf you could be liable for fraud as long as you're careful about

who you work with and only use officially licensed distributors for the brands you carry drop shipping is legit and safe now does it require a seller's permit and a business license well in the us you absolutely need a seller's permit in order to legally sell online now most states require you to charge sales tax to customers where you have economic nexus and drop shipping is no exception if your locality requires a business license then you must get a business license as well remember drop shipping is simply a method of order fulfillment your drop shipping business

is a real business and must be registered as such now how profitable is drop shipping well because your supplier is doing most of the heavy lifting when it comes to fulfillment and inventory the margins for drop shipping are much less than other e-commerce business models so typical margins for drop shipping are between 10 and 30 percent compared to 50 to 66 percent for private label and traditional wholesale which makes drop shipping far less profitable now the best products of drop ship are higher ticket items that yield more revenue per sale now is drop shipping worth

it well despite the low margins drop shipping can be a great way to get started selling online for less than three bucks you can start a fully featured ecommerce business that carries hundreds of products and drop shipping is worth it for product research as well without any upfront risk you can list many products online just to see what sells and then based on your own sales data you can private label or carry inventory for your best selling products and keep more of the profit now the best part is that drop shipping can be automated except

for the customer service now most established drop shipping suppliers support edi which stands for electronic data interchange edi is an electronic system that allows your website and your suppliers website inventory to automatically stay in sync so for example if your supplier runs out of stock on a particular product your website's inventory will automatically be adjusted in addition all orders placed on your website are automatically transmitted to your drop shipper for fulfillment however even though order fulfillment is automated you are still responsible for answering questions and performing customer service now here's how drop shipping from your

own website works now if you use a well-supported e-commerce platform like shopify bigcommerce or woocommerce setting up drive shipping is a straightforward process here's exactly how you drop ship from your own website and how it works a customer places an order on your site and you accept payment the customer's order is electronically transmitted to your drop chip supplier where you are charged the agreed upon wholesale price for your goods your drop ship supply then ships the order to the end customer and you pocket the difference in cost as profit now you don't have to drop

ship on your website you can also drop ship on amazon and here's how amazon drop shipping works you list your products or sell on amazon as a merchant fulfilled seller and then when an order is placed on amazon you electronically send the order to your drop ship supplier who then ships the products to the end customer now overall amazon drop shipping is a much riskier business model than drop shipping from your own site because you have to follow amazon's terms of service to the letter first off you must source your products from a legit wholesaler

you are not allowed to drop ship your products from another marketplace like aliexpress ebay or walmart otherwise you're going to get banned as a result aliexpress drop shipping on amazon is expressly prohibited amazon also imposes very strict requirements for shipping and fulfillment that must be met if you have a series of late shipments or inventory mishaps your account's going to get banned but outside of following amazon's terms of service drop shipping on amazon works much the same as drop shipping on your own website you can also drop ship on ebay you simply list your products

for sale as an auction or store listing and then when an order is placed you electronically notify your supplier who fills the order and similar to amazon you must source your products from legit dropship suppliers and not marketplaces like amazon or walmart otherwise you're going to get banned so as a result get rich quick schemes like buying products from amazon and drop shipping them on ebay at higher prices is prohibited now you're probably wondering how drop ship payments work well when you sign up with a drop shipping supplier you'll be asked for a form of

payment and typically you can pay by credit card your supplier keeps your credit card on file and simply charges your card when an order is placed you can also use ach or direct transfer this is where your supplier keeps your bank information and automatically places a transaction at the end of the day week or month for all products purchased the best way to pay a drop ship supplier is through payment terms some suppliers will offer you payment terms which means that you don't have to pay for your products until 30 or 60 days later now

whenever an order is placed on your website two payment transactions occur in the background the first transaction takes place when you accept payment from your customer and deposit the money into your own bank account the second transaction takes place when you pay your supplier for the raw cost of goods and any related drop ship fees now where do you find drop shipping suppliers there are four main ways to find suppliers depending on your budget and the types of products that you want to sell and by paying a fee you can perform a search and instantly

have access to hundreds of pre-vetted suppliers you can also use a drop shipping company a drop ship company acts as a middleman who automatically connects you to a dropship supplier you simply list the products that the dropship company offers and they handle the entire fulfillment process as a result you do not have to find or interact with any suppliers you can also go to a drop shipping trade show by attending local wholesale and drop shipping trade shows you can form drop shipping arrangements face to face you can also use a print-on-demand company print-on-demand companies allow

you to print your own designs on select merchandise to sell online without any upfront cost now how do you find wholesalers who dropship well the easiest way to find dropship wholesalers is by using google a directory like worldwide brands or by attending wholesale trade shows now many wholesalers are reluctant to drop ship for your store unless they know you can move product so if there's a brand who refuses a drop ship for you at first you should purchase and sell their products wholesale to start and then once you've demonstrated a track record of sales you

can request a drop shipping arrangement now where do you find products to sell for drop shipping well more than half the battle of starting a successful online store involves finding the right products to sell online and the best way to find profitable products to sell online is to leverage sales data from amazon because amazon owns over 50 of e-commerce you can get an accurate view of the supply and demand for practically any product sold online to perform product research on amazon i recommend a tool called jungle scout jungle scout is a software tool that tells

you how much revenue a product listing is generating on amazon for the last 30 days all sales information is collated for you in a nice table for you review here's a video i put together that gives you a quick demo now when should you use drop shipping now because the margins for drop shipping are low drop shipping is generally not a good long-term business model furthermore because you're selling other people's brands you'll be directly competing with other sellers offering the exact same product as a result drop shipping is best used to collect data for potential

products to private label or to buy wholesale because drop shipping allows you to instantly sell hundreds of products online without any upfront costs you can easily test a bunch of products find out what sells and then private label your winners in other words you should use drop shipping as a stepping stone to create your own branded products for sale drop shipping is also an excellent business model for dipping your toes in the e-commerce waters without a large budget now what are the best drop shipping companies most drop ship companies are middlemen who help online store

owners quickly list products from e-commerce marketplaces like aliexpress taobao and 1688. now the main advantage of using a dropship company is that you instantly have access to millions of products without having to build relationships or negotiate for pricing simply install a plugin to inforce your store to your favorite drop shipping company and you can instantly sell hundreds of products at the push of a button here's a list of my favorite drop shipping companies now a question i commonly get asked is who pays for shipping when drop shipping well every drop ship supplier charges their own

shipping rates so for example printful charges 3.99 for the first t-shirt and a buck 25 for every additional t-shirt shipped using usps first class delivery now when a customer places an order on your own website you can either eat the shipping cost yourself or pass the shipping costs along to your customer now using the t-shirt example you can either choose to charge a customer 3.99 for shipping or offer free shipping and cover the cost yourself now for our online store we charge a flat rate of five bucks for all orders and offer free shipping for

anything over 75 bucks now do drop shippers ship internationally well some drop shipping suppliers will ship packages internationally at an additional cost however international shipping is extremely expensive and getting accurate shipping quotes that account for customs duty that and other fees is actually quite complex so as a result it can take longer for a drop shipper to process an international order now how do returns work with drop shipping even though drop shippers take care of product fulfillment you are actually responsible for processing returns and providing customer service for defective merchandise here's how a typical return

is handled for dropship merchandise the customer contacts you for a refund you ask your supplier for a return authorization number the customer sends a product in its original packaging back to your supplier with the rma number clearly marked then your supplier refunds the wholesale cost back to your account once the package is received and then finally you refund your customer after you've been refunded by your supplier now some drop ship suppliers will charge you a restocking fee which you must pay or pass on to your customer you're probably also wondering can you use multiple dropship

suppliers well you can use as many drop ship suppliers as you want as long as your orders are routed correctly and as long as you set the proper expectations with your customers so for example let's say you sell three different products that are sourced from three different dropship suppliers now 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 three in other words your customer is going

to 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 in addition you should notify the customer to expect three packages instead of one now most ecommerce platforms will handle order routing among different drop shippers automatically now why is drop shipping good well it's a good business model because it's a risk-free way to sell products online you don't have to handle inventory shipping or fulfillment as a result you can run your business from anywhere in the world there's little or

no upfront investment and you can literally start a drop shipping store for free with shift for shop your store is also infinitely scalable it's approximately the same amount of work to make a hundred bucks a month as it is to make a hundred thousand dollars a month and most importantly drop shipping can be used to research products to sell that you can eventually private label to maximize your profits now here's why drop shipping is bad drop shipping is a bad business model because the margins are low at 10 to 30 percent as a result you

have to generate a large amount of traffic and revenue to make a significant profit furthermore customer service product quality and delivery is entirely at the mercy of your drop ship supplier if your supplier is flaky or ships orders out late it will reflect poorly on your company if you drop ship on amazon or ebay late shipments can result in a suspension and most importantly there's little or no brand recognition with a dropship store because you are selling other people's products you will face pricing pressure from other competing retailers offering the exact same goods now what

big stores use drop shipping well almost every large retailer leverages drop shipping to a certain extent so for example big box stores like home depot often drop ship large products from their catalog wayfarer is a multi-million dollar e-commerce company that is entirely dropshipped so bottom line you can make money with drop shipping when it's done at scale now is drop shipping profitable now with warehouse space and inventory at a premium drop shipping will still be a profitable business model however it will be much more difficult to make a significant profit due to poor margins ultimately

the best ecommerce business model is to start your own private label brand by being control of the product design and the entire supply chain you can future proof your business and command the highest profits hope you enjoyed this video now if you like what you saw there's actually a lot more where that came from if you subscribe to my channel below and if you are interested in learning how to sell physical products online then click over here and take my free six day mini course where i'll walk you through everything that you need to know

to get started in e-commerce thanks for watching