The Dangers Of Dropshipping on Shopify

by | Jul 26, 2021 | Entrepreneurship, Life Lessons, Side Hustle | 0 comments

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Dropshipping Overview

Most people are familiar with Dropshipping.

You can pretty quickly spin up a Shopify store, customize it and connect it to hundreds of thousands of supplier from China overnight.

It is really not that hard to get started.

It’s super easy to start. But being successful, that’s a different story.

But anything that’s easy to get into, isn’t going to be super profitable for everyone. When there’s a low barrier to entry, that’s not a good sign.

We have seen behind the scenes of a very select dropshipping sites. In our estimation, more than 95% of them end up in failure.

The problem is that you need to continue funneling Facebook Ads through to generate leads.

The only ones getting rich off of the Dropshipping craze right now are Shopify, those selling Dropshipping courses, and the 1% that truly understand SEO and branding.

People that spin up dropshipping stores don’t have a great understanding of SEO and traffic generation. It takes several months of hard work to start ranking organically for SEO search terms. Most people simply give up before this happens.

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Our Store Did “Okay”

We had a few dropshipping sites probably about 18 months back.

We stood them up on Shopify and honestly got the site “production ready” within 6 hours from buying the domain name.

We were selling rocks, minerals and crystals with our most popular site.

Something that we weren’t particularly interested in, but we thought that there was enough of a market out there where we cold target the right people and make some cash.

We were moderately successful, and were making sales.

We connected the Oberlo app to the backend of our Shopify store. And as a store owner, it was super easy to manage.

We couldn’t break past a point of having revenue exceed ad spend, so after 4 months – we shut down the store.

When you have a drop shipping site, you’re really driving traffic via Facebook Ads. It’s impossible to index and drive traffic organically through Google Search Engine Results in a short amount of time.

We’ve learned a lot since we closed them down.

But we realized something, after the fact, which was strongly backed up by our data.

We saw a direct correlation between Facebook Ad Spend, and revenue from Shopify.

The more we spent, the more we made.

But we were not really able to get past the “breaking point”, where we saw any exponential growth. That’s what an entrepreneur is really looking for in any market. Asymettrical upside risk. You want to put in $1, and get back $2. Put in $2 and get back $5, etc.

Our Facebook Ads knowledge has become much better since we closed out stores down. But we don’t think we’d get into it again. There are simply better ways to make money.

Lessons were learned. Rocks were sold. Some people were happy, others were upset at the amount of time it took to ship.

Which gets us to the most frustrating component of drop shipping for customers – aburdly long shipping times.

 

3-5 Weeks Shipping Times Are “Normal”

This was something that most people don’t understand.

And it’s not possible to get around in dropshipping, unless you use an American manufacturer (which no one does).

The American consumer has been trained by Amazon that 2 day shipping times are normal.

But when you have a factory in China, and you’re paying them $1 to send a gemstone through China Post – there’s no feasible way to ship this item faster in a costly manner.

It is expensive to ship from China, and it’s really expensive to ship something fast from China.

When you place an order on a Shopify based drop shipping website, you’re placing an order from a manufacturer in China for a single product. There’s no incentive for them to give you excellent customer service.

It doesn’t make sense for that manufacturer to expedite the shipping.

They’re trying to make money too.

 

No Customization, Impossible to Grow A “Brand”

When you are dropshipping, you never see your product.

The product goes from the Manufacturer in China, directly to the consumer in the US. Your website is the middle man, but you never touch any inventory.

When you’re dropshipping, you are usually working with dozens of manufacturers in China.

The American consumer is expecting branding everywhere. If you’re website looks nice, but your product looks terrible – there’s a huge disconnect.

When you don’t get your hands on the product, you’re relying on a 3rd party that has no incenstive to “wow” your customers. 

When you’re using different suppliers, they’re going to be shipping their product to your customers, in their own packaging. Their trying to cut corners and keep costs down. They don’t have any incentive to establish a brand or provide any support to your customers.

Building a brand is obvious for the American consumer.

Imagine buying a product from a slick looking store, waiting a month and then having your product show up in really crappy packaging, with zero branding?

When you fail to establish a brand. You’re not going to be getting any repeat customers. Customers won’t tag your product on social media, they won’t get to know your story.

They’ll be a little confused and won’t give you the word of mouth marketing that is so crucial for expansion.

If you want more customers, you’re going to have to pump up your Facebook Ad spend.

If you fail to make a brand, you have no shot at establishing a successful company.

 

 

Easy To Start, But The Competition Is Super High

When something is easy to get into, it attracts everyone. And when everyone is doing the same thing, it’s tough to make money. This is a classic problem for every entrepreneur.

The real money is made in the niches.

Hard work is not easy to replicate.

Try to think of something that’s super easy, where everyone makes a ton of money? It doesn’t exist.

If something is easy to get into, then your competition is going to be sky high.

When the market is flooded with cheap product, and you’re not able to establish a brand around it – how can that be a successful setup?

 

 

Final Thoughts

There are successful dropshipping sites, but it’s a tough industry to do well in.

Without being able to establish a brand you don’t get repeat customers.

So the only way to get more customers, is to increase Facebook Ad spend.

Our recommendation for someone looking to be competetive, would be to try to succeed in the organic search results on Google.

By doing this, you could decrease your ad spend, and have a more sustainable business model.

But this is the long game, and most dropshippers think they can strike it rich over night.

Let us know if you’re dropshipping in the comments below.

Good luck out there!

 

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