Dropshipping: Long Gone Silver

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TL; DR - Dropshipping is not for me

Dropshipping is an ecommerce model that requires the seller having no inventory and no products but sourcing and selling goods made by manufacturers. The products are shipped directly to the customer by the factory. All the seller has to do is find customers.

After spending, months looking at the dropshipping business as a potential side business, the conclusion is that it's not worth the effort or investment. This was reached after watching many how-to videos, blogs, and even going so far as to sign up for free trials on major platforms.

The primary source of supply is AliExpress where there are manufacturers of everything imaginable and more with most geared up to dropshipping. These items are all non-branded, the prices low and there is every opportunity to sell at 2-3 times the cost price.

There is another huge advantage to dropshipping in that it's possible to automate the whole process - everything from order taking to fulfilment. Only a few hours a week are required to answer emails, troubleshoot, track orders, ensure payments are made and, crucially, received.

Dropshipping is such a huge market that there are numerous platforms that allow sellers to open their own online stores and the back end tech is all built in. All the seller has to do is pay a monthly fee, find customers and the orders are processed through the platform. It's incredibly painless.

What does the seller actually need to do apart from find customers? Find a niche, look at potential products, build a website, identify manufacturers, customer service, troubleshoot and that's pretty much it. It's so easy.

Wordpress is the content management system and most popular for building ecommerce sites. There are plenty of template and plugin providers who have designed products to suit the site. The creation of a dropshipping store is made so simple.

There wasn't one reason but several that put altogether made me back away.

1) Customers

Once you are all up and running, customers will not flock to your online shop. There needs to be considerable online marketing of the site - both paid and unpaid - to make this happen.

2) Saturation

The market has reached saturation. Google 'where can I buy a cheese grater' and 8,110,000 results come back. Believe me, the market is saturated.

3) Niche

Most niches are tapped out. Choose a niche (cheese graters, for example). Go into AliExpress, then see how many vendors are offering graters - and how many were sold. Undercutting competitors in narrow or even general niches will lead to a death spiral for beginners.

4) Pro Dropshippers

Through the utilisation of technologies, hiring virtual assistants, and working to a system tried and tested over time puts market entrants at a disadvantage.

5) Advertising

Unless you want to spend a while to SEO your website, your other option is to spend on Facebook and Google keyword advertising and promotion. It's not just paying for advertising; it's ad creation and testing. There are ways to be creative in advertising, but there's still an ad placement cost.

To attract site visitors, an all-out offensive on Facebook, Instagram, Twitter, Pinterest etc. is required to aid customer funnelling.

6) Register a Company

If you are generating additional income, there's a tax implication. Setting up a company in Hong Kong will be US$1,000 plus but it does afford protection if someone decides to sue. In all my research, I only found one dropshipper even mention the possibility of being sued.

There is another reason for setting up a company as some AliExpress vendors demand it and / or offer even lower prices.

PayPal requires company registration proof for a business account; if you ask them, they might waive this. But PayPal will suspend your account if there is a dispute between you (the dropshipper) and the customer.

7) Cost

I estimated the minimum spend for one year would be US$6,500. Absolute minimum. Domain registration, hosting, building, advertising, company registration, platform fees, and advertising.

There is a hidden cost in SEM, social media pollution (i.e. getting the word out), trying and replacing products, advertising testing, customer service, research, and more. So the time and cost factor are quite high unless the niche is a success immediately. Worse if you work full time already.

8) Plastic

In my sub-consciousness was the fact that I would be adding to the plastic scourge affecting the planet today. Whether it's the actual product or the packaging, I would be doing my 'bit' to add to environmental woes.

9) Home Truth

Dollops of time, money, patience, and luck are all required to succeed in dropshipping.

Everything there is to know about dropshipping is available free on the Internet, notably via YouTube and blogs.

The established players are more agile in identifying trends and spotting short-term sales windows, cleaning up and moving onto the next opportunity just as others pile in and kill the market.