Winners in Drop Shipping
Let us start from winners of drop shipping. Strangely, they share no risk but still they are the main winners from drop shipping business model.
Paid Platform Providers
Paid platform providers are making billions from drop shipping business model. The main example of such platform providers is Shopify, and BigCommerce. These companies were started to provide business services to existing retailors who want to build online ecommerce stores. They found an unlikely customer in the form of drop shippers.
Although exact figures are not available but thousands of drop shippers sign up every day which is not much higher than the number who are quitting at the same time. Still these companies are able to keep huge number of stores running monthly helping them make huge profits at the cost of new drop shippers.
Drop Shipping Gurus
Gurus of drop shipping is another unlikely group of winners from this business model. Drop shippers find them when they start searching for drop shipping on the web. Lot of them have YouTube channels and blogs. They try to sell training material and structured training programs. Some of them have closed groups on social media. Some others have websites, access to those websites is available through subscription.
There is already huge amount of free material available on the web. Instead of utilizing free material novice drop shippers fell victim of these gurus when they are under pressure to make profit.
Drop Shipping Application Providers
There is another unlikely winners group from drop shipping business model e.g. ecomhunt and oberlo. Although these services add a good value to a profitable business. I don’t see any value at all for a new drop shipping business. In my view instead of using automation, drop shippers should do all these steps manually in the beginning, to understand the core of drop shipping.
Subscription to these and similar services in the beginning puts additional burden on the business which can ultimately lead to the failure.
Drop Shipping Suppliers
Drop ship suppliers is another group whose products get worldwide exposure without them knowing or making any effort. Drop shippers indirectly work for them. Aliexpress is the main website used by lot of drop shippers. Good thing is that drop shipper do not pay them. Although there are some suppliers who have created support applications for drop shippers. Some of these application require subscription. Drop shippers are advised not to subscribe to any of their applications till they become profitable.
Losers in Drop Shipping
There are not many losers in this business. In fact there is only one and that is a drop shipper himself. Yes, and this is true. Drop shippers are novice as discussed in our previous article. They are trying to make quick money which is not possible, in the real and very competitive World. If you look closely how drop shipping business is started by majority. You will observe following sequence of events or phases.
The Start phase
- Future drop shipper has lost job or want to try some business to get some extra cash or is a student thinking to try something to have his/her expenses covered or is a stay home mom or dad who want to help.
- Have done some web search and have found about this amazing idea of drop shipping.
- Watched some videos from drop shipping Gurus and started dreaming to be the next millionaire.
- By this time future drop shippers have some vague idea of drop shipping and think that they can do it. Lot of them really still do not have much idea of how things will work out.
The Invigoration Phase
In this phase our future drop shippers are full of energy and enthusiasm. They are still watching videos from drop shipping Gurus who are either trying to get them sign up for paid trainings or drop shipping platforms and/or solutions. Drop shippers are very optimistic at this point and are ready to make investments. Following sequence of events takes place from here onwards.
- They sign up for a free trial ecommerce platforms most likely Shopify which is very aggressively marketed.
- They try to work through technology and if they are technically sound they will try to learn themselves otherwise they will watch more training videos and read blogs. Some of them end up buying technical support at this point. Some others might buy training materials. So they are already spending from their very limited budget.
- Platform trial period ends and they have to buy subscription which is going to require monthly payments. Some of them will give up at this point but majority of them will go ahead with this spending.
- As spending increases and after signing up for recurring subscription charges they are under pressure to pursue things fast. Unstructured learning through free material is slow so lot of them will also sign up for some structured training programs.
- Further steps will take place from here as things start becoming real i.e. ecommerce store building, theme selection, payment gateway selection, niche selection, vendor selection, product selection.
- Paid drop shipping platforms offer very beautifully designed ecommerce stores. They are very impressive and have amazing functionality.
The Realization Phase
Important task at this point is to select niche, select products and import them. This is quite bit of work and our novice drop shippers are under pressure to start selling and make profit so that they can pay monthly charges. Lot of them end up signing up for more applications i.e. a product selection application, product import application, review import application etc. etc.
More and more signings of support applications means higher and higher pressure to become profitable. Even after all these spendings there is no guarantee of success.
To get sales marketing is a very important component. Lot of new drop shippers start thinking about marketing at this point. Marketing should never be after though. You should have a good plan from the beginning. Since, drop shippers are all new to the business they have not planned marketing yet. There are two types of marketing strategies paid and unpaid. Paid is quicker and expensive and brings in results quickly. Unpaid marketing revolves around SEO and requires very long time and effort but is more profitable in the end.
As drop shipper are under pressure to start making sales and profit. Their only choice is paid marketing. They jump straight into it, without much planning and start advertising on social media. Majority of them use Facebook. They have not done enough home work to choose target audience for their products so their campaigns don’t bring expected results
The End Phase
From this point lot of drop shippers start quitting. Some of them try different hit and trial techniques but because they are losing money every day it is becoming harder and harder for them to continue like this. They have already signed up for many subscriptions. Pressure of their recurring payment means they become aggressive in their marketing efforts which only increases their loss.
Lot of them quit at this stage. In fact 90-95% will quit ultimately.
Some of them will still be successful because they have done few steps differently. But I am afraid that big chunk of our novice friends will quit at this stage.
How to Avoid This Fate?
This is not a happy ending for any entrepreneur. We should educate them to avoid this from happening. Following steps can help reduce failure ratio.
- Recurring costs are killer of drop shipping. Keep them to zero or at minimum.
- Never signup for paid training programs or material. There is more than enough free material to get going.
- Use free platforms for ecommerce stores. Expensive platforms are not for novice drop shippers. You can use paid platforms once you have become profitable.
- Do not buy any paid application to manage your ecommerce store till you have become profitable. There are already lot of free resources available to cover every aspect of a new ecommerce store.
- Use paid and unpaid marketing strategy and plan it early.
- Do not panic if results are not coming back fast. Lot of successful drop shippers took months to get their first sale. Reduced cost will help you with this step.
Idea is to keep your running cost to a minimum value which will help you go longer without being profitable. It will give you enough time to try different things and learn along the way. It will ensure success and help reduce failure to a reasonable value from mind boggling 90-95%.