Weebly founder David Rusenko isn’t a fan of drop shipping. He believes we’ve flooded the world with enough cheap crap. We don’t need any more middlemen flooding out Instagram feeds with knock-offs.
But is he right? What’s wrong with middlemen doing the marketing legwork?
I’ve been around the web a time or two and have seen drop shipping touted as the next affiliate marketing. But I’ve encountered few who’ve made it work.
Here’s why you should be careful with one of the hottest trends in e-commerce right now.
1. What is Drop Shipping?
I use the word middleman literally. If you sell or make lanyards but don’t really care to market your lanyards, a drop shipper is a great way to get your product out there. A drop shipper essentially sets up shop and sells your product as if it’s theirs.
Often, a drop shipper works directly through a wholesaler like Alibaba. This is where the cheap crap comes in. A ton of stuff on Alibaba is cheaply manufactured knockoffs.
Despite this, drop shipping is appealing to home entrepreneurs for a few reasons. You don’t have to store or ship, you just have to market. If you do it right, fulfillment centers like Amazon will store and ship your product for you.
You only purchase what you sell. And all you really need is a computer.
Sounds amazing, right?
2. Nothing in Life is Really Easy
You are still running a business. While part of that business isn’t in your hands, all the same marketing, customer servicing, website maintenance, etc are things you must do to succeed.
The only thing drop shipping really eliminates is product overhead.
It’s not a get-rich-quick scheme. It’s a true business niche. And if you thought otherwise, it’s time to go back to that nine to five.
Online money-making is all about working 60 hrs a week to avoid working 40. Even if your drop shipping business becomes a hands-off affair later, it will take a lot of work to get there.
3. Everyone Else is Jumping Off the Same Bridge
When you Google drop shipping, some of the top articles are from six years ago. Drop shipping isn’t a new idea. It’s as old as Amazon.
In those six years, how many people do you think entered the drop shipping business? Too many. “Competition is a good thing,” you cry. I wouldn’t argue with you if this were a normal business situation.
The problem with drop shipping is that you can’t control supply and demand. You can’t actually compete because you have no control over your products.
4. The Tools They Give You Are Cheap Pieces of Crap
Like some of the stuff drop-shippers try to sell you, the digital tools they give you are just not worth your time.
How do you find your products if you’re a first-time drop-shipper? It’s the one step that seems so daunting many don’t even take it. Because it’s so scary, some websites have taken up the mantle and decided to give you a quick way to choose and price items.
Quick doesn’t always mean accurate, however. With some of these sites, you’ll find some misleading information about demographics and conversion rates. Sometimes it seems these sites pull information out of their rears just to fill a page.
5. Quality Control Is a Lie
Because you rely on warehouses and fulfillment center, you product never goes through your hands. How do you even know if the product you’re shipping is any good?
In a regular e-commerce business, you would get the product, inspect it, package it and ship it. If anything came to you damaged, you could return it to the manufacturer.
In drop-shipping, you will have to absorb the cost of poor or damaged goods. This will come out of your bottom line.
It’s a risk you take for convenience. The question is: is the risk worth it?
What are the consequences? You end up losing any credibility in the e-commerce world because customers will ultimately blame any shipping or product faults on you. While you’re the middleman, you don’t have the convenience of blaming “corporate” for their failures.
6. Returns Will Haunt You Forever
Because quality control is not a thing, you will most definitely have to deal with returns. Some wholesalers won’t take the product back. This is another huge dent in your product line.
In a normal e-commerce business, you would rely on 30% of purchases returning to you. Imagine how much this number might inflate when you erase any semblance of quality control.
7. Free Shipping is a Thing Now
About ten years ago I tried to start a used book business on Amazon. I worked 60 hr weeks and doing this on top wasn’t easy. I quickly found that shipping was the only way I would make money.
Amazon would give me $3.99 for shipping and I could ship media rate for pretty cheap. I could have made a killing if I could’ve quit my job and jumped in full time.
Today, I don’t know how possible this is. People expect free shipping thanks to Prime and WalMart’s e-commerce entry. To compete you really might have to offer some free or cheap shipping option. This too comes out of your bottom line.
It’s Possible But…
If you’re willing to put in the time and money, you might be able to find a niche nobody else has tapped. But you’re gonna be digging for a while.
Some have compared hopping onto the drop shipping bandwagon to arriving at a movie 45 mins late. You’ll get some value, but you’ve missed the entire setup. It would have been better if you’d gone to a different movie altogether.