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The truth is most drop shipping e-commerce stores never see a positive return on investment and just end up failing. To be successful you need to approach this venture differently and understand the “why” if you want to be successful. Understanding why will allow you to separate yourself from all the people simply putting up a Shopify store and linking to AliExpress products hoping to make some cash.
Understanding Drop Shipping
Drop Shipping has been touted as one of the best businesses to start with little to no startup costs. While drop shipping has made some people millionaires, the reality of it is most drop shipping stores close down within the first 3 months. Just like any business, about 80% of e-commerce stores will fail; that includes drop shipping.
If you are new to the e-commerce world you may not be familiar with this business model so let’s quickly talk about what it is.
Drop shipping is a business model that allows companies or individuals to sell products without having to own or keep inventory. The seller simply has to make the sale on their website, and then put in the order to their supplier. The supplier then packages and ships the product to the customer.
I’ll give you an example of this. Let’s pretend you went to an online website that sold coffee mugs. You end up purchasing a coffee mug for $19.99. What happens on the back end after the order is this:
- Owner of the website logs into the suppliers’ website.
- The owner orders that coffee mug for $9.99 from the supplier and puts in your shipping address.
- The website owner profits $10
- Supplier receives the order, packages the coffee mug and sends it to you.
- The coffee mug shows up at your doorstep and you live happily ever after drinking vanilla lattes out of it.
Sounds pretty simple right? The reality is that it’s not. Here’s why.
The Reason Drop Shipping Stores Are Failing
Drop shipping stores fail for a variety of reasons. It could be due to poor marketing, bad quality products, or lack of good customer service.
I need to explain the bigger issue though; the elephant in the room. This is what a large majority of drop shippers get completely wrong.
The big mistake most drop shippers make is not having a brand.
In order to run a successful e-commerce store a lot of things need to go right, but the most important asset is your brand. I cannot emphasize this enough!
The reason having a brand is important is because it allows you to stand out from the crowd.
Right now, most drop shippers are sourcing their suppliers from the website, AliExpress. What this causes is saturation for everyone is selling the same generic products with a 3-4x markup, running ads, and hoping they get sales. To make matters even worse, most of the items see on AliExpress can be had on Amazon for much cheaper with much faster shipping.
Must I also remind you, ad prices are continuing to go up? This has certainly been the case with Facebook’s recent price hikes.
This method of drop shipping used to work early 2016 but started dying around late 2017 once the cat got out of the bag and everyone pilled on.
While drop shipping isn’t completely dead, simply running ads to a generic AliExpress product will not generate you profits until you catch another hot trend like Fidget Spinners. Don’t get sucked into the hyped. Unless you build a well-established brand, this just doesn’t work. Besides, who wants to build a long-term business based on hot viral trends that fade away within a few weeks or months? I certainly don’t.
Drop Shipping with a Personal Brand
The correct way to drop ship is to build a brand. I am a strong advocate of not just building a brand but rather building a personal brand.
Building a personal brand allows your audience to connect with you as an induvial. One of the most well-known YouTubers by the name of Jake Paul is an example of what personal branding can do.
Because Jake Paul has a strong audience following he is able to sell his branded hoodies for $59.95.
Another well known personal brand is Kylie Jenner. Her Shopify store generated $420 million in 18 months.
I know you’re thinking “but Nathan, these are celebrities! How dare you use them as an example!”.
That is a fair assessment. The point I am trying to make is both of these people branded themselves to set themselves apart. You don’t need a large following as celebrities do. There are individuals with small blogs that create over 6-figures a month blogging.
If you have you 1,000 fans, and only 100 of them are true die fans, you could still make $120,000 per year selling them $100 worth of products every month. Not only that but creating a personal brand allows you to go beyond just selling products via Shopify and drop shipping.
My statement to you is this:
Don’t join try to jump into the pond where everyone is stepping over and undercutting each other to drop ship the same generic products from AliExpress. Take the time to build your personal brand and then create a product that your audience will love and find useful, then create a Shopify store if you still have the desire to.
As always, If you’re on Facebook, you can also join the awesome WiFi Mocha Community where we share great ideas and tips on personal branding to help you reach the next level.
Until next time,
Dream Big, Think Different.
Nathan Mensah, Make sure you don't miss any critical aspects to building your personal brand by using this FREE 5 step checklist!
Founder, WiFi Mocha
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