What is Dropshipping?

Dropshipping is when you sell a customer a product that you don’t currently own. Once you have made the sale, you then purchase it from a dropshipping wholesale supplier who will send it to your customer.

How Does Dropshipping Work?

customer buys and pays for product
you pay a supplier to ship that product to your customer
you pocket the difference

Is Dropshipping Legal?

Although I can’t answer specific legal aspects of it, the concept of selling products to customers and then buying that product to someone else is legal. That is actually how much of trade works in the real world.

Why would I want to start dropshipping?

Dropshipping is meant to minimize your risk.

In theory, it means that you don’t need to buy stock before you sell it. This has two main advantages:

you never have dead stock sitting there that you can’t sell
it makes your cashflow far easier as you never have to lay out money before you receive it

What are the best dropshipping products?

At the time of writing this article, the best place to dropship from is Ali Express. That is because they have almost every product that you could ever think of and their prices are very reasonable. Most of the sellers on Ali Express are used to dealing with dropshippers and will be happy to answer any questions that you may have.

There are a number of disadvantages to buying dropshipping products from Ali Express though which we will go through below. However, the main one is that they are shipping from China and shipping times can be longer. This means that your customers may not be happy with the long shipping times and if your customers aren’t happy, then your payment processor (or Paypal) won’t be happy and things can very quickly spiral downwards.

Why don’t my customers buy direct from Ali Express?

That’s a pretty good question and one that we will go over in more detail once we discuss sales tactics. However, in short the answer is that your customer doesn’t know that what they are buying from you, they can buy far cheaper from Ali Express. You are out-marketing Aliexpress in this case.

How to make money from Dropshipping?

Making money from dropshipping is far from easy and anyone who tells you otherwise is probably trying to sell you a course. I have sold well over $1m dropshipping products and it definitely isn’t all rosy. Even when you think that things are going well, things can go wrong very fast.

Before selling a product on Shopify you need to be very certain about you ‘numbers’.

Some things you need to be aware of are:

how much you are paying for a unit
how much you are selling that unit for
how much you are paying to a payment processor (around 3%)
how much you are paying to Shopify or anyone else who is hosting your store
your starting costs. eg. graphics, design copywriting etc.
any additional apps or software that you may be using on your store
the amount you may be paying support staff if you are not doing it yourself
helpdesk software
advertising and marketing
email autoresponder

and a host of other monthly charges that you will suddenly need to start paying.

As a rule of thumb, I only sell a product if I can sell it for 3 times the amount that I am paying for it. So, if I am buying it for $10 then I will want to sell it for at least $30.

ASIDE: At this point you will probably be wondering if Product X is an exception that this rule doesn’t apply to for some reason. Whatever the reason is, the answer is NO. Just no, no, no…

If you don’t stick to this rule then in almost every case you will NOT make money.

Can I lose money by dropshipping?

Absolutely! In fact, you are far more likely to lose money than make money – especially at the beginning.

The reason is that you will find that you are paying more for the sale than you are making in the sale.

Unless you have free traffic, you will need to buy traffic through advertising which can be very expensive. You will need to be very careful that you are not overspending on each customer. This is why it is so important that you know your ‘numbers’ so well.

What products shouldn’t I dropship?

Whilst I can’t give you specific products or this article would be extremely long, there are certain categories of products which I would advise you not to sell.

Some examples are:

anything that goes against someone else’s trademark or copyright. For example. don’t sell fake Nike shoes or Disney hats.
anything that is even slightly illegal. The reason should be obvious, but in addition it just isn’t worth the hassle that you will get
anything that is prohibited by Facebook/Google/MSN etc to be advertised. It severely cuts down your option if you can’t use these
try to find something that sells for at least $30. It is possible under this price-point but I have always found it far harder to profit under around $30.

Any more tips for dropshipping?

I have a load more and will add them on this blog. But just remember that finding a product that sells profitably is just half of the challenge. The other half is being able to actually make money on that by scaling and not running out of cash.

Good Luck!