Dropshipping is where you sell a product and the manufacturer or supplier ships it directly to your customer. You never touch the inventory and you don’t even have to “buy” it until you already have the cash in hand from your customer.
As you can imagine, that makes it an attractive business model that you can get started without a huge upfront cost, especially when compared with the Amazon FBA business of buying a large bulk wholesale order from a Chinese manufacturer and hoping it sells.
Dropshipping is also a topic we haven’t really covered in depth in the past, but many listeners have been requesting to learn more about it.
I reached out to Anton Kraly, who’s one of the most successful people I know in this space. He’s been selling online for almost 10 years and he and his team have built out an impressive portfolio or drop ship stores.
He also teaches people how to get started with high ticket dropshipping over at DropshipLifestyle.com.
I don’t know if it’s spelled dropshipping, drop shipping, or drop-shipping, but will defer to the two-word version since that’s the way Anton has it on his site. Like how I put all those in there for the SEO spiders?
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Learn:
- How Anton recommends new sellers research potentially profitable niches.
- The criteria he uses to select products to build a store around.
- How to avoid a race-to-the-bottom on product prices.
- How to quickly set-up a “dummy” store using Shopify for $30 or less.
- Where NOT to find suppliers, and how to approach them instead.
- His most effective source of traffic and customers.
- Anton’s #1 tip for Side Hustle Nation.
Links:
- DropshipLifestyle.com | The Dropship Lifestyle Blog
- Doba.com (an example of a service not to use)
- Shopify (free 14 day trial)
- Google Product Listing Ads
Additional Resources:
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Stock photo by Wayne0216 via Shutterstock
Hi Nick and/or Anton,
Great episode and a very interesting chat between the two of you.
I am curious – What kind of margins would a drops hipper enjoy when involved with, say, Nicks example of a treadmill desk ?
(Perhaps this is the “how long is a piece of string” question!)
The reason I ask is that a decent affiliate commission on an item in the $1000-$2000 retail price range is approx 10%-15%, and could arguably be easier and less potential grief than drop shipping.
With drop shipping, the end customer buys the product from you, so you have the relationship with and responsibility for the customer – the profit margins would need to be significantly higher for this, wouldn’t they ?
Why would a retailer give a drop shipper a significant wholesale price when it could be arguably easier to set up an affiliate program that doesn’t cost them as much ?
Thanks,
Matthew
(Melbourne, Australia)
+ 1 for this great question, pity there hasn’t been a reply yet.
Hey Matthew (and Paul),
Sorry for taking so for taking almost two years to respond to your comment on here!
To answer your question, we aim to keep our net margins at a minimum of 25%. Meaning if we get a $1,000 order, we’re left with at least $250.
It’s important to note that the actual markup on the products is much higher and MAP is often 2x wholesale cost. Meaning if we sell an item for $1,000, our COGS (Cost Of Goods Sold) is $500.
The other costs to consider are shipping, merchant fees, hosting, traffic, software, and VAs if you use them. These costs would be deduced from the $500 profit in the example I just gave above.
With that being said, there’s no fixed margin when drop shipping. We’ve built stores where our net margin is ~20% and we’ve built stores where it’s >50%.
Regarding the comparison to affiliate marketing, there are many different reasons why selling direct is more beneficial but the main one is that new traffic sources become available when you’re selling the products direct. For example, you wouldn’t be able to run Google PLAs to an affiliate website.
Hope that provides some clarity!
Anton
Just found this podcast, this episode rocks!!! Sadly the link to the 10 day course doesnt work anymore