What is your view about dropshipping?

youmakeme · Dec 15, 2015

I have been looking at many threads with regards to dropshipping product from aliexpress to amazon/ ebay, etc. However I noticed that commonly there is one problem that were not properly addressed. You will need cash on hand to do this.

Say if you buy from Aliexpress, you are buying credit card (if you are fortunate to have one) or debit card. But you are receiving from Amazon after x days (I think it takes a week or so before Amazon payout) and if ebay, money is on Paypal which means at least three working days to be in your bank.

My question is how do you overcome this issue of cash upfront? The more you sell, the more money that you are going to need to turnover.

Sherb · Dec 15, 2015

These are general business terms. Start-up capital. Reinvesting revenue back into the business. You don't "overcome" the cash upfront. This is the real world, there are no working slimy workarounds that will get you anywhere near the level of people who actually have the capacity to obtain enough start-up capital to begin on the large scale.

Having cash on hand is not a "problem". It's a way of doing business. Know who doesn't properly handle cash on hand issues? Affiliate networks that aren't able to pay their successful affiliates. Don't get lumped in with those sorry sons-of-bitches.

Ambitious12 · Dec 15, 2015

Most people open up a dropshipped online store with the misconception that they will be receiving the same wholesale pricing as everyone else for their products.

In reality however, dropship distributors often charge extra fees and/or tack these fees onto the quoted wholesale price.

Put yourself in your distributor's shoes for a moment. Would you prefer to sell a large bulk quantity of products all at once to a store or would you rather sell onesy, twosy amounts to individual customers and be forced to individually ship and pack each item?

UptonGoodwin · Dec 15, 2015

There's a lot of methods that get shared on BHW that work much better if you have cash to invest in the method. Dropshipping is one of those methods, you are going to need cash to get properly started up and operating.

youmakeme · Dec 15, 2015

Very interesting insights. All these information will help to debunked the myth with dropshipping as many are selling so call money making concept as ebook to the public. This is fatal mistake as most of these authors do not address the issue with the startup capital involve.

Those buy these ebooks are usually newbies who cannot afford more than $200 investment a month. One way that I can think of to overcome the cash involvement is trade financing but this will be need to be backed by letter of credit and deals with larger volume of trades.

From my understanding those who do dropshipping are the smaller players. And they overcome by using their credit cards (or multiple credit cards) so that they can pay back within 30 days without paying for interest. This basically means that they can easily have around $2k-$4k per card and when multiplied by multiple banks cards, you can easily get close to $8k - $10k startup capital free from the bank. Also some of these banks give rebates for online purchases. Let me know if you think I am talking nonsense here and don't make sense to you.

UptonGoodwin said:
There's a lot of methods that get shared on BHW that work much better if you have cash to invest in the method. Dropshipping is one of those methods, you are going to need cash to get properly started up and operating.

Ambitious12 said:
Most people open up a dropshipped online store with the misconception that they will be receiving the same wholesale pricing as everyone else for their products.

In reality however, dropship distributors often charge extra fees and/or tack these fees onto the quoted wholesale price.

Put yourself in your distributor's shoes for a moment. Would you prefer to sell a large bulk quantity of products all at once to a store or would you rather sell onesy, twosy amounts to individual customers and be forced to individually ship and pack each item?

Sherbert Hoover said:
These are general business terms. Start-up capital. Reinvesting revenue back into the business. You don't "overcome" the cash upfront. This is the real world, there are no working slimy workarounds that will get you anywhere near the level of people who actually have the capacity to obtain enough start-up capital to begin on the large scale.

Having cash on hand is not a "problem". It's a way of doing business. Know who doesn't properly handle cash on hand issues? Affiliate networks that aren't able to pay their successful affiliates. Don't get lumped in with those sorry sons-of-bitches.

UptonGoodwin · Dec 15, 2015

The banks don't give you "free" start up capital. If you are using a credit card as a way to invest in your money making goals, you are going to just end up in a lot of debt.

Also 99% of the Make Money Online ebooks/courses that you can buy are garbage and are often not going to tell you that the method works better if you have money to invest in the method.

youmakeme · Dec 15, 2015

Maybe I did not make myself clear on this point about bank money.

For credit card, you are given around 45 days to pay back the money used to purchase from Aliexpress for example.
You receive payment when you sell on ebay or amazon, etc. The cash out happens within two weeks. Once you receive payment, you pay back to your credit card. So no interest are incurred. This what I meant by free money. This is capitalism concept. This is only suitable for dropshipping when customer pay upfront so there is no payment risk.

I do agree with you on those make money online tutorial. This is why I like to start thread on BHW whereby fellow members can critics or advise improvement on the methods shared.

UptonGoodwin said:
The banks don't give you "free" start up capital. If you are using a credit card as a way to invest in your money making goals, you are going to just end up in a lot of debt.

Also 99% of the Make Money Online ebooks/courses that you can buy are garbage and are often not going to tell you that the method works better if you have money to invest in the method.

UptonGoodwin · Dec 15, 2015

I more or less got what you meant and it's not a bad idea usually. It's just don't go and load a bunch of money on a credit card on something that could end up going bad and leave you paying off a high interest debt. For drop-shipping small items you'll likely be okay and have nothing to worry about, but if it's a higher ticket item, make sure you'll be okay if one of your customers tries to do a charge back.

youmakeme · Dec 15, 2015

You are so right in this. That is another potential pitfall with dropshipping. Especially when you start to scale up. These are some of the typical disadvantage that course seller don't address when it comes to selling their courses on dropshipping.

Thank you for your valuable input in this.

UptonGoodwin said:
I more or less got what you meant and it's not a bad idea usually. It's just don't go and load a bunch of money on a credit card on something that could end up going bad and leave you paying off a high interest debt. For drop-shipping small items you'll likely be okay and have nothing to worry about, but if it's a higher ticket item, make sure you'll be okay if one of your customers tries to do a charge back.

Simas9 · Dec 15, 2015

Most of the affiliates don't have time/cash/determination/balls to start drop shipping, so yes...this is a good strategy, go for it.

Starting my drop shipping business back in 2009 was probably the best thing I have ever done with my life

youmakeme · Dec 15, 2015

Hi @Simas9, care to share a bit on your journey on dropshipping? What makes you go into this niche and how did you figure out the winning formula? Maybe could you give us a hint on how you are doing this? Don't worry I am not going to ask for proof or sales figure, etc. I am sure all of us are wise enough to read what works and what don't.

I think it will be very interesting to hear from your point of view regarding dropshipping.

Simas9 said:
Most of the affiliates don't have time/cash/determination/balls to start drop shipping, so yes...this is a good strategy, go for it.

Starting my drop shipping business back in 2009 was probably the best thing I have ever done with my life

toml3030 · Dec 15, 2015

youmakeme said:
However I noticed that commonly there is one problem that were not properly addressed. You will need cash on hand to do this.

ALL businesses need capital to flip the merchandise over, pay for upkeep until your revenue can cover the overhead, etc. Anyone telling you that you can do any legitimate business with zero costs is not telling you the reality. I have done some consulting for people who want to open retail businesses that you shouldn't expect any income for the first six months to a year.

toml3030 · Dec 15, 2015

Ambitious12 said:
Most people open up a dropshipped online store with the misconception that they will be receiving the same wholesale pricing as everyone else for their products. In reality however, dropship distributors often charge extra fees and/or tack these fees onto the quoted wholesale price.

Another problem you will run across when you scale up is that the Chinese dropshippers are themselves selling the stuff. For example, if you're buying something for $25 and selling it for $40, you will find eventually find out that your dropshipper is selling the exact same thing for $35, and they're using your orders to build their email marketing list.

toml3030 · Dec 15, 2015

youmakeme said:
For credit card, you are given around 45 days to pay back the money used to purchase from Aliexpress for example.
You receive payment when you sell on ebay or amazon, etc. The cash out happens within two weeks. Once you receive payment, you pay back to your credit card. So no interest are incurred. This what I meant by free money. This is capitalism concept. This is only suitable for dropshipping when customer pay upfront so there is no payment risk.

Have you seen how little profit some of these drop shippers operate on? I have seen people try to run dropship operation on as little as 3% profit on an item or less. That means for every time you get scammed out of one item, you're basically doing the next 50 items for free. You don't want this to happen while paying your credit card company 25% interest. Using debt as operating capital is very risky because you have no ability to come back from a disaster.

Let me tell you a story. There was this young couple who tried to dropship a bunch of $100-$300 items from a VERY reliable vendor. Vendor shipped promptly, the product was unique, and tracking # was always sent before the estimated ship time. The business was good, and they had thousands of dollars in the pipeline at any one time. The business was so good, in fact that they started getting other family members into the business. Then one day, the formally reliable drop shipper stopped shipping. Within days their eBay/Amazon account was banned and their business went belly up. How do I know this? Because I was the drop shipper. These people took the item I was manufacturing for them and took it to one of my competitors, trying to make $5 more on an item by ripping off my designs. Little did they know that this competitor did not do their own manufacturing and outsourced the manufacturing to me.

youmakeme · Dec 16, 2015

@toml3030 thank you for your input and perspective from dropshipper point of view. Definitely your input is of great use to all of us. So the biggest concern is with chargeback and product returns (and of cos dropshipper themselves). As per all businesses there are always risk involve. I think this thread is certainly useful to those who are into dropshipping and a newbie in this area. It certainly helps alot with different perspective from each respectable members here on this forum.

toml3030 said:
ALL businesses need capital to flip the merchandise over, pay for upkeep until your revenue can cover the overhead, etc. Anyone telling you that you can do any legitimate business with zero costs is not telling you the reality. I have done some consulting for people who want to open retail businesses that you shouldn't expect any income for the first six months to a year.

toml3030 said:
Another problem you will run across when you scale up is that the Chinese dropshippers are themselves selling the stuff. For example, if you're buying something for $25 and selling it for $40, you will find eventually find out that your dropshipper is selling the exact same thing for $35, and they're using your orders to build their email marketing list.

toml3030 said:
Have you seen how little profit some of these drop shippers operate on? I have seen people try to run dropship operation on as little as 3% profit on an item or less. That means for every time you get scammed out of one item, you're basically doing the next 50 items for free. You don't want this to happen while paying your credit card company 25% interest. Using debt as operating capital is very risky because you have no ability to come back from a disaster.

Let me tell you a story. There was this young couple who tried to dropship a bunch of $100-$300 items from a VERY reliable vendor. Vendor shipped promptly, the product was unique, and tracking # was always sent before the estimated ship time. The business was good, and they had thousands of dollars in the pipeline at any one time. The business was so good, in fact that they started getting other family members into the business. Then one day, the formally reliable drop shipper stopped shipping. Within days their eBay/Amazon account was banned and their business went belly up. How do I know this? Because I was the drop shipper. These people took the item I was manufacturing for them and took it to one of my competitors, trying to make $5 more on an item by ripping off my designs. Little did they know that this competitor did not do their own manufacturing and outsourced the manufacturing to me.

SantaInThailand · Dec 16, 2015

What is your view about dropshipping?

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