Realistic expectations of dropshipping business

Thanks Alksense. I read some of your other posts and you're a sharp guy.

I appreciate your response and I'm sure we'll run into each other again soon. I stumbled onto this community and am very glad I did.

Thank you - this was very helpful to me - even though it is an old post.

Well, today there are products research and tracking tools available that can help you find the profitable products and niches. Automated research tool can take the pain out of the manual research which is so 2012.

This helps, thanks.

Well, I may've over-simplified it, but yes. It almost always makes the most sense to contact the manufacturers of the top brand names directly first. Often times THEY will dropship, and if they won't, they can usually give you contact details for large bulk purchasers (aka distributors) that are open to it.

Yes, 'dealer accounts' or 'resellers' is typically what they call it.

You want to look at supply and demand for whatever portal you intend to drive traffic & sales from (typically Google is the #1 source to focus on).

Demand is easy, just see how many times a keyword phrase is searched for in [exact match] mode within your targeted country (usually the US). As you look at keyword phrases, also consider the amount of "intent to buy" each keyword phrase has (i.e. 'appex dog houses' has quite a bit more intent than 'dog house'). We look for keyword phrases that clearly represent a product type and get at least 80-100 exact match searches per day.

Supply is bit trickier and it really comes down to "strength" of the sites showing up on page 1 of Google (organically). If you aren't an experienced SEO that can quickly analyze websites you will want a keyword tool that can do this for you. There are many available out there that do a decent job, but I actually have one on my website that I designed and use exclusively for this purpose. It looks at the top 10 ranking pages for any given keyword phrase and analyzes how well they are doing on the top organic ranking factors before spitting out a "score." The score is a number between 0 and 100 that represents how challenging it will be to get ranked on page 1 for that phrase. We call the score a MOS (Market Opportunity Score) and recommend finding phrases that have an MOS of 80 or higher. The tool is called Coach's Keyword Tool and we are very proud of it!

Once you find a couple keyword phrases that represent a product line and pass the above factors, you want to think about the product lines these phrases represent and consider a couple other important factors: local availability and expected profit per order. We like product lines that aren't readily available to people locally in a wide selection and that we anticipate making at least $30-$40 per order on. You won't know the actual margins at this point, so you have to estimate a 20% profit margin on the order total.

I hope this info is helpful!

A DBA + seller's permit usually works just fine. However, I recommend getting an LLC or S Corp after you start making sales and making money. Both of those business types provide far more protection to you and your personal assets!

FYI, establishing a business entity and getting a sales tax permit is an extremely simple process in most states and something that you shouldn't be afraid of. It's typically something you can do online in 15 or 20 minutes and it's really no tougher than filling out a credit card application!

Here's a good article on our website about types of business entities and the PROs and CONs of each: http://storecoach.com/articles/artic...iness-entities

Nothing, they are different titles for the same thing. Really, they are all just names for the permit that you need from your state to be a registered retailer within that state.

Well, if you are in another state within the US I can't really see any reason to do that. I'm guessing you are considering it to avoid paying sales tax, but it's probably not worth the effort in my opinion. It's easier to just set it up in your cart to charge sales tax within your registered state and pay it to your state quarterly.

Certainly no offense taken. Because I was giving an overview I didn't go into as much detail as I could've on that point. We are NOT against selling items that are available locally. We are against selling items that are available in a wide selection and various price points in local "retail giant" dept stores. We find that if someone can pick it up at Walmart for the same price it doesn't make for a very good online store. We do better when we sell specialty items that are a bit more expensive and not available at competitive prices in national chain stores.

Hi, a7hanatos,

You will find plenty of advice in this thread and others on how to find a niche, so I won't comment on that, but I would like to add something about sourcing a product line once you have chosen the niche.

My suggestion is to go direct to the manufacturers, but don't dropship. I know this is heresy, and many warriors who are fanatical about dropshipping would like to see me burnt at the stake for such heresy, but......

There are plenty of good reasons and I will give you a few:
1. Higher profits.
2. Higher profits.
3. Higher profits.

Seriously, there are more good reasons, not the least of which is that you can locate products that are unique to you. You will never find unique products on a dropship wholesaler's list.

"Ah!" they will say " but you have to place huge orders to buy direct at good prices." My reply is that in 22 years prior to my retirement I ran an importing business, which I franchised in 4 countries, and I and my franchisees rarely placed huge orders.

True there was an occasional order for $50,000 or so, but most shipments came in under $1,000 and many were as small as $100. The great majority came in by air courier, making the importing procedure a breeze.

If my franchisees could not mark up by 250% they would have walked away from the franchise and sued me. In reality they often made much, much more than that. A selling price of (Total landed cost + selling costs) X 877% was the best figure reported to me. My personal best was Total cost $3,000 and selling price $21,000 for a single sale.

The market was B2B, but similar profit margins are possible for any marketing area provided you buy at the right price. My belief is that the only way to get the best possible buying price on a consistent basis is to buy from real manufacturers.

By real manufacturers I don't mean the multitudes of "manufacturers" listed on many of the B2B sourcing portals.

Well, if you find a supplier that dropships products from a manufacturer that enforces "MAP" you don't really have to do competitive pricing analysis, you can just put all the product right at MAP. As Anton eluded to previously, MAP provides a health margin above "cost" and protects the market from price wars.

For product lines that aren't protected by MAP, it is usually unrealistic to try and check "all competitor's prices" and you just have to choose the top 1 or 2 rankings stores and match their prices.

PS: NEVER undercut ALL competitors. This is how price wars start and every retail in the market ends up losing!

You can save yourself a lot of time just by calling suppliers before applying with them and asking if they enforce MAP policies. Of course it's also possible to make money with suppliers who do not enforce MAP polices but I don't like to sell for these suppliers. Like Dave said; you don't want to get involved in pricing wars and get to a point where no one is making any money. MAP protects your profits to avoid that situation.

If most of your products have MAP that's great. Why not list the other products without MAP too? Just set your price at a price that is worth it to sell.

Good advice. The only thing that I'd disagree with is where you said "You have to start at the top with the manufacturer and work your way down".

I've seen so many people post similar comments and it's simply not the case, at least not with all suppliers. I currently work with nine different companies (some much more than others) and of those, five I have end column or very close to it. I didn't have to buy anything up front or sign any agreement stating that I'd sell a certain amount over a set time frame either. There are certain tricks of the trade that, when used properly, can get a high success rate and greatly increase your profits right out of the gate.

Also, as I mentioned before, the internet is NOT the only way to drop ship for a living! I know that there are multiple companies and individuals that drop ship and make a great living without having an ecommerce store at all.

That being said, I'm just now starting to build an ecommerce store because it makes sense to leverage the internet and not have all of my eggs in one basket. Still, this is only one of many ways to get customers.

If we get back to the title of the thread, "Realistic expectations of dropshipping business", I know for a fact that I can find a supplier and be in profit with 1-2 days, sometimes the same day, and it has absolutely nothing to do with the internet.

Not to rant. Sorry if it reads that way. It's certainly not my intent. I'm kind of like "ImportExport". He knows from years of experience that he can do what he does without having to drop ship. I know that I can drop ship AND get best pricing, or close to it, without the internet and almost zero start-up capital.

Also, I know quite a bit about SEO, PPC, content syndication and other traffic methods. I highly recommend using more than one and I recommend using offline, if it pertains to your business model.

I've had businesses crash and burn a few times over the past 12 years simply because I didn't diversify my traffic sources enough and be flexible enough to branch into other areas of business. Having all of your eggs in one nest, whether it's the industry you're in, your suppliers, your traffic methods, etc is never wise. You can be making a killing one month and a month later have everything come to a screaching halt.

Just sayin'. :-)


Also, there's always a possibility that Google could one day decide to charge for ALL buyer keywords. That's no joke, folks. They know very well which keywords convert best. They have an enormous amount of analytics data!

You'll notice that over the past five years or so they've been giving precedence to their paid ads by adding a third listing to the top of the PPC ads. This pushes the free ads further down the page. They don't care about those people.

There are also some merchants who've been advertising on websites with high rankings in Google and Google isn't making anything from that. Wouldn't it make you mad if someone were not only running their business on YOUR property for free, but also collecting rent from someone else while you got nothing?

Honestly, rather than give away all or most of the buyer keywords long term, I wouldn't be surprised to see some listings in Google become paid only, at least for the first few pages. They're just now really starting to get a real grasp on listing relevance (for the most part) with their ongoing Panda and Penguin updates. Dave also mentioned that 8-10 listings for most buyer keywords are ecommerce sites in his webinar. How long can the "powers that be" at Google ignore that?

I'm not trying to be negative, but there's a strong possibility that they could grow tired of giving away that prime real estate for free. If that happens there will be a huge shakeup in the way things are done online and many small ecommerce stores won't be able to survive.

Be warned! They've done a lot of other things in the past that have crushed small businesses. This is not out of the realm of possibility. I'd start diversifying now!

What I do offline has nothing to do with ecommerce stores. The name of this thread is "Realistic expectations of dropshipping business". The term "drop ship" does not in any way, shape or form mean that it's only relevant for ecommerce stores.

I use the telephone - a lot. I have some customers that I've done business with for nearly 20 years now. That's from working for 6 other companies (two that my wife and/or I owned) plus the one I own now. I'd get mad and quit or get fired and then end up going back or going somewhere else and these guys would keep on buying from me. Why? Because I'd earned their trust and I respected their time and their needs.

By building a trusting relationship with an individual I'm able to overcome much of the price comparison roadblocks. Don't get me wrong. I always remain competitive and rarely sell for list price, but I don't try to beat everyone elses prices out of the gate either. I only drop my prices if I have to meet or beat someone else. Otherwise, I charge fairly, but accordingly.

You see, people buy from people that they know, like and trust. I'm not just a number on a website. When customers call my toll free number they don't get a customer service representative from overseas that speaks broken English (nothing personal towards anyone overseas). They get me - 100% of the time (during business hours). You have no idea how endearing that makes you to some people.

Do I think that having an ecommerce store is necessary in order to run a business in 2013?

NO!

I know this for a fact. As a matter of fact, unless you have at least some experience in internet marketing, SEO, PPC, content syndication, writing web content for product descriptions and more, you may struggle setting up a store. Dave has a system that he uses that can greatly increase your odds of success, as does Ezra Firestone and others. However, that's still no "guarantee" of success.

Just like any normal affiliate website, you could spend a significant amount of time, effort and/or money trying to make something work and end up having it fail.

On the other hand, all I need to do is use my proven system to see if people are already buying what I plan to offer and, if so, get on the phone and start selling it. Pretty simple stuff - AND I can have cash in hand in 2-3 business days, sometimes sooner.

I will say that business to business is the best way to go, though. That way you can avoid nearly all telemarketing laws. That being said, I'm not an attorney. I highly recommend that you study the laws yourself, read closely what applies to your situation, the products you intend to sell and hire an attorney if there's any confusion.

All that being said, I do plan to build an ecommerce store, use Amazon, Ebay and other relevant resources, have an online newsletter, etc as well. Like 7 figure marketer, James Schramko, said not long ago, "be everywhere".

There are other things that I intend to do to leverage my efforts as well, but I'm saving that for my report. :-)

Bottom line - you can make a great living by simply rolling up your sleeves and working hard. Even $100-$200.00 per day would give some people complete freedom. I guarantee you that it's right there for the taking. All you need is a laptop and a telephone. You can work anywhere you want.

HTH,

Joe

I'm not sure what you're experiencing because we are getting dozens of successful free trial sign ups every hour!? It must be an issue with a specific version of web browser or something. Try using a different browser or give me specifics on your browser / operating system so I can have one of our programmers look at it.

This is like asking "how long is a piece of rope?" There are far too many factors involved to give you a specific generic answer that would cover all stores. The more sales/inquiries you get the more CS time is required. Also, the amount of follow up greatly depends on the products you are offering. Some product types require a lot of post sale hand-holding and follow up, while others require little or none. These are important things to consider when you are trying to decide what niche to build your site around (the three most important considerations are listed here and we call them the "Big 3").

Hey - i am in the same boat of starting this exact model - and would like some help. Would you be able to help? I have been doing research on using Shopify and utilizing both Instagram and FB ads as well. Hopefully i can get a response in this area.