What Is Dropshipping About and How Does It Work

Dropshipping is a business model that seems to get a lot of attention from many who are just in the beginning stages of their journeys as online entrepreneurs. And it’s understandable, as dropshipping seems like a very attractive business model.

In today’s blog post I want to take a closer look at what dropshipping is, how it works and what my personal experience with this business model, as someone who built several dropshipping stores in the past, is.

Spoiler Alert: Dropshipping is NOT your best bet if you ask me! But let’s not get ahead of ourselves.

What Makes Dropshipping Attractive

Especially smart content creators who want to sell their online courses on dropshipping are not going to get tired to push the business model, claiming

  • how simple and cheap it is to get started,
  • how you won’t need to manage any inventory (other than with Amazon FBA, for example)
  • how you can adjust your business to a different situation in just a few days

And most of that is true to some degree. If you manage to find what is called a “winning product” in the early stages, which, at least from my own experience, isn’t very likely and can, in fact, become quite an investment pretty quickly.

How Dropshipping Works

What you basically do as a dropshipper is

  • you build a store around a niche that promises to be profitable (and there are proven ways how to do that) and, ideally, that you are interested in
  • research products on platforms like Alibaba
  • add those products to your storefront at a higher price (something that costs $10 on AliExpress will probably have a $30 price tag in your store)
  • and then get creative by setting up ads that you will shove in your potential-customers’ faces through Facebook-, Instagram  and YouTube ads
  • finally, you fulfill the orders by forwarding them to AliExpress and directly have the orders shipped to their doorsteps
Guaranteed Passive Income Opportunities - Building Apps
Dropshipping is all about ads, ads, ads…

Most dropshippers will justify the higher price tags in their stores by saying that they get paid for doing the work of getting the product in front of their customers and therefore charging more. I can see how and why this is their rationale, but I never felt quite comfortable with the idea of sending customers to my store (where they would have to pay much more) than they would have to pay when ordering directly through AliExpress.

I personally tried back a few years ago but I never was quite happy with it. On the one hand, it just never felt quite ethical to me. On the other, I wasted a few thousand bucks on a high ticket online course (that never paid off, though it promised to be bulletproof; like they all do) and on testing ads for products that never really took off.

That’s my personal experience, though. Successful stores like wish, as a prototype dropshipping business, are proof of how incredibly successful this business model can be. If you want to learn more about dropshipping and learn about a platform that teaches you how it can be done, you may want to read my review of Online Marketing Classroom here.

How “Passive” Is It?

Dropshipping sounds pretty passive when you hear about it first. Just drive traffic to your store by setting up ads and forwarding orders to the manufacturer. How hard can it be, right?

Actually, running a dropshipping business can be a pretty “active” job. As dropshipping is a rather short-term business with winning products suddenly not selling anymore, or competition driving bids on ads up and therefore turning a successful, profitable product into a lame duck from one day to another, owners of dropship businesses have to constantly look out for new product opportunities and test ads over and over again.

What Is Dropshipping About and How Does It Work - Dropshipping Can Become Pretty Timeconsuming
Dropshipping can become pretty time-consuming!

Also, the fulfillment part, i.e. forwarding orders from your store to the original seller on AliExpress can become quite exhausting and boring. That’s why many dropshippers either outsource this or invest in expensive software that tries to automate the process, which, from my experience, usually does not work as flawlessly as promised.

Pros

  • Very Little Upfront Cost: The costs for initially setting up your business are quite manageable. Most costs, like those for running a Shopify store, are rather recurring, and somewhere in the USD 50 range. If, however, you decide to take courses that will help you get started, it’s a different story. Flagship courses sell for $1000 to $2500 and even though they promise to lead you to ultimate success, there’s no guarantee for them to make your business fly.
  • Very Agile And Dynamic: Dropshipping is a very short-term business and very dynamic in the sense that you can change the focus of your business and its audience in literally days. You just set up a new store, add products, and start running ads. The hard part is to find a profitable product, where the profit you make from selling them outnumbers the cost for ads.
  • Does Not Require Special Knowledge: There is no real “special knowledge” involved, You don’t need a master in business administration, nor do you have to be an engineer or excellent writer to get your business up and running. It literally CAN work for anyone.
  • Can Be Applied To Any Niche: Are you a cat enthusiast? Or a DIY maniac? Do you enjoy fun gadgets or love adventuring outdoors? It doesn’t really matter: It’s very likely that you can actually build a store and business around the niche you are excited about.
  • No Need To Manage Stock: You do not need to manage stock, as you are only forwarding orders from your customers to the manufacturer/original seller on AliExpress. That’s a big pro, as you do not have to deal with factories, logistic companies, warehouses or, in most cases, even customs.

Cons

  • Lot Of Testing And Throw-Away-Work: As dropshipping revolves a lot around researching new product opportunities, building ads for them, and testing them on social media, there will be a lot of products you cannot advertise successfully, i.e. make those ads run profitable. That means that you will build many, many ads, and you will also throw away a lot of them.
  • Testing Can Become Very Expensive: Testing ads means running ads for real money. To get your ads in front of people, you have to pay for them. That can become very expensive, very quickly, if you don’t happen to find a winning product that can pay for testing others.
  • Fulfilling Orders Is Boring: Forwarding your customers’ orders to the original seller is a tedious job if you cannot outsource or automate it.
  • Ethically Questionable: As I have pointed out before, I never felt quite comfortable when I tried dropshipping as a business model for myself. Selling products at a much higher price than what the same person would pay if she just put in the little work of searching on AliExpress for herself, never felt quite right; and when the instructors of the online course I paid so much money for finally suggested to claim that the product was 50% off and low on stock (to create some artificial scarcity) they completely lost me. I want to make money by creating value and helping people, not by lying to them!

Verdict

What Is Dropshipping About and How Does It Work - Ethics Of Dropshipping
How important are ethics to you as a business owner?

Dropshipping works. Just look at Facebook. How often do you get ads for products that claim to be miracles, invented in secrecy by some genius that you have never heard of? Chances are, these ads come from dropshippers and it took them some… ehm… let’s say creativity to come up with it. Just go over to AliExpress, search for the product, and then compare the price they are selling it at with the price advertised on Facebook.

So yes: It works, quite well for some! But many fail! And I’d say that it does not give you the good feeling of purpose in building your business if the purpose you are looking for is something different than just making a quick buck. If you rather want to build a business that is focused on helping people and adding value, rather than just getting your hand on other people’s hard-earned cash, I’d personally suggest staying away from dropshipping.

  1. Upfront investment (more stars = less investment required)
  2. Time until “First Dollar Earned” (more stars = less time until first dollar earned)
  3. Tollerance for making critical and expensive mistakes (more stars = better for beginners)
  4. Competition (more stars = less competition or less impact of said competition)
  5. Satisfaction and ethical qualities (more stars = higher satisfaction and more honesty)
  6. Overall Rating (more stars = better)

Conclusion

For me, personally, building and running a dropshipping business was quite exhausting and little fun. Therefore, it’s not the business model I recommend to beginners. If, however, you are a very creative person who loves designing and playing around with ads on social media platforms, dropshipping might be something for you to look into.

What Is Dropshipping About and How Does It Work - Discounts And False Scarcity
Discounts… Discounts everywhere! Dropshippers make heavy use of fake discounts and false scarcity to rush buyers into making a purchase…

The ethical implications were the final nail in the coffin for me, personally: The entire idea of creating false scarcity and fake discount simply didn’t resonate with me. That’s not who I am, it’s not the way I want to do business, and it doesn’t make me proud. I want to help others, and I want happy customers!

My Suggestion

But then what? You already fell in love with dropshipping? That’s fine! I’m not saying you have to ditch the idea. If you like it, go for it and try it yourself. I’m happy you took the time to read my take on the topic and take it into your consideration. Great! I have reviewed one online marketing platform named Online Marketing Classroom, which teaches you how to get started, right here.

However, if you are open to alternative business models, then I would like to suggest something different: Have you ever heard of affiliate marketing? Yeah, it’s that business model with all that content creation involved. Blogging, podcasting, etc. I know that may sound scary at first! But it isn’t. It’s really not. I’d go so far and argue that affiliate marketing is the beginner-friendliest of them all. And it has such potential.

If you want to learn more about it, please make sure to check out my detailed breakdown of what affiliate marketing is all about or read my full review of Wealthy Affiliate here. You won’t regret it! Pinky promise!

Have you tried dropshipping? What was it like? Did you enjoy it? If you have anything to add or any questions, please let me know in the comments below.

All the best,

Chris

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2 thoughts on “What Is Dropshipping About and How Does It Work

  1. Gorjan Spirkoski says:

    Dropshipping is overrated, and there are so many things people don’t want you to know about. Maybe I’m a bit bitter, but that’s because I wasted a ton of money on trying to advertise ‘winning’ dropshipping products.

    But who knows, maybe I was terrible at it 😀

    I’ve moved on to affiliate marketing, and my business has been flourishing over the past year or so. It’s definitely a more sustainable way of making a living online, and it unquestionably beats dropshipping in my mind.

    Great post, by the way!

    Reply
    1. Chris says:

      Hey Gorjan,

      thanks for your nice comment! I couldn’t agree more. I can understand why people like the idea of starting a business out of thin air. Without having to manage an inventory and put money on the table up front for production, marketing, and so on (I mean, I fell for it myself). However, it can be incredibly hard to find that winning product that your business can finally thrive on. It’s a lot of testing, a lot of trial and error and ultimately it felt quite tedious to me. It just never made me happy!

      I know that feeling of asking yourself “Am I terrible at this?” – And I haven’t found an answer to it for myself yet. However, I am pretty happy that it didn’t work too well for me; otherwise, chances are that I would still be doing it; and I don’t know if running such a business would make me proud at the end of the day. I don’t think so, to be honest!

      Glad you moved over to affiliate marketing, just like I did, and are happy with it. Kinda proves my point 🙂

      I wish you all the best,
      Cheers,
      chris

      Reply

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