Who wouldn’t want independence from wage slavery by starting your own business? I applaud you for making that leap, or trying to. Just by watching this video, it shows you want to get this independence the smart way, not the get rich quick way. This video is not the typical step by step “how to” on getting rich with drop shipping schemes, but a how to video on applying sound business practices to ensure that your drop shipping business, or general e-commerce site, becomes a viable brand that can make you sure money over the years and deliver high quality customer service. Without this approach, your chances of making money will be 0% for the vast majority of you.
In fact, most of you won’t make money at drop shipping or e-commerce because you probably came to the game based on someone trying to sell a get rich quick scheme instead of offering a real pathway to success. I have no agenda other than helping you think through your business plan so that, once you achieve success, you will hopefully remember me and come back to show gratitude by signing up for one of the levels on my patreon page.
You probably already have a basic idea of what drop shipping is, but let me give you a wake up call: Much of the processes behind online drop shipping is not what it seems. As good as e-commerce platforms like Shopify, Big Commerce and others are, they are just platforms. They don’t fully explain drop shipping. In a nutshell, the drop shipping business models that are popular right now are inflationary schemes.
Why do I say inflationary? Because the US based drop shipper, who is adding a profit to the product price, is getting products shipped by a Chinese drop shipper, who in turn is adding its profit to the same price. They in turn are getting the product usually from a Chinese wholesaler, who in turn adds its profit. And this wholesaler is getting the product from a manufacturer, who is expecting a profit. That’s 4 price hikes in the supply chain.
So you ask, what is a supply chain? Most of those wanting to get rich with drop shipping don’t know what this is, so you will be ahead of the curve after I drop this science. Looking at how Investopedia defines it, “A supply chain is a network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer.”
In other words, you as a drop shipper are part of that supply chain. Your goal should be to make this supply chain as efficient and cost effective for you and your customer as possible. Since you are the last step in the supply chain that the customer sees, it is most important for your part of it to be valued by the customer. If the customer does not feel you provide value to it, they will either complain, seek a refund, or not buy your product at all.
And guess what? As a hands-off drop shipper, you don’t control the supply chain at all! That might sound easy when these experts on YouTube tell you it’s easy, but the reality is that you are on the hook with irate customers. For instance, what if someone orders a $30 product from your website, but the Chinese drop shipper decides to keep the money and not send anything.
Who do you think the customer will take to court? Whose brand will be messed up on Yelp and Facebook and every other online platform that the customer review pops up on? It falls on you. There are drop shippers who have had to come out of pocket and reimburse the customer when things go wrong in the supply chain. One drop shipper even had to reimburse the customer when a very popular e-commerce platform suddenly withheld his funds that he was going to use to reimburse the customer. It took him months to get his money from that platform. Other inexperienced drop shippers got sued.
Major banks who process cards are starting to get tough on fly by night drop shippers because consumers are complaining more and more, resulting in higher rates of card chargebacks. What’s a chargeback, you ask? It’s a refund against a card purchase that banks have to front to the angry customer, and if enough chargebacks happen, they start to go after the company whose product deficiency caused the customer to want their money back. Drop shippers are starting to pop up higher and higher on the banks’ dissatisfaction radar, so be careful and follow sound business practices.
Is that what you want? I really don’t want to see you go through that. I want to see you succeed. But you can’t if you don’t under simple supply chain management techniques. You don’t need a PhD in this area, but you need a basic understanding in order to protect yourself from losing money due to lawsuits, chargebacks, and the freezing of your money by the e-commerce platform. Nobody really talks about this dark side in those fun and cute drop shipping videos, so I am telling it to you raw and real. Go learn basic supply chain management techniques.
Without going into details about business principles and processes, which is part of my lengthy professional career, I am focusing on highlighting key fundamentals to give you a quick blueprint on how to approach your business dreams. Marketing is only one area of business, and there are some great tools on Facebook, Google, Pinterest, Amazon and other platforms to help you realize your marketing goals. But what is marketing? No need to rehash textbook definitions. Philip Kotler, considered the father of modern marketing, summed it up nicely in 2018:
“I see a lot of brand decay, partly because many brands seem to have a sameness of offer and pricing terms,” he says. “Brands have got to get better at differentiation. Some brands ought to lock into a specific customer problem so they are the only brand really talking about that aspect of a customer’s [life]. Marketing is best when it is need-orientated, when it is really solving a customer problem.”
Customers don’t just buy your products to enrich you. They buy from you because what you offer supports some aspect of their lifestyle, whether it’s a need or a want.
Your job is to find them and figure out their needs. FB Ad Manager, Google Analytics and Pinterest Analytics are good tools for trying to figure that out. Social media influencers can help you connect better with the target demographics you identify using these tools.
Ok, that’s it for this video. Be sure to like, share and subscribe, and hit the notification bell as I will be releasing more videos in this series. The next video will cover best practices for using technology in your e-commerce business. I’m John the CEO, take care.
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