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Comment by LargeWu | Hacker News Reader

Many "successful" dropshippers simply sell success. That is, they make claims about how much money they're making, and sell courses or coaching to unwitting marks. And if their marks' stores don't pan out, they an always offer the "advanced" course, the "super secret" formulas, just give me another $3000 please.

There might be a few bros out there doing well at this, that is, actually selling things to consumers, but mostly it's selling inessential products to indifferent consumers at tight margins. There's nothing wrong with dropshipping as a business model, per se, but there's a lot of hype and shadiness going on in these circles.

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My second job out of college, back in 2011, was as the only employee for a drop-shipper who sold fabric for upholstery, lighting, and all kinds of home furnishings. Her website was an off the shelf .NET ecommerce app she probably paid a few thousand for. I was the customer service rep and web dev for the company. She did surprisingly well, grossing $120-160k a month. Her margin was around 20% I believe. I made a pretty small salary but it was a great way to kickstart my dev career.

Edit: For clarity.

Did she say how long it took to get to those sales? Did she have any exclusive distribution deals?

She used to have her own store in Marin County. Too much overhead. I think she lost it in 2008ish and went purely online then.

So she built up knowledge, customer base, sales and reputation offline and was able to carry it over online?

Her biggest success was upholstery fabric. Forgot to mention she did a decent amount of wallpaper, probably 15% of her business. Furniture was a very very small portion. I don't think there was much overlap other then both businesses being designy but her store was a furniture showroom. Her sales were nationwide. I think she took a lot of business from interior designers who would sell at a high markup to customers.

Thanks for clearing that up.

As a frequent importer I think the most important thing she built was a relationship with her supply chain in China which was likely unique and an understanding of prices and quality in the industry. Her intimate product knowledge is the biggest difference between her and a normal dropshipper.

It was early days and I think she just had about 200k different fabrics and wallpapers and ruled SEO or at least got a decent chunk. She probably did well because of the bulk import of products. I am not sure but I think all of the warehouses were in the US. We didn't talk to anyone in China. We placed orders through distributors that sold to retail stores. The brands I remember were Duralee, F.S. Schumacher, Ralph Lauren, and others I forget. Customers knew what they wanted, usually from an interior designers recommendation. We could just send them a swatch of a specific run of fabric or wallpaper. It was always messy though because it was almost impossible to guarantee the swatch would match the actual product delivered. Every run of a product is slightly different. It's why people buy extra carpet or wallpaper for high traffic corridors to be replaced early.

The article hits on this a lot, and if you look up the main subject (Mike Vestil) on Google, some of the first hits you'll see are videos from him like "TURNING $2 INTO $500000!" Ironically, even Mike himself in the article says that he hates that part of the dropship culture.

But if you really want to see how prevalent it is, take a look at r/dropshipping. There's tons of posts trying to sell courses, or Shopify themes, or a new commerce platform, etc. There's an entire "get rich quick" industry that's aimed at targeting other "get rich quick" dropshippers.

It feels a lot like this Key and Peel skit, but more bro-y: http://www.cc.com/video-clips/xqcrmn/key-and-peele-con-artis...

Oh my. I checked out that Reddit group. There are people making posts trying to sell something, and in the comments people trying to sell the original poster something different. It's turtles all the way down.

Do you know of any courses that could teach me how to sell dropshipping courses to wannabe dropshippers? I'll pay $$$.

That should be easy. You’ll find plenty of “master classes” on online marketing from the same snake-oilers. They might actually fit the bill here, because the only thing they teach you, if anything, is how to push useless, digital content to suckers.

source: I know someone with a proper addiction to this stuff. Think 6-digits “invested” in “life-changing material”...

;(

In sales or trading, if someone is selling courses its a strong indicator that their advice isn't any good. If it was they wouldn't be sharing it.

There is a useful market for it. There is only so much you can do, so if you specialize someone can take your same tricks to a different speciality.

There is a lot of scams in there though. Telling the difference is not easy.

Those who can, do. Those who can't, teach.

Unfortunately this kind of thinking is also why I’ve never created a YouTube channel or blog to teach people software dev stuff from my years of experience.

I keep thinking I’ll come across as a failed developer who now has to teach for ad money because he can’t do anything else anymore.

Meanwhile they have become the rockstars of the dev world. Get on twitter and hashtag away.

How much does a “rockstar” dev make anyway?

A lot if they play their cards right as consultant.

Still not seeing dollar amounts.

I think most will struggle compared to a 6 figure salaried developer consistently bringing in paychecks.

Adam Wathan is a great example because he has shared details along the way.

His last php course I think he made 300k+. His latest css framework by my calculations netted him over a million.

His in previous refactoring to collections I think he made between 100-150k.

He recently down turn off all ads on his radioshow because he doesn't need the money.

Taylor Otwell has made millions from laravel ecosystem saas type sites.

Jeffrey Way doesn't disclose figured but based on user count and monthly revenue he must be pulling in at least 500k.

It's out there if you want it. Start a radio show, get opinionated, sell others on your vision. Then offer products to support your new vision.

> I keep thinking I’ll come across

Why? Youtube is a vast wasteland of videos, if people think that then your videos simply won't get many views, if people do find you insightful you will.

Unless you're specifically worried about the lack of low views maybe upload some random videos of you wandering around maybe even talking about random things first (because there's a trillion videos on youtube of people doing this already) so you get used to it.

1. If you try to make money on youtube with ads... good luck with that. Thats not the business model of most devs who teach on youtube.

2. Before your youtube channel becomes popular to get noticed in a good or bad way, it will probably take a long time. Teaching code, being good at coding and being popular on youtube are 3 skills that dont necessarily overlap.

3. If you do get noticed, the (financial) benefits of it far surpass any developer job. And usually it actually help you to get dev jobs anyway.

If YouTube devs aren’t using ads as a business model what is the financial benefit? Selling courses? Consulting? Books?

Some do it purely for the love and others for (directly or indirectly) promoting their paid courses.

I used to think like this.

Until I realized it was incredibly cynical, selfish and self-centered.

Not everybody has the same motivations, and this is not a zero sum game.

I love coding.

And I love even more teaching other how to code and help them get to where I am.

Coding is not sales or trading and I didn't intend for this aphorism to apply to programming.

If you know a stock is going to appreciate in value and you tell everyone about it, they are going to buy it and cause the stock price to rise. If you didn't buy any and they did you will miss out on the appreciation. Alternatively, if you buy enough of the stock and don't tell anyone that will also cause the price to rise in value and other people will miss out on the appreciation.

Teaching someone else how to be a better programmer does not diminish your market value as an engineer in any meaningful way. It most likely increases it. Disclosing your winning trading strategy will make it so you can't profit off it because your trading costs will rise to such a level that the trade is unprofitable.

There is also a tendency with these kind of businesses to happily disclose sales, but not much beyond that. Sure, making $200k a month is great for selling courses but they don’t tell you they had to spend $199k in facebook ads to get there.

Most of these businesses would be doing great if they could make $200k for 199k in advertising, most are earning $200 after spending every last penny they had on advertising.

Have a friend doing dropshipping of real products. He mostly goes into amazon. Had a marketing background.

Key things if doing the real version of this.

1) In person supplier visits to vet them (yes, you need to fly to china

2) Amazon reviews are everything to these guys. So ad copy that is not too overblown (disappointment), amazing customer service etc. FBA.

3) Stick your own brand on the product and try to build that in a niche.

Lot's of seedy stuff also, but it does make really good money when its working for sure. These guys live in total fear of their accounts being banned / blacklisted (usually by competitors filing fake reports on them).

I am a dropshipper and average margin on products I sell is 60-100%.

I don't sell course because i really doubt I could make much money by doing that when I can just keep dropshipping.

I never bought any course but I had a startup so I am familiar with sales and how you make conversion happens.

Yeah, I mean, if you have it solved, then that's great. I just tend to see a lot of comments in some communities I'm in to the tune of "I spent $2000 setting up my store, lots of traffic, no sales, please help". It's often touted as a get-rich-quick scheme when in fact it takes a lot of hard work and an understanding of how to sell.

> margin on products I sell is 60-100%

what kind of products do you dropship?

This is the one question no dropshipper will ever answer.

I remember reading an article a long time ago...

wait here it is:

https://www.cringely.com/2009/03/14/parrot-secrets/

This guy had found a niche for an online business.

I can't help but wonder how many competing cookie-cutter copies of the businesses were started the day that article was published.

Cringely is amazing. He runs his whole persona under a name that directly confessed how bad his thinking his, yet has somehow made a long career as a pundit.

Not saying he's a big fish in a small pond, but how many people consistently write about tech topics like he does?

I don't mean how many people write about tech, I mean how many people write about tech - and the who, and the why... and the why not.

Actually sometimes a dropshipper will be willing to say what sold really well last year (if they're seeing poor sales on that item during the current year).

My sister does this and she was a hairdresser so she mostly operates in the beauty product sector but also has had a lot of luck with things from IKEA this year.

It's not hard to figure that out, make bunch of fake Facebook accounts in different age groups and disable ad blocker, you'll get bombarded from ads on store.

Then go to that advertisers profile and checkout their all running ads on their page, you can easily Google how.

The generic product area like clothing or whatever is probably ok. Got to protect the secret sauce though.

The actual products almost never matter because they change all the time. Some only have a sales period of a few weeks. What dropshippers do is to automate data gathering and number crunching to figure out the next products to focus on.

Yes that's why you need to keep spying on competitors using fake fb accounts and establish a protocol of quickly testing and dropping the duds without investing feelings into it and scaling only the winner.

Most newbies fall for sunk cost fallacy.

That's what I'm curious about. With that margin I'd guess CPG with a re-branded product. Most retailers are lucky to see anything north of 50% gross margin. I would have imagined a drop shipper having closer to 20%.

Margins on electronic components like resistors are huge. But you have to sell loads of them to make some money.

So a 60-100% margin tells us nothing.

Actually many times I sell products which are available elsewhere for 1/2 the price like on Amazon or wallmart but it doesn't stop people from US buying those products. Not everyone has time or smartness to acquire perfect price info of the market.

You sell everyday product which look cool and might also be available on Amazon or wallmart but people don't buy it.

Keep in mind the ones buying either don't have time (to look up on Amazon if it's selling for cheap there) or are impulsive buyers.

Your numbers tell us nothing.

You could be selling very cheap items once a month.

Sales price is between $30-$80 max

> I am a dropshipper and average margin on products I sell is 60-100%.

At the risk of being nitpicky, it sounds like you may be talking about your markup, not your margin.

  Markup = ( SalePrice - YourCost ) / YourCost

  Margin = ( SalePrice - YourCost ) / SalePrice

Each is typically expressed as a percentage, and we're talking about the gross margin here, not the net (net margin takes into account other business expenses).

If your gross margin is 100%, it means you got the product for free:

  Margin
    = ( SalePrice - 0 ) / SalePrice
    = SalePrice / SalePrice
    = 1
    = 100%

And your markup is infinite:

  Markup
    = ( SalePrice - 0 ) / 0
    = SalePrice / 0
    = Infinity or beyond [1]

More typical examples: buy a product for $50 and sell it for $100, your markup is 100%, and your gross margin is 50%.

Or buy for $25 and sell for $100: Markup is 300% and gross margin is 75%.

[1] https://en.wikipedia.org/wiki/Division_by_zero

But what if your SalePrice is also 0? I asked our Lenovo Smart Display about this: "Hey Google, what's zero divided by zero."

She replied "No one knows. It's possible that zero divided by zero is some unknown number mathematicians have yet to discover. Maybe they'll name it after you!"

> I am a dropshipper and average margin on products I sell is 60-100%.

Name checks out.

Dropshipping is all about arbitrage, in one form or another. If you can do just a little bit better than a manufacturer at customer acquisition, you can make money.

This is what retail and trading is about. Making contacts with suppliers, making contact with distributors, researching the market, trying to get credit, etc.

I think people get very angry about dropshipping because there is this self-help industry around it...but what that really reflects is that platforms for acquiring customers have totally changed: costs are nothing, you don't need huge scale to contact customers, etc.

But it is a legitimate business model, people have been dropshipping for decades (shock: most Asian manufacturers have little to no interest in working out how to market to Western consumers), and you can make billions doing this if you want - Wayfair is a dropshipper, Wish is a dropshipper, you can do this if you want.

Dropshipping is a great way to test an item before private labelling. Then you can focus on building that brand and not worry about being priced out by your supplier. Even DoorDash is a dropshipper since they list all restaurants on their app, order from the restaurant when an order comes, and then handle the "fulfillment" aspect.

I'm working on an e-commerce automation platform called Openship and one of our first users wasn't even into dropshipping. She sold her own brand coffee but wanted to sell coffee accessories like french presses, grinders, etc. Her buyers would get these add-ons with the coffee. She would ship the coffee and dropship the other items. Those add-ons would cover her ad costs and she eventually private labelled those items too. That is how you effectively use dropshipping to test and build out your catalog.

Even DoorDash is a dropshipper since they list all restaurants on their app, order from the restaurant when an order comes, and then handle the "fulfillment" aspect.

Aren’t restaurants calling DoorDash and GrubHub out over exactly this “ghost kitchen” practice though?

Ghost kitchen means a real kitchen with a fake brand-only "restaurant". It's more akin to "white labeling". Of course one could argue the Chili's and Applebee's are just "white label" brands for Sysco food.

Parent was referring to DoorDash pretending to be affiliated with the real restaurant you but from. That's not really dropshipping.

Dropshipping would be setting up a ghost kitchen storefront but not even having a kitchen, just redirecting orders to Chile's or whatever.

> nothing wrong with dropshipping as a business model

Actually, that's the part I'm struggling to understand. Why isn't drop shipping automated? And what's stopping consumers from bypassing drop shippers altogether?

> And what's stopping consumers from bypassing drop shippers altogether?

Situational awareness and a narrative of trust. The number of advertisements on facebook these days promoting some retail site where every single product can be found on aliexpress for less money _and_ free shipping is staggering. The only reason you would buy from them is 1) You don't know what's on aliexpress because you don't know about aliexpress, 2) You don't know what's on aliexpress because you don't trust rando chinese factory sellers without western-friendly spin.

I suppose, depending where you live, local laws may provide more assurances if something goes wrong with the order. Here in Australia at least you are not obligated to deal with anyone other than whoever took your money.

Though in my experience most AliExpress sellers are friendly and willing to refund or work through issues anyway. I've had fewer bad surprises on there than Amazon.

Not a big aliexpress shopper but last time I checked everything is being sold in volume. You don't buy one thing you have to buy many. I am wrong? If that is the case buying one radio instead of 25 makes more sense.

Alibaba is about volume. AliExpress does single quantities too. Except for really cheap things and then you can several items together but nothing you'd really call bulk.

90% of the job of a dropshipper is to market the product, make ads campaigns, SEO, and optimize their website(s) for conversion. There's almost nothing on dropshipping website you couldn't find on AliExpress, the value added is the sale itself.

Dropshippers (assuming the product they are shipping is decent quality) are providing a service to the manufacturer - customer acquisition. Sure, it's possible for a consumer to find the vendor on Ali Express or somewhere like that, but most don't want to. They just want to Google $THING and buy it from a website that they've heard of or looks like it specializes in $THING.

It’s interesting seeing the same product on Amazon being sold by different vendors at widely ranging prices

You might think they are the same product, but Amazon is currently being overrun by counterfeit goods. It's no better than ebay or craigslist, at this point.

Also delivery timescales vary a lot. The worst are the ones claiming to ship from local warehouses and four weeks later you get an envelope from China. Basically they just con you on the wait period. But hey you can always go to a local shop and pay £20 for 16GB microSD card or USB cable.

No customer buys a product from a drop shipper after a googling session. It's all sales by aggressive advertising on FB and Insta, peppered with false promises aiming at selling you a $3 plastic gizmo for $25.

They actually do.

The part you left out is highlighted:

> They just want to Google $THING and buy it from a website that they've heard of....

People google stuff (or search on Amazon), land on Amazon or some other online retailer, and buy it.

You might be surprised how much stuff is drop shipped via Amazon sales, and that can be direct shipment or to an Amazon warehouse then FBA.

And yes, paying $25 for a $3 rack rate good is close to standard. If you walk through a Target or Walmart, you will see tons of stuff that can be purchased on Alibaba for about that ratio.

It can't be automated because they are different manufacturers. There is already Aliexpress for that. What manufacturers need to do is setup a marketing operation in the US/EU to sell their product. They figured that it's more profitable to let these guys run these operations.

but not all.. We have a local company - ArtFire was started by a dude that drop shipping beads. Parlayed it into an etsy basically.

wish.com is a pretty wildly successful drop shipper.

everyone else, not so much

many tech companies do too.

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