Dropshipping: Hustlers making millions from goods they never handle
bbc.com
bbc.com
Of course if drop shipping was so lucrative, they’d be doing that instead of bilking hopefuls with their expensive courses on Udemy or wherever.
This sounds very lucrative. Are there any courses I can take, which would teach me how to make lots of money by creating courses for others?
However, there are plenty of legit dropshippers that sell items already on this side of the ocean. You are probably familiar with Wayfair, but may not know that they were almost 100% drop ship at one time.
A couple years ago, most products sold on their site were still drop shipped, though they were beginning to get some warehouses to hold inventory.
I have done ecom for dropshippers that sold things like furniture, lighting, bean bags, jewelry, and security systems, where the companies were run from one or two room offices and the products shipped from other companies' warehouses in the USA or Canada.
It's very doable once you get the relationships in place. That's not trivial, since these manufacturers and distributors do not make it known that they are willing to drop ship, and they will only do it if you can convince them that you have a legit business already running, but if you get a legit business running and start talking to sales reps, you can absolutely move $500K+ USD worth of product per month without ever looking at it.
In a pyramid scheme, you would be buying the product and holding onto it.
Of course if starting a business was so lucrative, they’d be doing that instead of bilking hopefuls with their expensive courses on Udemy or wherever.
(Note: Not critiquing the idea of side hustles or diversifying income streams in general—just making an observation about some specific dynamics in these communities.)
Compare that to running a real business where things change all the time
Not kidding. $5 arbitrage.
Get an Amazon box, then a Walmart box, then the product makers box.
2020.
Sourcing from 'Walmart' means you just 'click and send' - it's pure arbitrage. No working capital needed.
I make way more money being selective than when I have drop shipping a try. It’s really not all that cracked up to be.
There are people that just don't shop around, he can literally charge a little more or around the same price, the key is getting good rankings on Amazon.
Many people searching Amazon are just looking for something, they don't care about a few dollars here or there.
So as long as his price is reasonable, and he can get ranking ... it works.
What's new is using Influencer Marketing to lend more credibility to knockoffs.
That is already exactly what the article says.
> All this is legal and often done well. But the anonymity it confers means there is also abuse.
> Dropshipping: Hustlers making millions from goods they never handle
And who are you quoting? The article doesn't include the word 'poisons' at all.
Most people view arbitrage as kind of scummy unless there's some actual value-add. In many cases, there is some, like using domain expertise to find cheaper or more reliable versions of the same product, or the time-cost of finding sales. Those are things that people are often fine paying a nominal markup for as long as it still presents a better deal for them. But that's not always the case, obviously. There's a reason why "cutting out the middleman" is a popular phrase.
I put "poisons the well" in quotes to indicate it's a stock phrase: https://en.wikipedia.org/wiki/Poisoning_the_well
What you see with the "hustler" dropshippers now is that they are buying from an additional middleman, who is the equivalent of a bucket salesman in a gold rush. Dropshipping existed before Amazon, but Amazon took over fullfilment, and these other middlemen became the suppliers for the people trying to get rich quick with dropshipping.
The original concept of dropshipping was that you'd get a product manufactured (or would sell a white-label product, or would be a reseller for a large company), but the product would go straight from the manufacturer to the consumer without having to stop at your own warehouse.
It makes a lot of sense in lots of businesses and has no reason to yield counterfeits, it avoids having to hold stock (so your costs are lower which means you can sell for less, or can leave more to the manufacturer) yet the product doesn't have to stop by your warehouse so the buyer waits less.
Many sellers or designers don't manufacture their products, they contract the manufacturing to a company with those capabilities (often in SEA), they might QA every piece initially to make sure everything's ship shape, but once every kink has been worked out they only need to sample to ensure the product conforms to expectations (or separately contract on-site QA at the manufacturer), they don't need to personally inspect every product.
At that point, if the manufacturer can drop-ship, chances are it's a win for everyone.
It's apparent that dropshippers know they are being dishonest and simply don't care, in a similar manner how fraudsters don't care if their victims get the shaft.
My front page of saved searches on ebay is over 50% counterfeits, I complain to eBay relentlessly. Also try hitting amazon.fr and search Balmain. At least 60% counterfeit, just one example.
If the governments will do NOTHING to set an example on the largest dropshippers in the world, why on earth would the small fry hesitate to compete in this space? Why should ebay and amazon reap all the profits from stolen intellectual propery?
Clickbait means deliberately withholding a key piece of information from a headline ("you'll never believe what this area woman found in her piano" etc) - this headline doesn't do that.
It's a decent interview with someone who expresses a view of the industry as sketchy. I don't get the disdain.
Edit: thanks for all the answers.
Wait, what you're describing above isn't dropshipping.
This is why trade creates wealth!
Isn't that fraud?
The reason why "dropshipping" exists is: there are lots of factories in China who make stuff and either don't want to distribute or can't distribute. More recently, Amazon fba exists too so you don't need physical space at all.
Also: this is part of this modern meme where a new term is invented that totally obfuscates actual meaning. The point of "dropshipping" is just to give people something they want...it is just a business. But the term has been imputed with all kinds of odd ideas about what activities are legitimate for a business to perform. It is really very unhelpful if you want to understand business.
The most consistent source of surface-level, near clickbait articles that make it to the top of HN is the BBC.
What is the article you wanted to see? "Some fraction of cheap goods from China are fake; some buyers displeased."
I'd imagine those rare exceptions are exactly where most of customer service time in ecom/payments is spent.
Maybe nowadays there are some solutions around this? Any dropshippers would like to share their feedback on this?
If that's how it worked, then it wasn't really drop shipping. It's not drop shipping because the goods didn't go directly from vendor to customer. That's more like Just in Time fulfillment.
https://retailops.zendesk.com/hc/en-us/articles/202763175-Se....
An unfortunately long time ago now, when I was a younger teen (like, 13), I had a large amount of mechanically inclined hands on hobbies. As a dirt poor person from the really dirt poor part of Appalachia, if you wanted something, especially in a niche hobby, you built it from near raw materials.
At the time, a few of the things I needed had a surprisingly small supply chain/availability in the U.S., and with asinine prices at that. One thing in particular, could be found practically nowhere aside from a single source in the U.S., and at something like $20/pop with a business type account necessary to purchase.
Frustrated, and having been raised by the internet, I went to China, mainly Alibaba/AliExpress for sourcing - Tangent: as I write out this comment, I was going to state "back before everybody and their uncle knew about AliExpress in the U.S., atleast." - turns out, it was only a year after AliExpress had launched. Didn't know that till now.
So, I found the specific thing I was after - needing only two of them. Two were $8 shipped, 10 was $17 - and these were the exact thing being sold for $20/PC from one U.S. supplier, and a pain to purchase. Obvious what choice I made, luckily had an older friend to use their credit card for purchase. Since I only needed the two, I for some reason thought, hey, maybe somebody else might be in my same situation, put them up on eBay for $5/PC + shipping, and hoped that maybe 2 or 3 would sell in a month and I'dve gotten what I needed for basically free.
By the end of the night, all eight of them had sold. Kinda shittered myself, and that's how I became a go-to stateside supplier of a few very niche fans, some other RC-type hobby supplies, and most notably the second top-seller of quality multi-stranded silicone "hobby" (UL 3135) wire on eBay as a sick 13-15 year old. A little over 2500 packages in 2.5 years. And, I think I've forgotten to include the main point - I was making some pretty massive margins on sales - but still undercutting the next seller by half or more. My entire point of doing this was in hopes of making some niche hobby stuff more accessible for people like me. I'm lucky enough to be able say that I'd regularly reach out to buyers and get fairly frequent replies, and found that I was often able to fulfill that goal.
Anyways, that's my I should definitely be asleep by now HN ramble of the week. My apologies that it wasn't on topic/directly related to "anonymous" dropshipping in which the "importer" never even touches their "product" cause err, my entire point being - I absolutely fucking HATE this shit ass fad or whatever you may want to call it I hear being talked about everywhere. Honestly, fuck these people. Fuck em like the intro to Method Man.
Whenever I talk to him he has a similar opinion that dropshippers are one way or the other getting in his way (take order for X, don't deliver. People are now hesitant to order X from other suppliers). His clients stay for a long time but getting more is always an uphill battle.
Whenever I see him moving into a new field with a handful of offerings and make profit, it makes me realize how many more business in niche areas can pop up in every country, that too by only putting some effort in effective fulfillment and maintaining relationships.
Unfortunately, becoming extremely physically ill, of which I'm still barely moving towards recovery from, and having absolutely abhorrent and parasitic parents kinda ruined everything at the same time. Always hurts to think of what could've been, but life is strange ¯\_(ツ)_/¯
I've definitely developed an absolutely pessimistic, utterly cynical view towards all of the people that are coincidentally mostly my same age with their whole "build up your own brand, sell your own product" when it's just them hiring a graphic artist that they're paying practically nothing to slap "their brand" only widely available mass produced China junk/apparel. I completely realize it's not a healthy quality/habit in any way, and I actively try to fight back against the feeling... but sometimes the pettiness/fakeness of it all is just too much.
Edit - just as it popped back into my thoughts... for two years after I'd completely taken down all of my listings/sale fronts, every few months I'd get some random emails of people still trying to get the more niche things I'd sold, or old customers coming back. I guess eBay caches stuff in some weird ways with regards to Google searches. As I for the most part had everything still laying around, I filled around 20 of those orders. Eventually, things did completely stop popping back into my life, haha.
Definitely stealing that line.
I imagine this is the way most criminals rationalize their work.
Worse still, he believes others might share in such an abhorrent world view except they simply aren't "skilled" (haha, yeah right) enough to be scam artists.
I've filed a complaint with the BBC, because on top of being purely terrible, this is also blatant self promotion and offers nothing of value to the article.
Buying this one item, which I knew had regular demand, from a retailer allowed me to offer a price which was competitive, but from which I could also make a small profit. With dropshipping, I was competing against others who could drop ship the same items, so I could not offer as competitive a price, nor have any kind of margin.
I used dropshipping for two scenarios. One was if I traveled and was unable to ship out the item I had in stock. In this scenario, I would drop ship the item and lose any margin (or sometimes even take a small loss).
The other scenario was to test new items to sell. My main wholesaler (which I bought my 3M bulk item from) could drop ship a catalog of items at a decent rate from their one watehouse. I also had accounts with two larger dropshipping wholesalers, both of whom had multiple warehouses with mostly the same catalog in stock - with items more likely in stock, but at a higher markup.
So what I did was for through my main wholesaler's catalog and see what items they had. I then checked that both other wholesalers had the same item in their catalog, and that all currently had the item in stock. Generally my main wholesaler would drop ship for the lowest rate. So I put the item up on my website, at a break even price. I did this for many items.
Sometimes I would have a sale. Often my main wholesaler still had the item in stock. I would break even on the sale, but would know there was demand. Sometimes they would be out of stock - then I would drop ship from one of the two backups and lose some money on the sale. Maybe I would increase my sale price until I knew my main wholesaler had the item in stock again.
As margins were small, one goal was to sell more and increase margins. If I bought boxes, tape and shipping labels in bulk, my margins increased a few cents per sale - I could decrease the sale price (and increase sales doing so) while also increasing my cut a few cents. This worked for a number of things - with $3,000 a month in sales my Payapl fees would drop, with $10,000 a month in sales they would drop even more. This would also allow me to offer more items at a competitive price.
I'm not sure how it works nowadays. One lesson I learned was what to do when you succeeded. I got to where I was shipping several items a day and making a small margin, and had the opportunity to ship even more. But it would then outgrow my closet space - I would need to rent some warehouse space or something to receive shipments and store items. Also, as sales grew, I spent less time programming my web site, and more time putting items in boxes, taping up boxes, weighing boxes, printing out shipping labels to attach to boxes etc. I figured I eventually would have to hire someone part time to ship items out during the week. By then I was familiar enough with the business to decide I did not want to make this leap, and decided to wound down my business. Actually I stumbled out of the business like I stumbled into it - my friend had some familiarity with some of these wholesalers, knew I could sell online and suggested I try it out, which I did.
This has become quite a phenomenon due to the rise of the 'influencers' and a generation that blindly follows them.
Even though this method may be legal, the onus is on the people to look for something like BBB certification, and this new certification, whatever form it may be, should be nimble and easy to initially obtain, and fast to update by the consumers.
The BBB is and always has been a literal "you give BBB money, we give you good rating - no money, no rating/bad rating"
They had good enough PR that they made themselves look like an official government/whatever else trustable entity...
They're literally just a private business with a name that was good enough to fool people into thinking they're legit/worth something.
Can somebody correct me on this? Am I crazy?
Most of the reviews I knew were fake, it said they were fine. I wouldn’t trust it for anything expensive.
What if there is an independent 3rd party company that is able to collate the reviews from verified purchases from different vendors like Amazon, Walmart, etc.
Not sure of the business model.