Is Dropshipping the Best Low Budget Business Model?
People who choose dropshipping as a business model usually do so because they lack the funds to purchase stock for sale and they lack the confidence to purchase stock that they have not yet received an order for.
Without the need to carry any inventory or even handle the goods, dropshipping can be a relatively easy way to run a small retail business with very little outlay. This apparent simplicity and low cost of entry entices a lot of people to start a dropshipping business without considering alternatives.
In my opinion, there is a much better alternative for those who have a few hundred dollars to put into a business. I will describe that alternative, but first I would suggest that people considering dropshipping should think seriously about the pathetically low profit margins usually earned from dropshipping.
This is not just my opinion, you will find countless posts on WF talking about the low margins. When responding to one such post, a dropship aficionado spoke about his 20% margin!!!!! I used to pay my commission representatives more than that, and all they had to do was sell. In my opinion, dropship margins are pathetic compared to the huge margins available in the low budget business model I will describe later in this post.
BUT....... Now to show that this is not just my opinion, here are a few quotes from other WF threads on this subject:
"All the products I was interested in were being sold cheaper on eBay than I could buy them for from dropshippers. So, my question is does anyone here make money with dropshipping?"
"Why would you Drop ship when you can import and have full control over your inventory. It doesn't make sense."
"Explore China , You leaving a lot of money on the table trust me on this. My first experience in China blew my mind ....If you get a chance to go over there do it. Your mind will spin because you'll see things in China for $5-$10 that are selling in Wal-Mart for $200-$300 ..... There is no reason why you can not do the same as them just in your own local market and your own product. In a nut shell China is where the big profits are made. .... When you import and CONTROL the goods you CONTROL the price. .... When you buy from middle men your always buying at inflated prices."
"Customer returns. By far the biggest issue when dropshipping. Remember, Dropshippers DO NOT accept returns on items unless the item is faulty (some may accept item exchanges, though I have never come across one that accepts a return just because the end consumer changes his/her mind). When you buy from a Dropshipper it is classed as a Business to Business transaction (B2B), and the consumer protection laws do not apply in B2B transactions."
This last quote was in the context of the need to have sufficient funds to cover inventory, because if customers change their minds, maybe due to a model upgrade just released, you have to refund and suddenly finance those refunds.
The low budget alternative I suggest newbies consider is to buy small quantities direct from overseas manufacturers at genuine ex-factory prices. You can get huge margins by buying even small quantities direct from manufacturers in China. Here is an email from one who has done just that, on a budget of less than $300:
"Ok. From extremely skeptical to successful completion. Credit given where credit is due. I followed the book instructions you laid out. Took my time to double check everything and was able to successfully import an order from China. Not only that but it was also a "sample order" for less than 300.00. A 300% mark up has allowed to get initial investment back and I have 70% of my inventory left. Stop promoting your book. Your encouraging competition for me Many thanks." Email on file for FTC inspection if required.
I would like to comment on the post quoted above by a warrior who visited China. It is not necessary to go to China to source products. Of the hundreds that I have taught safe sourcing and easy importing, only a handful have ever visited China.
"If you think education is expensive - consider the cost of ignorance."
Without the need to carry any inventory or even handle the goods, dropshipping can be a relatively easy way to run a small retail business with very little outlay. This apparent simplicity and low cost of entry entices a lot of people to start a dropshipping business without considering alternatives.
In my opinion, there is a much better alternative for those who have a few hundred dollars to put into a business. I will describe that alternative, but first I would suggest that people considering dropshipping should think seriously about the pathetically low profit margins usually earned from dropshipping.
This is not just my opinion, you will find countless posts on WF talking about the low margins. When responding to one such post, a dropship aficionado spoke about his 20% margin!!!!! I used to pay my commission representatives more than that, and all they had to do was sell. In my opinion, dropship margins are pathetic compared to the huge margins available in the low budget business model I will describe later in this post.
BUT....... Now to show that this is not just my opinion, here are a few quotes from other WF threads on this subject:
"All the products I was interested in were being sold cheaper on eBay than I could buy them for from dropshippers. So, my question is does anyone here make money with dropshipping?"
"Why would you Drop ship when you can import and have full control over your inventory. It doesn't make sense."
"Explore China , You leaving a lot of money on the table trust me on this. My first experience in China blew my mind ....If you get a chance to go over there do it. Your mind will spin because you'll see things in China for $5-$10 that are selling in Wal-Mart for $200-$300 ..... There is no reason why you can not do the same as them just in your own local market and your own product. In a nut shell China is where the big profits are made. .... When you import and CONTROL the goods you CONTROL the price. .... When you buy from middle men your always buying at inflated prices."
"Customer returns. By far the biggest issue when dropshipping. Remember, Dropshippers DO NOT accept returns on items unless the item is faulty (some may accept item exchanges, though I have never come across one that accepts a return just because the end consumer changes his/her mind). When you buy from a Dropshipper it is classed as a Business to Business transaction (B2B), and the consumer protection laws do not apply in B2B transactions."
This last quote was in the context of the need to have sufficient funds to cover inventory, because if customers change their minds, maybe due to a model upgrade just released, you have to refund and suddenly finance those refunds.
The low budget alternative I suggest newbies consider is to buy small quantities direct from overseas manufacturers at genuine ex-factory prices. You can get huge margins by buying even small quantities direct from manufacturers in China. Here is an email from one who has done just that, on a budget of less than $300:
"Ok. From extremely skeptical to successful completion. Credit given where credit is due. I followed the book instructions you laid out. Took my time to double check everything and was able to successfully import an order from China. Not only that but it was also a "sample order" for less than 300.00. A 300% mark up has allowed to get initial investment back and I have 70% of my inventory left. Stop promoting your book. Your encouraging competition for me Many thanks." Email on file for FTC inspection if required.
I would like to comment on the post quoted above by a warrior who visited China. It is not necessary to go to China to source products. Of the hundreds that I have taught safe sourcing and easy importing, only a handful have ever visited China.
"If you think education is expensive - consider the cost of ignorance."
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