Realistic expectations of dropshipping business

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Hi everyone, I'm new to the forum here and am strongly considering getting into the dropshipping business.

I understand this is kind of a broad question since it depends on so many things, but I just wanted to do a sanity check.

Is it realistic to make $50k+ a year starting a new dropshipping business if I do the correct research?

What has your experience been in terms of when you started? Was it hard to make money? How long did it take you to see some real rewards?
#business #dropshipping #expectations #realistic
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  • Profile picture of the author alksense
    You're going to get answers that are all over the place because there are wayyy too many variables to answer that question directly.

    I personally started with eCommerce by importing from China and my business did 680k in revenue the first year (I chose a hot niche at the right time and did things my competitors weren't doing). Drop ship suppliers started contacting me the second year wanting my company to sell for their brands. I did and year two my company did $1.2 million in sales. By the third year we completely stopped importing and worked exclusively with drop ship suppliers and we did $1.8 million in sales.

    Of course some people will make less (even nothing) and some will make more. Hayneedle started off only drop shipping and they do over $500 million/year in sales. Wayfair has a similar story and they do over $1 BILLION in sales! Here's a great article on them by the way: Wayfair's Road to $1 Billion | Inc.com

    Do your research, stay focused, and outperform your competition and take a chance. I did seven years ago and it was the best decision I have ever made.

    - Anton
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    • Profile picture of the author a7hanatos
      Thanks Alksense. I read some of your other posts and you're a sharp guy.

      I appreciate your response and I'm sure we'll run into each other again soon. I stumbled onto this community and am very glad I did.
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    • Thank you - this was very helpful to me - even though it is an old post.
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  • Profile picture of the author rodsav
    Great inspiring comment from Alksense. The key for starting a dropshipping business - is finding the right product/niche.
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  • Profile picture of the author a7hanatos
    Yup totally agreed. Are there any common tools to research trends or is Google my best friend on this?
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    • Profile picture of the author Fred Kimberly
      Well, today there are products research and tracking tools available that can help you find the profitable products and niches. Automated research tool can take the pain out of the manual research which is so 2012.
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  • Profile picture of the author dave_hermansen
    Much like Anton we've had some hugely successful online stores that used the dropship model exclusively. We've had single stores like bird-cage.com & pitchingmachinesnow.com make 6-figures a year in true profit.

    Here are the 7 phases we go through to launch and market a store:

    1. Find a Niche

    Find a "hot" market by identifying a product line that has 2+ high volume phrases and poor competition. Don't worry so much about "trends" but focus on phrases that show clear intent to buy and on product lines that will sell well all year and don't have a lot of local competition.

    2. Find a Supplier

    By simply identifying the top brands within your niche and contacting the manufacturers of those brands directly you can typically find a dropship supplier in most markets. It helps to have a business entity and domain name in place at this point so potential suppliers will take you seriously.

    3. Build Your Store

    Choose a platform and build your store using the product details your dropship suppliers have made available to you. We recommend going with a PCI compliant hosted solution so you don't have to spend time fussing with customizations and security patches.

    4. Launch Your Store

    There are a dozen or so vital steps to take if you want to launch your store in a way that gets the attention of Google and potential buyers in your market. This includes launching your social profiles, installing visitor analysis tracking code, making sure your website is "sound" and well categorized, and more.

    5. Get Natural Traffic

    At this point you should focus on ways to start building up your traffic so you can start making sales. This includes working on getting ranked naturally in search engines, but also getting free direct traffic from places like comparison shopping portals, social networking sites and other hangouts within your topic.

    6. Consider Paid Advertising

    There are half a dozen or so paid advertising options that every store owner should test out. Then, only keep the ones that are effective in place and running and work to decrease cost per conversion over time.

    7. Maximize Profits

    This is really the final stage and you will never "complete" it. At this stage you should have a profitable website and it's time to increase the bottom line. This can be done by improving your conversion rate through split tests, pushing a newsletter, participating in giveaways, etc.

    As you'd expect, there's a lot to learn and a lot to go through to build a hugely successful ecommerce store that uses the dropship model, but it's certainly worth it. We've been making a very healthy income from ecommerce since 2005 and if you are an "ecommerce nerd" like me you will actually enjoy the work you do each day!
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  • Profile picture of the author a7hanatos
    @dave_hermansen Thanks so much.

    So on #2, I would call the manufacturer and just ask them for a dropship supplier and they will give me this info?
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    • Profile picture of the author dave_hermansen
      Well, I may've over-simplified it, but yes. It almost always makes the most sense to contact the manufacturers of the top brand names directly first. Often times THEY will dropship, and if they won't, they can usually give you contact details for large bulk purchasers (aka distributors) that are open to it.
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      • but wouldn't this only work if your store is only primarily marketing a single product? As opposed to a multi-product store?
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  • Profile picture of the author a7hanatos
    Gotcha. Is there a specific department that I should ask for?
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  • Profile picture of the author a7hanatos
    @dave_hermansen, on #1, what is a good method for this? Any specific steps you could recommend to get going in the right direction?
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    • Profile picture of the author dave_hermansen
      You want to look at supply and demand for whatever portal you intend to drive traffic & sales from (typically Google is the #1 source to focus on).

      Demand is easy, just see how many times a keyword phrase is searched for in [exact match] mode within your targeted country (usually the US). As you look at keyword phrases, also consider the amount of "intent to buy" each keyword phrase has (i.e. 'appex dog houses' has quite a bit more intent than 'dog house'). We look for keyword phrases that clearly represent a product type and get at least 80-100 exact match searches per day.

      Supply is bit trickier and it really comes down to "strength" of the sites showing up on page 1 of Google (organically). If you aren't an experienced SEO that can quickly analyze websites you will want a keyword tool that can do this for you. There are many available out there that do a decent job, but I actually have one on my website that I designed and use exclusively for this purpose. It looks at the top 10 ranking pages for any given keyword phrase and analyzes how well they are doing on the top organic ranking factors before spitting out a "score." The score is a number between 0 and 100 that represents how challenging it will be to get ranked on page 1 for that phrase. We call the score a MOS (Market Opportunity Score) and recommend finding phrases that have an MOS of 80 or higher. The tool is called Coach's Keyword Tool and we are very proud of it!

      Once you find a couple keyword phrases that represent a product line and pass the above factors, you want to think about the product lines these phrases represent and consider a couple other important factors: local availability and expected profit per order. We like product lines that aren't readily available to people locally in a wide selection and that we anticipate making at least $30-$40 per order on. You won't know the actual margins at this point, so you have to estimate a 20% profit margin on the order total.

      I hope this info is helpful!
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  • Profile picture of the author yasser
    Yes you can . I made around $10000 in net profit in one year selling wedding favors. One important thing you should know, that for real dropshippers based in US you have to have a reseller certificate and sales tax ID.
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  • Profile picture of the author a7hanatos
    I need a reseller cert to do this? Is that hard to obtain? Timeframe?

    Would opening an LLC cover the sales tax ID or is there a better way to do it? Would a dba work or would that pose problems trying to get suppliers?
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    • Profile picture of the author dave_hermansen
      A DBA + seller's permit usually works just fine. However, I recommend getting an LLC or S Corp after you start making sales and making money. Both of those business types provide far more protection to you and your personal assets!

      FYI, establishing a business entity and getting a sales tax permit is an extremely simple process in most states and something that you shouldn't be afraid of. It's typically something you can do online in 15 or 20 minutes and it's really no tougher than filling out a credit card application!

      Here's a good article on our website about types of business entities and the PROs and CONs of each: http://storecoach.com/articles/artic...iness-entities
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  • Profile picture of the author a7hanatos
    Yea I think doing a DBA to start is good.

    What is the diff b/w a reseller cert, a sellers permit, sales tax permit?

    In what case does it NOT make sense to open an LLC in Delaware? I remember talking to my accountant a while back and he said sometimes there isnt a real benefit if you're not conducting the majority of your business in the state you live in. So is the logic to LLC it if you are selling nationwide?
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    • Profile picture of the author dave_hermansen
      Originally Posted by a7hanatos View Post

      What is the diff b/w a reseller cert, a sellers permit, sales tax permit?
      Nothing, they are different titles for the same thing. Really, they are all just names for the permit that you need from your state to be a registered retailer within that state.

      Originally Posted by a7hanatos View Post

      In what case does it NOT make sense to open an LLC in Delaware? I remember talking to my accountant a while back and he said sometimes there isnt a real benefit if you're not conducting the majority of your business in the state you live in. So is the logic to LLC it if you are selling nationwide?
      Well, if you are in another state within the US I can't really see any reason to do that. I'm guessing you are considering it to avoid paying sales tax, but it's probably not worth the effort in my opinion. It's easier to just set it up in your cart to charge sales tax within your registered state and pay it to your state quarterly.
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      • Profile picture of the author lindasdd
        WARNING: UNMOTIVATIONAL RESPONSE BELOW

        I hate to poo-poo the parade, but reaching $50K PROFIT is possible, but definitely not as easy as, follow 1,2,3. Especially if you are dropshipping (significantly more competition and lower margins.)

        I'd say you'd need to sell at least $1 million in product to hit $50K profit after all expenses. I've heard of some big ticket item industries that have higher margins, but otherwise 5% profit margin seems to be the norm I run across.

        The competition in physical goods only continues to increase and there are countless competitors who are years ahead of you.

        That doesn't mean it isn't possible, but based on the questions you have already asked you have a lot of learning to do before you will be able to reach that level.

        That being said, the best time to start learning is now.

        My advice would be to start your own product line rather than selling someone else's. If you sell other people's stuff there will come a day that a competitor will undercut your prices. As much as people like to say "But I give better service" most customers don't care.
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        • Profile picture of the author alksense
          Originally Posted by lindasdd View Post

          WARNING: UNMOTIVATIONAL RESPONSE BELOW...

          I'd say you'd need to sell at least $1 million in product to hit $50K profit after all expenses. I've heard of some big ticket item industries that have higher margins, but otherwise 5% profit margin seems to be the norm I run across...
          $50k NET on $1 mil in sales? You're doing it wrong... the lowest margins I'll accept is 20%, my average is ~30% and I have some suppliers who offer margins much higher than that.

          With that being said; like I said in my first post some people make nothing with business model.

          and IMO here's why:

          Someone interested in starting a business might hear an interview or read an article in Entrepreneur magazine or in Inc. about an drop ship eCommerce site that is netting $xxx,xxx/year or more and think "wow, that business sounds amazing. I want in".

          The next step this "eCommerce newbie" makes is usually to go on Goolge and search "drop shipping" or "drop shipping suppliers" or something similar and they're likely to find Doba or a similar site which IMO are worth less than nothing.

          They will show you all of these examples of products that you can sell (major brand names) and what your margins will be (if you sell at MSRP) so this "eCommerce newbie" quickly pays to be a member and have access to these 1 million+ products quickly to learn that if you want to price yourself competitively then you will be making those 5% margins you're refereed to. This is a suckers game a quick way to lose all of your motivation (and possibly your money).

          Dave gave great examples in this thread of the way to do things right. Research different niches, find potential competitors, find the manufacturers they sell for, contact them directly (this is of key importance! you don't want to resell for a middle man).

          To add one more thing to his comments FIND SUPPLIERS WHO ENFORCE MAP policies (minimum advertised price). Almost every legitimate brand has a pricing policy in place for their retailers. Meaning you will get a pricelist (the same one that every dealer gets, even Amazon if they sell for them) and it will have their MAP prices. The lowest ANY OF THE RETAILERS can sell an item for. This means that no competitors can drive down the price of item and this means your profits are protected. A brand/manufacturers website won't just say "we enforce MAP" so I usually call and ask.

          Do what Dave said plus the step I added and you will start seeing 30%, 40%, 50%+ margins.

          Not bad for sending a few emails

          Hope that helps!
          Anton
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          • Profile picture of the author sirk63
            This is an awesome write up for newbies. Thanks to the contributors.
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        • Profile picture of the author mrultra
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          • Profile picture of the author alksense
            Originally Posted by Joe Stewart View Post

            This really isn't as hard as it sounds, guys. It's simply a matter of finding a market with a burning need, finding a supplier that will give you a good price (I get end column or close to it everywhere I do business), set up credit card processing (easy) and start driving traffic (easy).

            One of the biggest mistakes I see people make is putting all of their eggs into the internet for traffic. You can do MUCH better by being different and marketing offline (cheap). You can take yourself out of the comparison venues and build relationships built on trust, excellent customer service, timely delivery and fair (competitive) pricing.

            I've built three businesses like this (working #3 right now) since 2001 and have been in the industry for 16 of the past 20 years. I started working for others doing this in 1993.

            If you learn how to do this the right way you can consistently earn 30-50% margins and more. I can even make 100% or more on certain items.

            Think outside of the box, avoid going head to head with your competition by standing on the same street corner and get ready to work HARD, especially the first year.

            Do all that and I can almost guarantee that you'll never be unemployed again.

            I think I'll put together a report in the next couple weeks that'll cover much of this. Don't worry. It'll be affordable.

            Joe


            P.S. One more thing. I would argue vehemently the idea that it's a bad idea to try to sell things to people that they can buy locally. Many local companies/stores know that they have the local residents over a barrel and they can charge whatever they want. Remember, we're talking "burning need" products here. I have many, many customers that love my services because it keeps the local guys honest.

            Also, no disrespect intended toward Anton or Dave. You guys obviously have a system that works well for you too.
            None taken. The point of discussion forums is to share, discuss and learn. There's nothing worse than when one person says their "method" works and has deaf ears to everything else.

            Originally Posted by mrultra View Post

            And you would be wrong. This thread is about drop shipping, not the Amazon affiliate program, lol.
            Seriously.. and if you're doing $1 million in sales as a Amazon Associate you're probably at the 8.5% tier of commissions!

            Like I said in my last post; it's the big, "newbie attracting" drop shipping companies that give people this idea of 5% margins. Live and learn though. The people that make it are the ones that actually do their own research.
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        • Profile picture of the author dave_hermansen
          Originally Posted by lindasdd View Post

          I'd say you'd need to sell at least $1 million in product to hit $50K profit after all expenses. I've heard of some big ticket item industries that have higher margins, but otherwise 5% profit margin seems to be the norm I run across.
          As others have pointed out, you are certainly doing something wrong! You are either using dropship "posers" you found by searching Google or you are using the affiliate model instead of the dropship model. Just to give you an example, bird-cage.com barely did $400k in gross sales to make over $100k in net profit. That's over 25% cleared after ALL EXPENSES.
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  • Profile picture of the author a7hanatos
    @lindasdd I respect people pooping on parades with facts and experience. Seeing the other side of the coin is helpful and something to always take into consideration.

    Starting my own product line?? I always play devil's advocate, but how would I do that? I'm creative as hell, have good business management skills and know PPC very well but I would have ZERO idea on where to start.

    You've sparked my curiosity (for the purpose of learning). I'm not flip flopping but want to know how someone would even START their own product line.
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  • Profile picture of the author Joe Stewart
    This really isn't as hard as it sounds, guys. It's simply a matter of finding a market with a burning need, finding a supplier that will give you a good price (I get end column or close to it everywhere I do business), set up credit card processing (easy) and start driving traffic (easy).

    One of the biggest mistakes I see people make is putting all of their eggs into the internet for traffic. You can do MUCH better by being different and marketing offline (cheap). You can take yourself out of the comparison venues and build relationships built on trust, excellent customer service, timely delivery and fair (competitive) pricing.

    I've built three businesses like this (working #3 right now) since 2001 and have been in the industry for 16 of the past 20 years. I started working for others doing this in 1993.

    If you learn how to do this the right way you can consistently earn 30-50% margins and more. I can even make 100% or more on certain items.

    Think outside of the box, avoid going head to head with your competition by standing on the same street corner and get ready to work HARD, especially the first year.

    Do all that and I can almost guarantee that you'll never be unemployed again.

    I think I'll put together a report in the next couple weeks that'll cover much of this. Don't worry. It'll be affordable.

    Joe


    P.S. One more thing. I would argue vehemently the idea that it's a bad idea to try to sell things to people that they can buy locally. Many local companies/stores know that they have the local residents over a barrel and they can charge whatever they want. Remember, we're talking "burning need" products here. I have many, many customers that love my services because it keeps the local guys honest.

    Also, no disrespect intended toward Anton or Dave. You guys obviously have a system that works well for you too.
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    • Profile picture of the author dave_hermansen
      Originally Posted by Joe Stewart View Post

      P.S. One more thing. I would argue vehemently the idea that it's a bad idea to try to sell things to people that they can buy locally. Many local companies/stores know that they have the local residents over a barrel and they can charge whatever they want. Remember, we're talking "burning need" products here. I have many, many customers that love my services because it keeps the local guys honest.

      Also, no disrespect intended toward Anton or Dave. You guys obviously have a system that works well for you too.
      Certainly no offense taken. Because I was giving an overview I didn't go into as much detail as I could've on that point. We are NOT against selling items that are available locally. We are against selling items that are available in a wide selection and various price points in local "retail giant" dept stores. We find that if someone can pick it up at Walmart for the same price it doesn't make for a very good online store. We do better when we sell specialty items that are a bit more expensive and not available at competitive prices in national chain stores.
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      • Profile picture of the author lindasdd
        @alksense the 5% net margin I mentioned would be the net after expenses - everything from website hosting and design costs to merchant processing, bank fees, customer service costs, and especially advertising (the big thing required to get those sales in the first place since you aren't going to be at the top of Google) I really like my freedom so I hire staff to do everything I would need to do which means my expenses are higher than normal, so maybe I will bump it to 10%

        Then again, this is of course just my personal experience and when you say "You're doing it wrong..." maybe you are right. You are certainly correct that finding manufacturers who have MAP practices in place is the way to go. That is what I do for my private label brands.

        @mrultra - I wasn't speaking of the Amazon affiliate program.
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        • Profile picture of the author Scott Rush
          The idea of having that freedom you mention is definitely worth a few % in my opinion. I'm just getting started on this journey and that's my biggest draw to this business model!
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  • Profile picture of the author a7hanatos
    @Joe Stewart and @alksense - I appreciate what each of you guys is saying and yes, this is about tossing the ball back and forth and getting something out of it which is exactly what's going on. I'm learning alot.

    At the end of the day, everyone has their own unique methods (as we can easily see here) and the only wrong way is if you're NOT making a sustainable profit.

    So getting back to the topic, and finding a profitable niche specifically.

    Since this IS the most important part of the model, is it safe to say that you can always find a niche? Have you guys ever seen yourself months on end researching and chalking up a no hitter or are you consistently burning and churning and picking out the best?
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  • Profile picture of the author kite6w
    So is it reasonable if I bump up 15-20% above acquired cost? or do you recommend I compare all the prices on google and work from there? If so, is there anyway I can check competitive prices in bulk? I want to have a good margin, but at the same time. I don't want to overprice my products, especially if it it listed on shopping comparison sites, since they will avoid my item if it priced high.
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    • Profile picture of the author Importexport
      Originally Posted by a7hanatos View Post

      Starting my own product line?? I always play devil's advocate, but how would I do that? I'm creative as hell, have good business management skills and know PPC very well but I would have ZERO idea on where to start.

      You've sparked my curiosity (for the purpose of learning). I'm not flip flopping but want to know how someone would even START their own product line.
      Originally Posted by alksense View Post

      $50k NET on $1 mil in sales? You're doing it wrong... the lowest margins I'll accept is 20%, my average is ~30% and I have some suppliers who offer margins much higher than that.

      Do what Dave said plus the step I added and you will start seeing 30%, 40%, 50%+ margins.

      Not bad for sending a few emails

      Hope that helps!
      Anton
      Hi, a7hanatos,

      You will find plenty of advice in this thread and others on how to find a niche, so I won't comment on that, but I would like to add something about sourcing a product line once you have chosen the niche.

      My suggestion is to go direct to the manufacturers, but don't dropship. I know this is heresy, and many warriors who are fanatical about dropshipping would like to see me burnt at the stake for such heresy, but......

      There are plenty of good reasons and I will give you a few:
      1. Higher profits.
      2. Higher profits.
      3. Higher profits.

      Seriously, there are more good reasons, not the least of which is that you can locate products that are unique to you. You will never find unique products on a dropship wholesaler's list.

      "Ah!" they will say " but you have to place huge orders to buy direct at good prices." My reply is that in 22 years prior to my retirement I ran an importing business, which I franchised in 4 countries, and I and my franchisees rarely placed huge orders.

      True there was an occasional order for $50,000 or so, but most shipments came in under $1,000 and many were as small as $100. The great majority came in by air courier, making the importing procedure a breeze.

      If my franchisees could not mark up by 250% they would have walked away from the franchise and sued me. In reality they often made much, much more than that. A selling price of (Total landed cost + selling costs) X 877% was the best figure reported to me. My personal best was Total cost $3,000 and selling price $21,000 for a single sale.

      The market was B2B, but similar profit margins are possible for any marketing area provided you buy at the right price. My belief is that the only way to get the best possible buying price on a consistent basis is to buy from real manufacturers.

      By real manufacturers I don't mean the multitudes of "manufacturers" listed on many of the B2B sourcing portals.
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    • Profile picture of the author dave_hermansen
      Originally Posted by kite6w View Post

      So is it reasonable if I bump up 15-20% above acquired cost? or do you recommend I compare all the prices on google and work from there? If so, is there anyway I can check competitive prices in bulk? I want to have a good margin, but at the same time. I don't want to overprice my products, especially if it it listed on shopping comparison sites, since they will avoid my item if it priced high.
      Well, if you find a supplier that dropships products from a manufacturer that enforces "MAP" you don't really have to do competitive pricing analysis, you can just put all the product right at MAP. As Anton eluded to previously, MAP provides a health margin above "cost" and protects the market from price wars.

      For product lines that aren't protected by MAP, it is usually unrealistic to try and check "all competitor's prices" and you just have to choose the top 1 or 2 rankings stores and match their prices.

      PS: NEVER undercut ALL competitors. This is how price wars start and every retail in the market ends up losing!
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    • Profile picture of the author alksense
      Originally Posted by kite6w View Post

      So is it reasonable if I bump up 15-20% above acquired cost? or do you recommend I compare all the prices on google and work from there? If so, is there anyway I can check competitive prices in bulk? I want to have a good margin, but at the same time. I don't want to overprice my products, especially if it it listed on shopping comparison sites, since they will avoid my item if it priced high.
      You can save yourself a lot of time just by calling suppliers before applying with them and asking if they enforce MAP policies. Of course it's also possible to make money with suppliers who do not enforce MAP polices but I don't like to sell for these suppliers. Like Dave said; you don't want to get involved in pricing wars and get to a point where no one is making any money. MAP protects your profits to avoid that situation.
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  • Profile picture of the author kite6w
    Thank you Dave Nd Alksense for the reply. My suppliers do enforce MAP but there are some products that do not have a MAP price. Should I just list products that have MAP? But that would limit my product variations and category. I am adding with one supplier at a time. Thank you.
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    • Profile picture of the author ryshark
      Originally Posted by kite6w View Post

      Thank you Dave Nd Alksense for the reply. My suppliers do enforce MAP but there are some products that do not have a MAP price. Should I just list products that have MAP? But that would limit my product variations and category. I am adding with one supplier at a time. Thank you.
      If most of your products have MAP that's great. Why not list the other products without MAP too? Just set your price at a price that is worth it to sell.
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  • Profile picture of the author ScooterDaMan
    This was an interesting thread to read. Lots of great advice - especially from alksense and Dave Hermansen. Success or failure really comes down to three things:

    1. Low Profit Niche: You need to make at least $20 per order, preferably $50-$100. If you aren't making that, the time and effort you put into setting up the website, maintaining it, marketing it and processing orders is simply not worth it. It's not about your profit margins, it's about your profit. I'll gladly take a 10% profit margin on a $1,000 item over a 50% profit margin on a $20 product. You have to start at the top with the manufacturer and work your way down. If you take the easy way out (i.e. dropshipping directories), you'll get creamed by people who did it the right way and are getting products at far cheaper prices than you.

    2. No Buying Intent: Sure, there might be a ton of people searching for "Oklahoma Sooners Football" but what are they really searching for? Likely, 95% of those searches are for schedules, news (i.e. information). On the other hand, searches for things like "Oklahoma Sooners grill cover," "Oklahoma Sooners memorabilia" or "Oklahoma Sooners Autographed Football" are buying words. Know the difference and don't jump on something because it looks like a high search, low competition keyword phrase. 99% of all high search volume, low competition phrases have low competition for a reason!

    3. No Work Ethic: Like most things in life, the people who work the hardest usually win. If you think you are going to "build it and they will come" you are deluding yourself. You have to have a mindset where you are going to do something positive each and every day that will ultimately lead to driving more traffic to your website. You have to be active in your niches, reading everything you can, so that you can be on top of the latest news. This allows you to become an authority and it will be reflected in things you write for your store's connected blog and what you share in social networks and on forums. This means staying on top of everything SEO, too! Set up news feeds that send you everything going on in your niche and in the SEO world. Skim the headlines and read the ones that look important.

    Really, those three things are what ultimately determine success or failure.
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    • Profile picture of the author Joe Stewart
      Originally Posted by ScooterDaMan View Post

      This was an interesting thread to read. Lots of great advice - especially from alksense and Dave Hermansen. Success or failure really comes down to three things:

      1. Low Profit Niche: You need to make at least $20 per order, preferably $50-$100. If you aren't making that, the time and effort you put into setting up the website, maintaining it, marketing it and processing orders is simply not worth it. It's not about your profit margins, it's about your profit. I'll gladly take a 10% profit margin on a $1,000 item over a 50% profit margin on a $20 product. You have to start at the top with the manufacturer and work your way down. If you take the easy way out (i.e. dropshipping directories), you'll get creamed by people who did it the right way and are getting products at far cheaper prices than you.

      2. No Buying Intent: Sure, there might be a ton of people searching for "Oklahoma Sooners Football" but what are they really searching for? Likely, 95% of those searches are for schedules, news (i.e. information). On the other hand, searches for things like "Oklahoma Sooners grill cover," "Oklahoma Sooners memorabilia" or "Oklahoma Sooners Autographed Football" are buying words. Know the difference and don't jump on something because it looks like a high search, low competition keyword phrase. 99% of all high search volume, low competition phrases have low competition for a reason!

      3. No Work Ethic: Like most things in life, the people who work the hardest usually win. If you think you are going to "build it and they will come" you are deluding yourself. You have to have a mindset where you are going to do something positive each and every day that will ultimately lead to driving more traffic to your website. You have to be active in your niches, reading everything you can, so that you can be on top of the latest news. This allows you to become an authority and it will be reflected in things you write for your store's connected blog and what you share in social networks and on forums. This means staying on top of everything SEO, too! Set up news feeds that send you everything going on in your niche and in the SEO world. Skim the headlines and read the ones that look important.

      Really, those three things are what ultimately determine success or failure.

      Good advice. The only thing that I'd disagree with is where you said "You have to start at the top with the manufacturer and work your way down".

      I've seen so many people post similar comments and it's simply not the case, at least not with all suppliers. I currently work with nine different companies (some much more than others) and of those, five I have end column or very close to it. I didn't have to buy anything up front or sign any agreement stating that I'd sell a certain amount over a set time frame either. There are certain tricks of the trade that, when used properly, can get a high success rate and greatly increase your profits right out of the gate.

      Also, as I mentioned before, the internet is NOT the only way to drop ship for a living! I know that there are multiple companies and individuals that drop ship and make a great living without having an ecommerce store at all.

      That being said, I'm just now starting to build an ecommerce store because it makes sense to leverage the internet and not have all of my eggs in one basket. Still, this is only one of many ways to get customers.

      If we get back to the title of the thread, "Realistic expectations of dropshipping business", I know for a fact that I can find a supplier and be in profit with 1-2 days, sometimes the same day, and it has absolutely nothing to do with the internet.

      Not to rant. Sorry if it reads that way. It's certainly not my intent. I'm kind of like "ImportExport". He knows from years of experience that he can do what he does without having to drop ship. I know that I can drop ship AND get best pricing, or close to it, without the internet and almost zero start-up capital.

      Also, I know quite a bit about SEO, PPC, content syndication and other traffic methods. I highly recommend using more than one and I recommend using offline, if it pertains to your business model.

      I've had businesses crash and burn a few times over the past 12 years simply because I didn't diversify my traffic sources enough and be flexible enough to branch into other areas of business. Having all of your eggs in one nest, whether it's the industry you're in, your suppliers, your traffic methods, etc is never wise. You can be making a killing one month and a month later have everything come to a screaching halt.

      Just sayin'. :-)


      Also, there's always a possibility that Google could one day decide to charge for ALL buyer keywords. That's no joke, folks. They know very well which keywords convert best. They have an enormous amount of analytics data!

      You'll notice that over the past five years or so they've been giving precedence to their paid ads by adding a third listing to the top of the PPC ads. This pushes the free ads further down the page. They don't care about those people.

      There are also some merchants who've been advertising on websites with high rankings in Google and Google isn't making anything from that. Wouldn't it make you mad if someone were not only running their business on YOUR property for free, but also collecting rent from someone else while you got nothing?

      Honestly, rather than give away all or most of the buyer keywords long term, I wouldn't be surprised to see some listings in Google become paid only, at least for the first few pages. They're just now really starting to get a real grasp on listing relevance (for the most part) with their ongoing Panda and Penguin updates. Dave also mentioned that 8-10 listings for most buyer keywords are ecommerce sites in his webinar. How long can the "powers that be" at Google ignore that?

      I'm not trying to be negative, but there's a strong possibility that they could grow tired of giving away that prime real estate for free. If that happens there will be a huge shakeup in the way things are done online and many small ecommerce stores won't be able to survive.

      Be warned! They've done a lot of other things in the past that have crushed small businesses. This is not out of the realm of possibility. I'd start diversifying now!
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  • Profile picture of the author ryshark
    Do you have examples of offline marketing techniques for ecommerce stores?
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    • Profile picture of the author Joe Stewart
      Originally Posted by ryshark View Post

      Do you have examples of offline marketing techniques for ecommerce stores?
      What I do offline has nothing to do with ecommerce stores. The name of this thread is "Realistic expectations of dropshipping business". The term "drop ship" does not in any way, shape or form mean that it's only relevant for ecommerce stores.

      I use the telephone - a lot. I have some customers that I've done business with for nearly 20 years now. That's from working for 6 other companies (two that my wife and/or I owned) plus the one I own now. I'd get mad and quit or get fired and then end up going back or going somewhere else and these guys would keep on buying from me. Why? Because I'd earned their trust and I respected their time and their needs.

      By building a trusting relationship with an individual I'm able to overcome much of the price comparison roadblocks. Don't get me wrong. I always remain competitive and rarely sell for list price, but I don't try to beat everyone elses prices out of the gate either. I only drop my prices if I have to meet or beat someone else. Otherwise, I charge fairly, but accordingly.

      You see, people buy from people that they know, like and trust. I'm not just a number on a website. When customers call my toll free number they don't get a customer service representative from overseas that speaks broken English (nothing personal towards anyone overseas). They get me - 100% of the time (during business hours). You have no idea how endearing that makes you to some people.

      Do I think that having an ecommerce store is necessary in order to run a business in 2013?

      NO!

      I know this for a fact. As a matter of fact, unless you have at least some experience in internet marketing, SEO, PPC, content syndication, writing web content for product descriptions and more, you may struggle setting up a store. Dave has a system that he uses that can greatly increase your odds of success, as does Ezra Firestone and others. However, that's still no "guarantee" of success.

      Just like any normal affiliate website, you could spend a significant amount of time, effort and/or money trying to make something work and end up having it fail.

      On the other hand, all I need to do is use my proven system to see if people are already buying what I plan to offer and, if so, get on the phone and start selling it. Pretty simple stuff - AND I can have cash in hand in 2-3 business days, sometimes sooner.

      I will say that business to business is the best way to go, though. That way you can avoid nearly all telemarketing laws. That being said, I'm not an attorney. I highly recommend that you study the laws yourself, read closely what applies to your situation, the products you intend to sell and hire an attorney if there's any confusion.

      All that being said, I do plan to build an ecommerce store, use Amazon, Ebay and other relevant resources, have an online newsletter, etc as well. Like 7 figure marketer, James Schramko, said not long ago, "be everywhere".

      There are other things that I intend to do to leverage my efforts as well, but I'm saving that for my report. :-)

      Bottom line - you can make a great living by simply rolling up your sleeves and working hard. Even $100-$200.00 per day would give some people complete freedom. I guarantee you that it's right there for the taking. All you need is a laptop and a telephone. You can work anywhere you want.

      HTH,

      Joe
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  • Profile picture of the author timpears
    Originally Posted by a7hanatos View Post

    Hi everyone, I'm new to the forum here and am strongly considering getting into the dropshipping business.

    I understand this is kind of a broad question since it depends on so many things, but I just wanted to do a sanity check.

    Is it realistic to make $50k+ a year starting a new dropshipping business if I do the correct research?

    What has your experience been in terms of when you started? Was it hard to make money? How long did it take you to see some real rewards?
    You can make $50K or $550K or more, it is up to you. Not rocket science. Dave is a little shy, but you can sign up for his coaching program and join the other $100K earners he has coached to success

    Welcome to Store Coach <<<<Go there and sign up, Dave will show you how it is done.
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  • Profile picture of the author Igor Pauer
    Back to original question: $50K+ is realistic. Based on empirical experience of our partners.
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    114.000 pcs of silver jewelry physically in stock. Diamond jewelry also available (in stock).
    We are direct producer. We dropship worldwide. Details of our affiliate, dropship and wholesale program find here.

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  • Profile picture of the author MinimalistMuser
    Tried signing up for the Store Coach free trial but its not working. I get a red bar at the top with no text when I submit my info.
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    • Profile picture of the author dave_hermansen
      Originally Posted by MinimalistMuser View Post

      Tried signing up for the Store Coach free trial but its not working. I get a red bar at the top with no text when I submit my info.
      I'm not sure what you're experiencing because we are getting dozens of successful free trial sign ups every hour!? It must be an issue with a specific version of web browser or something. Try using a different browser or give me specifics on your browser / operating system so I can have one of our programmers look at it.

      Originally Posted by Ivan777

      Thanks Anton and Dave for such amazing information and real people talk. I got all (99%) answers to all my possible questions about Drop Shipping. My last 1% is about customer support. How much time you spend by talking to the customers? I mean how many hours a day/week, for example? Or you have separate person/service/outsource for that?
      This is like asking "how long is a piece of rope?" There are far too many factors involved to give you a specific generic answer that would cover all stores. The more sales/inquiries you get the more CS time is required. Also, the amount of follow up greatly depends on the products you are offering. Some product types require a lot of post sale hand-holding and follow up, while others require little or none. These are important things to consider when you are trying to decide what niche to build your site around (the three most important considerations are listed here and we call them the "Big 3").
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      • Profile picture of the author Ivan777
        Originally Posted by dave_hermansen View Post

        This is like asking "how long is a piece of rope?" There are far too many factors involved to give you a specific generic answer that would cover all stores. The more sales/inquiries you get the more CS time is required. Also, the amount of follow up greatly depends on the products you are offering. Some product types require a lot of post sale hand-holding and follow up, while others require little or none. These are important things to consider when you are trying to decide what niche to build your site around (the three most important considerations are listed here and we call them the "Big 3").
        Thank you Dave. You are right. There is no way for clear answer without choosing the product/niche first, but thanks anyway.
        BTW, I also tried your SC using Chrome and IE, does not work for me. Coach’s Keyword Tool looks very interesting.
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        Lucky Slevin

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        • Profile picture of the author Ivan777
          Dave. Thanks one more time for coaching.
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          Lucky Slevin

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        • Profile picture of the author dave_hermansen
          Sure thing Ivan!

          Originally Posted by Ivan777 View Post

          BTW, I also tried your SC using Chrome and IE, does not work for me. Coach's Keyword Tool looks very interesting.
          There was an issue for some people with the captcha yesterday, so I'm guessing that's what you were experiencing. We updated the script for that captcha and it was acting funky for many browsers. All good now!
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          FREE ONLINE COURSE- Learn How to Dropship the Right Way!
          My PROVEN ecommerce process, as seen on: Fox News, the NY Times & Flippa
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  • Profile picture of the author Ivan777
    Thanks Anton and Dave for such amazing information and real people talk. I got all (99%) answers to all my possible questions about Drop Shipping. My last 1% is about customer support. How much time you spend by talking to the customers? I mean how many hours a day/week, for example? Or you have separate person/service/outsource for that?

    P.S. My 5c to the forum is here

    Thanks
    Signature

    Lucky Slevin

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  • Profile picture of the author mikedy
    Try to find an item that is profitable enough to cover the expenses, such as the postage costs, the listing fees, etc.

    On top of that, you have to find a product that is liquid, meaning that the product for sale is popular enough attracting at least a significant number of people, than nothing. If not, try to advertise it, but, then again, if it is not profitable, don't go for it.
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  • Profile picture of the author thinkpad1234
    You people are awesome. Thanks for all answers. @dave_hermansen your coaching site is great.
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  • Profile picture of the author DripRevenue
    I know this is an old thread, but thought I would comment anyways in case newcomers are still in the same position.

    I made over $300,000 my first year dropshipping with Shopify in 2015/16, but also lost quite a bit from not knowing the downsides to it.

    You have no quality control, high risk, high refunds, lose merchant accounts from overwhelming chargebacks, get your ad accounts banned from angry customers, and generate low margins at best. I've also seen people doing AliExpress dropshipping who have actually been sued or had government action enforced on them due to so many angry customers. It's better to own the product and store it in your own country, instead of sending it from China. Use dropshipping to test the waters, then order bulk from the supplier and store it and ship it yourself. It will pay off big time.

    My biggest competitor when I launched my store did it properly while I did not (stuck with the dropshipping model). They are still in business doing multiple 7-figures per year, while I lost my entire eCom business due to sticking with dropshipping. Not trying to discourage anyone from dropshipping necessarily, just trying to let you see the two-way street that it really is.
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  • Profile picture of the author MValmont
    50k per year? More like 50k per month if you know what you are doing.

    I do thing differently than the guys above, I drop ship from Aliexpress using Facebook and Instagram ads mostly.

    I used to do Amazon FBA and my margins are MUCH higher now. Much much higher.
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    • Hey - i am in the same boat of starting this exact model - and would like some help. Would you be able to help? I have been doing research on using Shopify and utilizing both Instagram and FB ads as well. Hopefully i can get a response in this area.
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  • Profile picture of the author Serki09
    Since 2005 SaleHoo has helped over 137,000 customers successfully start
    online businesses on eBay, Amazon and their own online stores.
    New to selling online?
    Ready to grow your online business?
    Find trusted suppliers of brand name products
    you can sell on Amazon, eBay, and your own store

    Find products you can sell without having to buy, store, pack, and ship stock www.saalehoo.com
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  • Profile picture of the author Jeffrey Joson
    is it possible as long as you get right supplier and you have good advertising skill
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  • Profile picture of the author alfa_375
    Great inspiring comment from Alksense. The key for starting a dropshipping business - is finding the right product/niche.
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