facebookIs dropshipping profitable? Anyone done this before? - Seedly

Jay Liu

Accounting and Finance at ACCA

07 Jun 2019



Is dropshipping profitable? Anyone done this before?

Drop shipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

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Since my business began to expand and develop, and we needed a large warehouse to store products, we also needed modern technologies that allow us to at least partially automate the workflow. Among all the options that I managed to find, automated guided vehicles in warehousing and related software provided by deus robotics attracted the most. I advise you to learn more about these solutions.

Kenneth Lou

07 Jun 2019

Co-founder at Seedly

Gonna help a friend answer (saw his answer on the group):


Question from a friend:


Actually like to ask friends who managed to read this post. What do you all think about the ecommerce space? Can you still buy things in from Taobao and sell? Does it work?


His Answer:

I use to do this alot. and my learning points are:

  1. It's hard to scale to a point that's worth your time. Imagine if you teach tuition and it rakes you maybe $50/hr. You need to ensure your e-commerce business makes it worth $50/hr that's not easy. If you can work on other IT projects for $100/hr your time gets more and more expensive.
  2. You're very likely in a commodity business. Unless you can find a niche, like fancy underwear and G-String for homosexual man (don't laugh, this is a legit money making niche awhile back.)
  3. A lot of newbie e-commerce people think it's just COGS - Revenue = Profit. But it's never true, the moment you factor in TIME. Time to source, to purchase, to track, customer service to time-wasters, packing, licking stamps, travel to post office, deal with lost mail, deal with negative reviews, deal with dead on arrival items. TIME is marneyyyy.. and it's really back to point #1 in making it worthwhile = hard.

4. There a few ecommerce models.


4.1 Bring in, stock up, sell. 4.1 brings in highest margins with the greatest risk(stuck inventory). and requires larger capital. 4.1 Characteristics: Limited to low SKUs. Say no to t-shirts/shoes(too many sizes). Seasonal products, like handphone cases(gets outdated fast).


4.2 Dropshipping


Keep no stock. Mid-risk. Low Margins. You're in the commodity business. Sales goes through you. You keep the data. You handle the money. 4.2 Common cause of death. CAC > Profit Margin. 4.2 Medium risk = if your supplier doesn't ship, you bear the cost, you are liable. 4.2 is better than 4.3 Because you keep customer data.


4.3 Affiliate Marketing


Keep no stock, take little risk, you can sell 1million items. You direct traffic to supplier, they close, they own the data, they take the money. You get a commission. Usually the simplest way to get started. Chances of success ultra low = there's plenty of other affiliates.


Summary: We're definitely transitioning into ecommerce, but those fly by night classes that says it's as easy as it seems, really aren't true. you need to put in a ton of work to make it really work in a way that it's worth your time.

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Can be profitable last time on Amazon (before they changed the rules). But returns can be a killer, ...

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