Is dropshipping profitable? Anyone done this before? - Seedly
 

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Asked by Jay Liu

Asked on 02 Sep 2018

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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Kenneth Lou
Kenneth Lou, Co-founder at Seedly
Level 9. God of Wisdom
Updated on 07 Jun 2019

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 Seasonal products, like handphone cases(gets outdated fast).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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Jay Liu
Jay Liu

21 Sep 2018

Nice thanks
Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Answered on 05 Sep 2018

Can be profitable last time on Amazon (before they changed the rules). But returns can be a killer, ever encountered situations where the supplier demanded a return shipping fee that cost more than my revenue... And you can't say no to returns when using amazon. Will be exploring a new method of dropshipping later in November with my mentor using another platform

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HC Tang
HC Tang, Financial Enthusiast, Budgeting at The Society
Level 8. Wizard
Answered on 04 Sep 2018

Hi

I did ebay and blog selling and help others on e-comm website last time. Basically we does some drop shipping and also kept some inventory.

Answer:

Yes it does but :

  1. Must assure quality - Same as all business, you have to ensure your quality of stock otherwise because you can't see / check the stock , so you really have to trust your supplier. If quality is bad, your customer will be gone forever and reputation ruin.

  2. Costing - Of course your selling price must be able to cover all your baseline, the cost of shipping etc

  3. Tracking - Best if you could find supplier that provides a system of tracking rather than let customer left hanging.

Hope your new ventures goes well.

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