Is dropshipping still profitable?
Here is the thing, this is something that everybody knows about, yet something we really need to talk about – its this elephant in the room that is constantly there, getting bigger with no signs of slowing down. Yes, that’s Amazon.
So how exactly can you and I compete with a big corporation like Amazon? That’s the big question that needs to be answered. The biggest barrier you’re going to face is shipping times and prices.
Here’s the thing, Amazon is becoming the AliExpress of same day shipping. So how exactly do you combat this, how exactly do you go out there and make money, stand out and still become profitable in this day and age, when it comes to dropshipping?
The very first thing that comes to mind is that you need a combat this with off setting the price and lowering your price when it comes to Amazon.
If you are a non-branded store, meaning that your store doesn’t revolve around one product or a particular brand, then you’re going to need to undercut generic products on Amazon by at least a dollar. Why? Because people value their money more than anything else. So when it comes down to it, you want to go ahead and play off of that.
If something is selling for $35 on Amazon and you’re getting it for, say, 24.50$ – you can sell it for $34 in your store and people will cross-reference it with Amazon and see that you’re actually cheaper and psychologically they’ll purchase from you.
This is of course, unless they need that item really fast, then they’re going to get it from Amazon. So one thing that you can do immediately is lower your price by under a dollar, undercutting amazon, but a lot of times it might be hard to actually undercut Amazon. So you’re going to actually have to really dive deep into the supplier chain and find a product that meets your margin and your criteria as well.
Use a long-term strategy
Nobody sets themselves up correctly in this stage of dropshipping for a long-term play. This is something that we’ve been really big advocate here at SaleSource and we even go as far as saying that if you’re currently still trying to go after one-off sales, you’re fighting an uphill battle that necessarily isn’t going to ever end up profitable for you. You won’t ever win this battle because of Amazon and other ecommerce giants.
Amazon is this looming giant over all of us that’s waiting for your next move so he can combat you.
The sad truth is that a lot of dropshippers barely break even, because of the fact that they are focusing on one off sales and do not upsell to their existing customers.
Let’s say for example that you have a moderately successful store with a 15-20 % profit margin, if your monthly revenue is $200.000, then you’ll be able to keep around $30.000.There are couple of ways that you can dramatically increase your profits, without that much extra effort:
Firstly, you need to be using stripe – that’s huge. Without doing so, you would be leaving a lot of money on the table.
Secondly, you need to have a proper schedule or proper format to reach your customers that you’ve already acquired. So, if you are able to make a profit from the initial sale, within 7 to 14 days later, you’ll be able to go out there again and make even more money by selling to those same exact customers. The best thing, is that all you have to subtract is the product cost at that point, because you already paid for the advertisement, so it’s a no-brainer, not to mention that results will become obvious almost immediately, within the first month of doing so.
A good app that I would suggest using is SMS Bump
But one that I would really suggest for follow-up is Mail Funnels.
With mail funnels you have the ability to do one-click cart abandonment setup. You have the ability to have a post-sale sequence set up, so your customers get emails after they purchase,
for however many days you want. There is a lot of stuff that you can do.
You definitely want to set yourself up correctly when it comes down to a longer term structure and the person who’s willing to spend the most and who can spend the most on acquiring a customer will win the long-term game of e-commerce. That’s how it works. That’s what Jeff Bezos knows as well and that’s how he scaled Amazon to great lengths.
Over-relying on Facebook
Relying so heavily on Facebook, unfortunately isn’t the best idea – everybody puts all their eggs in one basket, when there are other platforms, such as Twitter, Pinterest, Instagram.
Interestingly, a lot of people don’t also realize is that Bing actually has 33 % purchase rate than Google, more buyers on average compared to Google.
Bing users are more of an older crowd, so they tend to purchase more, even though the traffic isn’t as big, in regards to volume, as it is on Google – Bing has higher buyer traffic. So you have Bing you can use, you know, Google ads still you can use Pinterest you want to start diversifying your traffic sources. Diversifying your traffic sources is very important.
Use different advertising mediums
Everybody knows about advertising on Facebook.
There are other unorthodox methods that some of our clients have been trying. For example, we have clients doing upwards of a million dollars per months running Google campaigns
Pinterest is another great way to run ads that no one else is doing. Pinterest is a platform for discovering new things, meaning that practically of the searches on pinterest are unbranded. This goes to show that Pinterest users are open to new product ideas and it’s a great place to run ads as a dropshipper.
If you want to advertise online, you probably didn’t have Snapchat in mind. The choice of social network is heavily dependant on the audience that you want to target. There is no point to limit your ads to the more traditional platforms like Facebook or Google if the vast majority of your audience uses Snapchat.
Reddit acquired 8 billion page views from over 235 million unique monthly visitors. Reddit has thousands upon thousands of targeted communities that are organised around every conceivable topic. It is the most engaged, the biggest and most influential platform on the web – the self-proclaimed Front Page Of The Internet, so it’s certainly worth exploring.
What I would recommend is harnessing and focusing in on one particular traffic source that you want to learn and master and once you’re done, you can then move to another one. But if you’re constantly hopping around different platforms trying to figure out which one works best, you’re never going to get the best results because let’s face it: You don’t have hundreds and thousands of dollars to burn through to test. So Focus your energy and time on one traffic source and really harness in on learning it and then move on from there.
Dropshipping is done correctly you can make a huge profit. However, if you’re doing what everybody else is doing and just throwing together some random store, running very generic ads, very bland targeting – you’re going to get lost in a vast sea of competition and your ad cost will drown you in a lot of debt.
You should always take a look at cross-referencing Amazon: What’s selling, what the price point is, see if you can undercut or see if you can do something a little better.You also want make sure that you’re diversifying your traffic sources. This is huge and not a lot of people are doing this.
Lastly, not many stores have a long-term proper structure in place, that’s why most dropshipping stores go out of business within first 6-8 months. You want to make sure you’re setting yourself up with a proper structure before have the ability to spend more money than everybody else does to acquire a customer, so you can make more money in the long term. That’s the name of the game in 2020.