Table of Contents
- 1 Too many competitors exist to make the same widgets sell.
- 2 Your Tools Are Intentionally False
- 3 You are providing a wonderful customer experience
- 4 You are providing a wonderful shopping experience
- 5 You have no control over your product costs
- 6 There is no control over the product’s quality
- 7 You have no control over the shipping method
- 8 The Manufacturers Don’t Really Need You
- 9 Your business is not needed by anyone
Many people believe that dropshipping from China via Ali Express or Oberlo is dead. We have spoken about it many times. We disagree. It has been dead for longer than that.
We actually have 9 reasons to discuss in this post. So let’s jump straight into reason number 1.
Too many competitors exist to make the same widgets sell.
I will be the first to tell ya never to fear competition. Competition is a sign that you are in a healthy sector and you WANT competition within your industry.
This is possible when you own something and can control your destiny with a superior product, service, or something you cannot get from someone else’s shipment to China.
I’ve already discussed this one quite a bit with the examples in the previous post – so if you haven’t yet read that one I would recommend you stop reading right here and check out the previous post on Why Starting a Dropshipping Business is a Waste of Time.
This is the second part of a series. This post alone is equivalent to being 45 minutes late for a movie.
Dropshipping is very competitive, as I have already explained. This is because of the insane numbers involved.
AliExpress does not limit the number of sellers who can sell a product. There is no minimum advertised price (MAP) and there are no protections for you or your business.
Oberlo sent me an email to all their mailing list. It was entitled “Best Dropshipping Products to sell in Spring 2020”.
Oberlo is owned by Shopify. – sent an email out to the tens to thousands of subscribers and posted on their blog a list of the top products that you can sell in your eCommerce store.
What do you think it will look like for those who follow this advice?
You may have the entire market for LED pet collars, bamboo sunglasses, and hideous anchor bracelets.
You and the other 50,000 people who opened that email will be the only ones to see it.
Enjoy your popcorn as you watch the race to the bottom unfold!
Ooh… You should also include the ever-popular yoga pants, as you’ve probably come across at least 5,000 bad yoga pants stores during the holiday season.
Yoga pants are very popular, but don’t get me wrong. Comfortable clothing is what people want, and yoga pants are what women love.
You can start your own brand selling Yoga pants. You can count on me to be there for you every step of your journey.
Are you selling yoga pants of the same terrible quality that everyone else is trying to sell? Don’t waste time.
Oberlo gives you the exact product and the EXACT Facebook targeting you need with screenshots. This is the real kicker.
Oberlo advises that you target 18- to 65-year olds in the U.S. when selling bamboo sunglasses.
You’ll be spending so much money advertising with all the others who have the same ad targeting that you might forget why dropshipping is bad and instead blame the high cost of advertising on Facebook.
Your Tools Are Intentionally False
Although I do not like to call things a scam, it is something I have to do. When something is a fraud, I will call it what it is.
If I haven’t seen it, I wouldn’t call it out. There are many products that accomplish the same thing, but eCOMHUNT is my favorite.
This site was mentioned in my previous post. I said that there would be more information on the topic later. So here it is.
These are membership sites dropshippers can join to find the most recent and greatest trinkets on AliExpress. They also provide all the information you need to make money in eCommerce.
The first screen capture shows a product from the featured results page at ECOMHUNT. You don’t need to look too hard to see examples of what I mean.
This product is called “Grip and Flip Tongs”. This product is listed on the ECOMHUNT website at $6.99. You can also set the selling price as $22.99. I think this is a fictitious number. In the real world, this item is not worth that much.
You can also find a profit margin calculation on the page. It says that you will make $16.00 in profit.
The calculator also estimates your marketing cost per convert is between $2-$4, but again, that’s not accurate considering that the average cost per click for a Facebook advertisement is 5x more than the $0.12 they would need to do their “math”.
You can also target U.S. residents 18-65 with Buzzfeed Food interests. This site will show you exactly how to target this product.
The AliExpress link for this product will show that it is currently only $6.80. This is your lucky day!
It is possible that it will cost as much as $9 tomorrow, and you cannot sell it.
It will arrive in 12 to 20 days. Ugh!
After doing some basic research about this product, I was able to quickly locate dropshippers who offer this exact product.
ExpressDen is the first website I find. This is hilarious because it takes so long for items to arrive.
This website is poorly designed and tries to convince customers that the product is $40. However, if I hurry up and order one the last 2 remaining products, I can get it at a bargain price of only $24.95.
The product description and images look exactly the same as AliExpress.com. And it also contains my favorite line – “Items may take 15-30 days to arrive due to high demand.”
High demand? It is not. Stop lying to people!
I don’t like eCommerce sites that treat customers like idiots or lie to them.
Demand is absolutely nothing to do with 15-30 days. If you treat your customers as if they were dumb, they will never shop at your horrible site again.
Next, I am directed to Joopzy.com by Google’s next search results. This site is worse than the previous one and may be the most ugly ecommerce site ever made.
It’s okay if that site owner is reading this. But, eesh… Your store is awful in so. Many. There are many ways.
This item, which is normally priced at $39.99, is now only $19.99!
Wait a second. ECOMHUNT states that this product should be sold for $22.99
You can see in the bottom left corner that this image also uses Beeketing’s terrible app. This allows customers to be lied to by creating little overlays to try and convince them that Oscar in Orlando Florida has just purchased another product.
No, Oscar did not.
Even if Oscar was in Orlando, it’s unlikely that he would open a credit card to pay for such a bad site. Although I don’t know Oscar personally, I know he isn’t an idiot.
Edit: Shopify has now banned Beeketing sharing these horrible apps in their app store. Just a thought.
Besides, you might be able to get the ECOMHUNT $22.99 price to your benefit by having a more professional looking site.
Bocs.co is the third Google result for this product. It is by far the most professional-looking of all the three. Here’s where $22.99 comes in.
The regular price for this item is $34.99, but you can now get it on sale (ofcourse) for just $15.99 What’s the deal? $22.99! We have a new leader in this race to the bottom.
Let’s have a little fun and see the first Ebay paid search result listing. This exact product is available for $9.19 with FREE shipping.
It also tells you that shipping is from Shenzhen China, and may take several weeks. Honesty is a comforting quality. I would almost not mind the wait if I was told the truth from the beginning. What about the $22.99 suggested cost? Is there a deal?
We’ll give it another shot and locate another sponsored Ebay listing for this product.
Available at $6.99 Shipping from Shenzhen (China) included with FREE SHIPPING
The factory seems to prefer selling this product directly to U.S. customers. They can also sell it directly for less than what you can get on AliExpress as dropshipper.
We have a winner in this race to the bottom, I believe!
Is anyone interested in this horrible game? This is seriously… How can anyone believe that this is a profitable business model?
Worst of all, ECOMHUNT charges $20 per month for misleading or harmful information. It is very frustrating to see. It is really sad.
We still have seven more reasons to dropship from China.
You are providing a wonderful customer experience
Dropshipping sites that hide the phrase “Please Allow 2-3 Weeks for Delivery” in their fine print are worse than dropshipping sites that don’t bother to tell customers that this will take so long.
Perhaps the worst thing about people like me is that they lie to customers to try to trick them.
Don’t ever do that. Never do this.
A lifetime customer is the goal of a business that succeeds. You will always spend the least on marketing for follow-up sales. If you treat customers poorly you won’t have repeat business.
Let’s get back to shipping. Dropshippers and those who promote dropshipping try to convince customers that they are okay with waiting 2-3 weeks for their product to arrive.
Even if they are okay with it (not likely), it is still a bad customer experience. You won’t be able to make them a repeat customer.
Customers will not be able to see or forget the shipping terms and will inevitably reach out to inquire about their order status. Dropshipping will result in a significantly higher customer service investment than someone who does not dropship.
Many of these customers will be unhappy and leave negative reviews based on shipping times alone. Others may also request a refund.
Worse, they simply file a chargeback at their bank, rather than telling you that they are mad. If you use Shopify payments, a chargeback is when your payment processor takes money from you without asking.
This is why dropshipping is technically against the terms and conditions of payment processors like Stripe and Paypal.
Shopify Payments is actually run on Stripe, so you don’t have to be concerned about it.
You are providing a wonderful shopping experience
Many dropshipping site owners reach out to me for advice and support.
These people are truly my worst nightmare. Many of these sites have poor design and are built using Shopify’s free themes.
Dropshippers often say that they don’t want any money. You can spend anything.
They choose a theme that is free and it looks horrible.
I will be the first person to tell you that you often get what you pay.
You might not want to spend $350 on the Shopify Theme Turbo. It’s from Out of the Sandbox and is the best Shopify Theme. This theme is a great value and it pays off every time.
I’ll also say that most of the Shopify themes are terrible and should not be used.
I have installed dozens upon dozens of themes. Only a few TOTAL themes would be considered usable for an eCommerce store.
Pro tip: If you decide to spend a lot on your business and purchase Turbo, you can use the promo code Launch20 to get 20% off your order! It’s so useful that I even have my own discount code.
Dropshippers also make the same mistakes as dropshippers when they use product descriptions and photos provided by suppliers.
These images are often just plain awful, which makes your website look unprofessional.
These are also the exact same images that thousands of people use when trying to sell the exact same device on their sites.
The style of images can also be inconsistent when different Ali Express manufacturers are being sold by one seller. They clash, creating a confusing appearance that shouts “This is a scam, not a legitimate business”.
Also, product descriptions written in non-native English will not often convey the right message to make customers want to purchase.
Many dropshippers don’t have the time or desire to write their own descriptions, so they just let it go.
There were two extreme examples I came across: one for a product that said “Sexy Lingerie for Fat Women”, and the other for “Denim Pants for Chubby Boy”.
These wouldn’t be enough to make you reach for your credit card and buy!
You have no control over your product costs
I have been to China multiple times each year to visit my factories and attend events related to product sourcing such as Canton Fair. It is not uncommon for pricing to be inconsistent.
This event will allow me to tell you that I can easily get better pricing if I want to sell the products that you find on Ali Express. This listing is better than any AliExpress listing for exactly the same product.
It is not uncommon to negotiate price in Asia.
AliExpress is a dropship website that allows you to negotiate. While AliExpress may offer you a one-off price for your product, a person like me who visits China regularly can purchase the same product at a lower price.
You want to race to the bottom along with someone with a price advantage?
AliExpress will only allow you to pay the listed price. You have no control over the price tomorrow.
Are you willing to spend your time in a business that has no cost certainty for the products it sells?
If the product is a hot one, the laws of supply & demand could cause the manufacturer to raise their prices to the point where it would be prohibitively expensive to take you out of the market.
This is possible and it will happen. It is absurd to think that anyone would build a business on a model in which they are not able to control product pricing.
That’s for sure.
There is no control over the product’s quality
Dropshipping was a hot market last holiday season for beauty and makeup products. Shopify is home to billions in beauty product sales every year, including Kylie Cosmetics and ColourPop.
This popularity led to thousands of dropshipping sites for beauty products that have sprung up over the years. They can quickly set up a storefront with products from Oberlo or AliExpress and sell directly to their customers.
You may have read the article about how many beauty products shipped from China to be sent online were instead intercepted at customs because they contained lead and asbestos 15 times the legal limit.
I will repeat it so it sinks in: the products contained lead or asbestos at 15 times the legal levels.
Many people who bought these products, whose shipments were not caught by customs, suffered from eye infection and facial burns due to the hazardous chemical content.
Let me ask you a question: Do you think customers care if you dropship products or are they going to remember the retailer who sold them the unsafe product?
Dropshippers face a high legal and moral risk for selling dangerous products, whether they are licensed or counterfeit. Many dropshippers don’t realize what they are doing.
Dropshippers rarely order the products in question to test them out, so they don’t know the product quality.
An eCommerce store owner must know exactly what quality product they are selling, as returns can be very costly / impossible in China.
Selling your own product is the best and only way to do so. Make sure you have all ingredients tested by an independent lab to ensure they pass any consumer safety testing.
You have no control over the shipping method
Currently, an ePacket allows items to be shipped cheaply from China and Hong Kong to the United States.
The agreement with the United States Postal Service allows packages to be shipped from China via USPS First Class Mail. This includes end-to-end tracking and delivery confirmation.
It is possible to ship a package to New York from Shanghai as long as it is less than the cost of shipping the same package from Savannah, Georgia. These packages are subsidized through the USPS.
It is likely that if you received one of these packages in China, shipping it back to China would cost you more than the China shipper to send it.
If you get a return from a customer you can send it back to your supplier China. They will likely refund your purchase.
It is probably not worth spending the money to send it back.
Dropshipping from China is possible only because of the ePacket.
Given the current political climate in America, it’s only a matter time before this type shipping agreement is at the center of trade talks between China and the U.S.
To be honest, there’s no reason for these shipments to China to be sub-subsidized.
Dropshipping could all be in danger of being destroyed by a single tweet from the president. Regardless of your political views, you should be ready for any price changes at ePacket that could result in your business closing down, or even dropshipping products from China.
The Chinese manufacturers are happy with this because…
The Manufacturers Don’t Really Need You
If you believe I am the only one who thinks the ePacket gravy trains could end in the near future, then you should know that many Chinese factories and manufacturers are already planning their next strategic move.
They won’t need dropshipping websites to run their business.
More than 40% of Amazon merchants are Chinese businesses. These businesses are not dropshippers but manufacturers. This number is increasing as these businesses improve their logistics.
Many factories in China have reached out to me personally to find fulfillment opportunities in the United States. This will allow them to sell their products directly to American customers.
They don’t need dropshippers to get in the middle of it and take part of their profits. They are positioning themselves to control the whole pie.
Dropshipping is not required by Chinese manufacturers.
This brings us to the 9th reason dropshipping from China is bad.
Your business is not needed by anyone
Most of us who work in eCommerce want to create a business, grow it sustainably and profitably, and then sell it. Maybe some people like doing the same thing over and again.
Perhaps you simply want to move to a Caribbean island and sell your business for millions. If your business is a dropshipping site selling from China that’s unlikely to happen.
Every day, eCommerce businesses are sold and bought. I can even help people who are looking to purchase them connect with those looking to sell them.
An excellent rule of thumb is to expect to sell your online business for approximately 1.2x to1.8x annual profits.
There are many factors that influence business valuation. I will share them in a future blog. However, I can assure you that it is impossible to get a comparable valuation for a dropshipping website using AliExpress and Oberlo.
If someone offers you a site similar to this and you are interested in a 1.2x offer, the only question you should ask is “Where do I sign?”
Since I was a teenager, I have been involved in eCommerce business sales and buying for years. I can tell you what I would spend for an AliExpress dropshipping website.
Actually, if I have one, I’ll make you an offer now.
No matter your sales history, I’ll give you $0 right now for your website. This is the final offer. You can accept it or not.
You are correct, I wouldn’t pay a dime for one of these sites.
They aren’t worth the effort and are not long-term sustainable. They are a house made of cards that is ready to fall to pieces. If it hasn’t already, it’s only a matter time before it happens.
Many people looking to buy businesses feel the exact same way. Dropshipping businesses are one of the most difficult to find buyers.
On a daily basis, I meet with many brokers to try and sell these websites. Those who attempt to build them will often try and flip them to an unsuspecting buyer.
It is very sad when people put their hard-earned cash into such a business without realizing it. This is something I have seen many times. I offer to buy them a beer and give them a tissue while they complain.
It would have been a great idea if they had read the two-part series before investing.
Dropshipping is still a scam. Many people fall for it, believing that it can be profitable with little risk.
As someone who has been involved in eCommerce since 1997, and has worked in real eCommerce businesses building global brands and generating billions of dollars in revenue, I hope you will listen to me.
Recognize that your time is a financial investment. Every hour you spend has a dollar value.
Even if you feel you have more time than you actually have dollars, remember that you can always make more money.
There are only so many hours in a day. Use them wisely.
Many models can still be achieved at a low cost or even free. Building a Print on Demand brand like we’re doing with our Ultimate eCommerce Premium Community is one of those ways.
Affiliate marketing is another way to learn and get involved in the business. It is basically the same as dropshipping, but without the negatives.
You are more than that and deserve better for your future. Let’s do something.