IM Rant

The pipe dream chase has been going pretty well, I must admit.  On Saturday just before all the college football games I’ll fill you in on all the details.  But now, it is time for the new Wednesday Opportunity.

The average everyday shopper, online or offline, doesn’t know about dropshipping at all.  Believe it or not, these major stores like Wal-Mart, KMart, Best Buy, Target, among many others are something like dropshippers in a way.  Let me explain just what dropshipping is in a nutshell: Buy low, sell high.  As in buy a product for much less than its retail value then resell it for profit.  These major stores buy a huge bulk of certain products (like video games for example) for, say, $20 a pop.  This is called the wholesale price.  Then they resell these products (using the video games example) for, say, $50 a pop, giving them a $30 profit on each copy that flies off the shelf and into a consumer’s hands.

Well, okay, it isn’t dropshipping in the sense of the word, but this is basically how the retail business works.  But the model of dropshipping has been opened up online to the average everyday person.  The way the dropshipping online business model works is this way: A customer buys a product through you.  You collect the selling price and the shipping costs.  You send the dropship provider the wholesale price.  The dropship provider sends the product to the customer (with your company info on there).  You keep the profit.  And basically, you don’t even have to have the product in your hands to sell it.  Sound good?

Well, don’t get excited.  Let me tell you why – most of these dropship providers are basically something like middlemen.  Basically, they are the ones getting the products for you from REAL wholesalers.  And most of these dropship providers jack up the price on you, forcing you to sell the products at a higher price than others in order for you to even make any profit.  Bad, BAD stuff.  Examples of these dropship providers include Doba and Salehoo.  I have read too many horror stories to count from these clowns so don’t even waste your time with them.

But can you get the products directly from the wholesalers?  Yes you can – if you know where to find the reputable ones.  But to help you out a bit, I heard of this company called Worldwide Brands, which supposedly lists some reputable wholesalers.  It has got some good reviews.  But prepare to shell out $300 for that info.  Even if you do find a good one, you’re basically another store competing with some of the top names out there as well as the Powersellers on eBay, which is a no-win situation.  And here is the thing – you will have to stock the products yourself, so be prepared to make some room in your house.  And another BAD thing – remember that wholesale price?  Well, don’t expect to just buy one of the product at wholesale price then turn around and resell it for profit.  You have to buy a certain amount.  It depends on the product and the MSRP.  Going back to the video game example, say the MSRP is $50 and the wholesale price is $20.  The company will force you to buy, say, 50 copies of the video game at $20 a pop.  $1000.  OUCH.  That is too high of a startup cost for an online business.  You better hope you sell all 50 of those at $50 a pop and make a healthy $1500 profit.

If you DO have the money to invest and you HAVE found a reputable wholesaler, you’re still not out of the woods.  You now have to do your research and find out just what is selling right now.  And let me tell you – that research is a royal pain in the ass.  You have to find the niche, go around on various websites and pinpoint what is really hot at the moment.  Waste of time.  Waste of money if you haven’t done your research.

Overall, I recommend that you stay away from dropshipping.  It is just too much bullshit that goes into it and you’ll be set up with way too many damn roadblocks.  Don’t try and compete with Wal-Mart.  You will NEVER win that battle.  You’ll just get your ass handed to you.

If you do decide to dropship, however, don’t forget to put this on the box: If it doesn’t work for me, it won’t work for you.  Chase the pipe dream.  Live the pipe nightmare.