Hello, and welcome to another episode of whiteboard sessions with me Andrew Maff. I'm the founder and CEO of BlueTuskr are a full-service digital marketing company for e-commerce sellers. And today, they get a little controversial. And I'm going to get into the real truth behind dropshipping on Shopify that no one ever tells you.
There's a reason I wanted to create this video. And the main reason is that every time I go onto YouTube, I see all these guys who claim to be "Gurus". And they say how I made an insane amount of money dropshipping on Shopify, and how you can do it too. And then here's the thing, you go and read the comments. And most people are saying like, this shit didn't work. And I want to explain to everyone why it doesn't work. Or I want to explain to everyone how you can adjust it to make sure that you do actually make money.
General Store vs Niche Store
Now here's the first thing I want to let everyone know, getting directly onto Shopify, setting up a really basic shop, and throwing in a bunch of products and just running some Facebook ads and stuff to it does not work. And it hasn't worked in a very long time. So the fact that a lot of those videos still exist blows my mind.
Here's the one thing you have to understand is that a, it's not easy to get into drop shipping, there are a bunch of apps that you can download, and things like that, where you can aggregate a lot of products, or you have to go directly to whoever it is you're looking to dropship and they have to approve you. And if you haven't done it before, it's a little bit more difficult that way. But what a lot of people don't understand is that you have to build your website to actually cater to a certain type of brand, right.
General Store
So let's paint a picture. Let's say we own a department store. This department store sells stocks. Let's say we sell cameras. Let's say we sell candy. We also sell on the court, right? Sure. We sell shovels, who doesn't love a show? We also have dog toys. Right? Isn't this great? Pardon? Sorry, oh two is crap. No one should go here is the most random stuff. And there's no cohesiveness to it.
So you're kind of like, Why do you have this random amalgamation of stuff. So then you start thinking like, alright, well, if I want like a bunch of random things, you're gonna go to a traditional department store like a Walmart or something like that, we're gonna go to Amazon like everyone else.
Niche Store
Now let's think of something else. Now, let's say we have a department store, and we're going to cater to something. So let's say we cater sports. So now all of a sudden, we have footballs, and we have baseballs. And we have bats and we have workout gear, and we have running shoes, and we have running socks. We've all this stuff that's a little bit more specific to sports.
Now, all of a sudden, here's the thing about online, right? In both of these cases, you're going to get traffic that's constantly driving by your store. And then we'll pop in every now and then go okay, this is kind of weird in the lead. In this case, same concept, right? But they'll start to see like, alright, so these are sports stuff. If I ever need sports stuff, this works online, it's different. You don't have to travel to just happen to go by your side, you have to bring the traffic to you.
Pros and Cons
So how are you going to run ads on this? How do you run an ad for a shovel? And then for socks? And for like home decor like you can't, you'd have to create creativity for each and every one of those. And then when they land on your site, they'd be kind of confused by like, Why do I have home decor and shovels and random other shit doesn't make any sense. In this case, you can actually make creative and completely caters to the sport.
So it's about making sure that you have one big type of category that you can drive all your traffic to. And this way, if I drive traffic to run socks, maybe they don't need socks, but they see shoes and I still get the purchase here is very less likely that they're gonna see I have home decor and then be like, Oh, wait, I also need socks, that's not really going to happen.
About your Website
So this is the big thing that I always see is a big issue with the dropshipping right is that a lot of people turn their website into a reason to go there. So here's the other thing. A lot of these people who create these dropshipping sites, just kind of throw up a theme and start to drive traffic to it. And even if they do have like a general category that they stick to the site is relatively outdated, and it's kind of beat up looking into be honest.
I could be biased because I've been doing this for a long time. But if you use a theme on Shopify, you kind of know you're using the machine a theme on Shopify, it's usually pretty ugly. So why is it if we were to create a website that catered to sports Why would someone come here as opposed to going to Dick's warehouse or Sports Authority or something like that, your website needs to almost outpace them? And it needs to have a better experience to the point where when you do finally get those conversions, they continue to come back.
How to Make Real Money on Dropshipping
Now, this is all marketing 101 stuff, this is all e-commerce one on one stuff, but I'm going to tell you how to make real money dropshipping. The one thing that works the best is if you have a goal to eventually stop drop shipping, or do a mix of drop shipping and private label, in my opinion, solely drop shipping.
Profit Margin
There's not enough margin in dropshipping. To continue going, especially as time goes on, with paid advertising cost per click (CPC) continues to rise, too, as cost per click goes up, so does your cost per acquisition, which means your average order value has to go up and higher and higher. And then you start out pricing yourself from all these big guys who can't, who can't afford to keep their prices lower.
Cater to a Specific Category
So one of the things we suggest is to dropship, specifically a category, make sure that you're catering heavily to whichever category you have, and make sure you have a wider range of products. If you're going to do sports, make sure you have everything for football, basketball, baseball, golf if you can drop ship it and it's relevant to sports, you want to bring it into one place. Or let's say you just did golf, make sure anything and everything you could possibly dropship come into one place so that at least the traffic your driving that audience is relevant enough where they might shop around and purchase other things which could increase your average order value, reduce your cost per acquisition, or at least reduce.
What to Expect
I mean, your cost per acquisition remains the same, sorry, but at least it would expand your average order value, your lifetime value, maybe a little bit more profitable. But the next thing to do is as time goes on, consistently pull the data on every single one of your products that you're selling, right. So you're able to drop ship, all this stuff you have coming in from all these different apps and these different brands that have approved your dropshipping, great. But you want to pull data on every single one of these products and figure out which one of these is selling the best.
Proof of Concept
So let's say we are doing golf, we'll get specific to golf. And we're selling shoes and clubs, golf balls, clubs, and tees, and all this fun stuff, right? Well, you start to pull a lot of data on all these different things you're setting, you're just creating one audience that's really interested in golf, and you're sending all the traffic to the site to basically telling people like if you're looking for golf stuff, we have everything you need, getting them to your site, then they're all going to start shopping around, they start to purchase, once you start to see, okay, I'm getting a ton of sales on people that are really needing golf clubs, right. So we drive all this traffic of general golf audiences to the site, but I'm getting a lot of sales for clubs. This is your proof of concept.
Now what you're being told is that the audience you're able to reach relatively easily needs golf clubs, golf clubs, so the issue that you're going to always have dropshipping is that your margins are crap margins are really low, so you're not going to make a lot on it. And if cost wrap, if your cost per click starts going up, cost per acquisition goes up, it's still gonna be tough for you to make that kind of money.
Start a Private Label
So what we suggest doing from here is to actually go and now start looking into private labeling your top stuff, leave everything else. But now you know, hey, gloves are selling well, here's the type of glove that sells well make it a little bit better. Make sure you don't break anyone's patent or anything like that. And then within here, maybe you have a gloves page.
Now feature your glove, put a banner up top, put it on the homepage, that way you're starting to really cater to your own stuff, private label, your own stuff you've already now proven is selling. And so from here, you're gonna want to continuously go down this route. So okay, gloves, let's go make a bunch of gloves for ourselves. Okay, we're starting to prove out some decent numbers on tees.
Let's now go make tees let's private label some tees. Then once you can do is turn this whole website into basically a golf marketplace. But each of these products and each of these categories to a certain extent, you'll eventually start private labeling yourself. So your margins start to go the other direction and your margins go up. So now you're earning the money. You're basically leveraging other people's brands to drive traffic to your own website to figure out what sells the best. And then just doing it yourself and then you have another option.
So you see gloves are selling a lot. You could basically continue to have a big plethora of gloves and give people a lot of options for them to shop or start getting rid of some of your competitors. Like hey, we privately labeled our own, and we're selling way too much of Tiger Woods is Golf Club Golf golf gloves. So your option now was, let's hide the Tiger Woods golf gloves and see what happens for a little while? Do we start getting the sales? Or did we lose them, if you lose them, do you put the tiger one back?
Start Making Money
Alright, what's the next one down and start getting rid of them. So that way you start to make money off your drop shipping, but you can actually start to really make money on your own private label. Otherwise, one thing a lot of people don't talk about is that with drop shipping, they can easily pick and choose when they don't want to allow you to drop ship anymore, you're basically taking your business and being reliant on a lot of other people's businesses, which is nice. In theory, there are a lot of businesses that do that. But you're really at a risk there for basically a company that is wildly expensive, because your margins are so low on every sale yet. So you're gonna have to put a lot of marketing dollars into basically driving a ton of traffic to a site, you're going to need to make sure looks great, but your margins are going to below.
So when you look at these YouTube videos, and these guys saying like, Hey, I made 20 $30,000 This month, drop shipping, that's revenue, not profit, ask them what their profit is, and find out how much money they made, and decide how much they put into marketing dollars and how much they put into an email. And at what point does it take them to actually be profitable on the business as a whole. Because I'm gonna bet most of those gurus take years before they're actually profitable, and even then their profit margins are really low.
That's my opinion on how to do dropshipping on Shopify correctly. It's almost like just bootstrapping a business from the beginning and allowing yourself to kind of learn the market. But as usual, please comment, tell me why I'm wrong, or comment let me know any other video you'd like me to make. And I'll walk through anything you guys would like rate review, subscribe, all that fun stuff, but I will see you all next time. Thank you
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