- Usually, I'm a huge advocate for just jumping in
and getting started with business,
but dropshipping comes with warnings.
(drum booming) - What were
my failed businesses and why did I fail?
- [Voiceover] Show me something
that you thought that would sell . . . .
- Biggest takeaways from my failed drop . . . .
- $220,000, but I failed.
- Drop shipping is riddled with payment bans
and ad account bans
that could affect you for your entire life.
This is a message to my younger viewers.
Make sure you watch this video
before you get started with dropshipping.
- [Man] That's cool.
- Cool. (upbeat music)
(shutter clicking)
Hey everyone I'm Davie.
I'm 26 years old and my Shopify brands have done
over $270 million in sales.
Today is a really special video.
We're gonna break down the dark side of dropshipping.
The other day,
a kid came into my office.
He is 16 years old and just dropped out of school.
He is incredibly smart, driven, and ready for success.
He was telling me stories
about how his stores were doing huge volumes,
making more than his parents and his teachers combined.
I've seen some of his Shopify dashboards now,
and he's doing over $20,000 in sales a day.
The problem is he's doing dropshipping.
His main challenges right now
is that his Facebook ad account keeps getting banned.
He needs to set them up through agency accounts
or his friends and family.
All of these headaches with account bans stops people
from finding success with e-commerce.
Even when you find success,
those account bans are gonna keep following you
and stopping your momentum.
They stop you from focusing on the main things
like fixing your advertising and your website.
Instead you're focusing on
where my next ad account is going to be.
I personally was incredibly lucky.
When I started the Oodie,
I custom branded my store
and focused on customer experience from day one.
This means that I've never had an account ban.
However, I'm very, very familiar with it.
And I'm gonna tell you exactly how to avoid it today.
As the Internet became more mainstream
globalization happened.
China became closer and dropshipping was born.
Western economies were able
to contact Chinese suppliers easily
and ship products directly from China to their country.
Dropshipping as you know is a pretty simple business model.
All you need to do is acquire a customer
and then the Chinese manufacturer
will ship it directly from China.
You hold no inventory.
So the risk is much lower.
The fact that it is so simple
is the main problem of dropshipping.
Basically anyone with an internet connection can do it.
Online gurus are busy selling courses,
but they don't actually tell you the main risks
of the business model itself.
So these are the reasons why people think dropshipping
is such a good idea.
The first and foremost is that low barrier to entry.
It requires very little capital to get started.
The second thing is the simplicity.
You don't have to handle the freight component
and setting up the 3PL.
The logistics is much simpler.
All you need to worry about is acquiring the customers
and also the customer service component.
The other benefit that often isn't talked about
is the tax component.
A lot of countries have thresholds for their duties
and by shipping directly to China,
you can actually avoid those duties
by shipping under that cost.
If that's the case,
why don't we hear about more dropshippers
on the Forbes list?
There are some major disadvantages
about this business model.
Let's get into them.
Before we keep going,
make sure you like and subscribe.
The first major disadvantage of dropshipping
lies in its simplicity
in that it's super, super competitive.
With low barriers of entry
people flock into the market.
It's basic economics.
The standard business model for dropshipping
is going onto a tool like Adspy
and then finding a product
that has high amount of some social proof.
Because this business strategy has been standardized,
what will happen is when a product scales quite well,
lots of other people will flock into it
and your margin will drop.
The competition will increase.
This is the same for other tools like E-com hunt.
Because everyone is using them,
everyone is launching the same products.
While you may be able
to arbitrage Facebook traffic initially,
what will happen is that
if you do not differentiate your product,
people will keep undercutting each other
and the ad costs will keep going up.
Pair that with the Chinese suppliers
actually listing their products on Amazon themselves
and you're in real big trouble.
Basically your trend lifespan has been shortened.
The other negative of dropshipping is my biggest pet peeve.
There is no customer connection.
In e-commerce, you have two elements.
You have acquisition, acquiring a customer
and then retention, keeping them around,
Dropshippers generally only really care
about the acquisition pace.
They're trying to make profit
on the first purchase of the transaction.
So basically they're buying ads,
they're buying the one product,
they're shipping it to them minus the courier costs
and you get your profits.
Often brands are actually opposite.
There'll be willing to lose money
on the first acquisition cost
so that they can retain their customers,
bring them back to repeat purchase,
and make money over time.
There is actually two reasons why this is the case.
Because of the really competitive nature of dropshippers.
Often what will happen is the product quality
will continuously drop.
Suppliers will continuously reduce the quality
of their product to increase the margin.
Drop shippers will then gravitate to this supplier.
And eventually the product will just break.
We all have that experience of just buying a product
as cheap as possible, getting it, and it barely even works.
The second element around retention is the shipping times.
If you buy a product from a store
and it takes over 30 days to get to you,
you're never gonna buy from it again,
especially when there's an alternative
that has treated eight days shipping time
or even one day with Amazon.
Now this continues a chain reaction.
With the delayed shipping times comes negative reviews.
These negative reviews can be in the form
of the automatic Facebook survey
that Facebook sends your customers after they purchase,
or they can be on sites like Trustpilot
with all these negative reviews.
The next step is platform bands,
all platforms out there,
whether it's Stripe or Facebook ads,
want to make sure
that their customers have a good experience.
They invest millions of dollars in preventing
this negative experience from happening to their customers,
whether it be fraud or scams,
if a customer buys something off the newsfeed,
and it comes, and it's really bad experience,
chances are that you're not gonna buy something
off the newsfeed again.
This is why Facebook would rather
just ban the account straight away,
then risk their user experience.
Now, once this ban happens,
it's very hard to get your accounts back.
Even when you make a mistake when you're 12 years old,
it's gonna haunt you for the rest of your career.
I was banned off a payment gateway
when I was very young selling headphones
and it lost me so much money when I first started Oodie.
Before I get into mitigating the risk
with drop shipping and account bans,
I thought I'd jump on the phone
with The ECOM King. (bell ringing)
This guy is a beast in the industry.
He's got brands and dropshipping stores.
So he's gonna be an expert on the topic.
Let's give him a call now.
So Kamil,
you're one of the biggest advocates
for drop shipping I know.
Can you please tell our Subscribers
a little bit about yourself?
- Yeah, so my name's Kamil Sattar,
as The ECOM King.
I started my YouTube channel about three years ago
and I started e-commerce back in 2015
buying and reselling sneakers and clothing.
And then in 2017,
that's when I came across dropshipping.
And then ever since then,
I've just been doing dropshipping.
And since then we've been building
a few different e-commerce brands as well.
- How many products and brands
are you actually running at the moment?
- So in terms of actual e-commerce brands,
white label brands,
around about four or six.
In terms of dropshipping stores,
we've got around about five to eight of those.
- That's awesome.
It sounds like you've got a bit of a balance
of dropshipping and brand,
which really makes you a great person
to talk about the topic that we're talking about today.
Do you have any advice
for beginners getting started
with either dropshipping or branding?
- Yeah so for those that are looking
to do like dropshipping or branding,
the best thing that I can advise you to do is start
with a lower amount of buying in bulk.
You can actually do like 10 minimum.
We found some suppliers
that will let you do 10 in quantities,
and then start private labeling.
And do the private labeling slowly.
Don't go straight into it.
Or maybe start with some packaging branding,
then start with maybe a logo on the product.
And then you can start scaling into things
like actual own custom designing
and stuff like other products.
- If you're just getting started in the industry,
would you recommend dropshipping or branding
as a whole using a 3PL going fully into it?
- Yeah great questions.
So my personal opinion on this,
there's no right or wrong from it
is I do think dropshipping's a great way to start.
Now in terms of how long you should be dropshipping for
is a second question which is important.
Now, I think you should be dropshipping to start with
for maybe the first 30 to 50 orders,
maybe a little bit less,
depending on how confident you are.
But I do think it is important for a lot of these guys
that are starting the e-commerce journeys
to actually get a bit of proof of concept.
Know the product that is actually doing pretty well
whether they use it on Facebook, Google,
or these other advertising platforms.
And then once they're confident
and they know that they're getting consistent orders,
they're making a bit of money,
then I think they should move to, like you say,
a 3PL ordering it in bulk,
using certain agents and suppliers to private label.
But I do believe everybody
should be test doing dropshipping,
but the thing is a lot of people get stopped dropshipping.
And that's where I do very much disagree with that.
I think you should only be doing it very, very short term.
- What makes a successful brand?
What are some lessons that you've learned along the way?
- In my opinion getting a lot of customers,
but keeping them happy with what your brand is all about.
And then you can then follow more people in
and again and again,
but with a brand
it just comes down to really keeping those people happy.
And this is the difference between starting a brand
and not doing a brand.
You've got to keep the people
that you get into your door extremely happy.
You got to be very transparent with them.
You've got to give them everything
that they want from you as a brand.
And you got to really listen to them more than you would
with another e-commerce store,
let's say a drop shipping store, for example.
- Totally.
If I could summarize it's more emotional
rather than focusing,
making sure the customers have a strong emotion to you
rather than just focusing on the profits of the business.
- Yeah, so it's less impulsive.
It's less about impulse buying.
It's more a little bit about you storytelling
in telling people what you are there for.
- Now I'm sure you get this comment
probably more than most, ad account bans.
How many have you had?
How do you prevent it?
Talk us through it.
- So I've been through
around about 20 to 30 ad accounts.
Right now I've got ad accounts on my mom's Facebook,
my dad's Facebook, my brother's Facebook.
So I've had to use a lot of different ad accounts
now in terms of getting around it,
really, what you've got to do is you've got
to try and stay as compliant as you can with Facebook.
So doing your ID verification,
doing your business manager verification,
making sure that the means verified,
making sure on your website,
you've got a blog,
you've got content that Facebook's looking for.
Make sure you're not using copyrighted imagery,
try and get some custom content done
and they're surprised as well with your video content.
So when you're using your videos on your ads,
try not to copy people's videos.
Get unique videos.
Make UGC content done or little something like that.
Because as soon as they see a copyright,
they're gonna strike you really hard.
And they're going to basically black label
your account going forward,
based on a trust issue with them.
And the same with your ad copy,
make sure you're not copying and pasting
other people's ad copies.
Make some unique content
and the same with thumbnails as well.
Now, something else that I do recommend
that works really well is you've also got a look
at what Facebook deems really bad.
So for example certain skins they don't like.
They don't like close ups.
But a big way to get around this,
and we found that works really well
is you need to try and get yourself an agency account.
I find with agency accounts,
especially for like our fashion stores,
they never get banned.
Like it was funny.
(Kamil laughs)
We were looking at this other line,
it was like a lingerie brand.
It was like a lingerie fashion brand.
And on their Facebook ads,
they've literally got women on there
where they've got obviously their skin revealed.
And obviously normally
you'd get straight away (fingers snapping)
banned for that.
But because they've got an agency account,
they can just get away with a lot of stuff.
- So shipping times as well.
I get this comment, every single video.
Can you run us through shipping times with dropshipping?
How to improve them?
Or yeah how to get around that as well?
- So yeah, with drop shipping times you look
and it doesn't matter which company you use,
Ali Express, Alibaba, One Product dropshipping.
These other companies that are around.
You're looking at around about seven to 15 days,
as long as you're using a special line delivery,
which is gonna cost you an extra three to $5
than these other lines,
which typically most people use.
And that will take between 20 and 30 days.
And I always advise my people
don't ever go with anything that's longer than 20 days
because that is really, really bad.
And you're gonna get charge backs and refunds.
So do go with a special line
when you're doing one product dropshipping,
which will get you around about seven to 15,
potentially 18 days.
'Cause that's way better than anything else.
Now, in terms of then
obviously you getting that down quicker
then you looking at buying in bulk,
using an agent and a fulfillment center
and things like that.
3PL like you said before.
- ECOM King thanks so much for coming on
and sharing your advice.
I can't wait to see what you do next.
Appreciate you taking the time.
- Thank you so much man for having me.
I really do appreciate,
and I do love what you've been doing
on your YouTube channel recently.
So again thank you so much.
- There's one more person that I want to call, Jordan Welch.
He's touched on this topic a few times
on his YouTube channel.
Let's give him a call and see what he thinks.
Jordan, thanks so much for joining us.
Can you tell our subscribers
just a little bit about yourself?
- Yeah so my name's Jordan.
I've been an entrepreneur pretty much my entire life.
Right now I run a YouTube channel
where I've been documenting my entrepreneurial journey.
I have an e-commerce brand,
and a software company called Viral Vault.
- How many products and brands
are you running at the moment?
- Just one.
I mean, there's so much work
with running the YouTube channel
and the software
that for me to start another brand,
I think I would go a little crazy.
So just working on this one brand right now.
But hopefully in the future can build a portfolio
like you have.
- For sure and is that a dropshipping brand?
- Well, we started with drop shipping
initially when we first were testing
and when we found the product,
but now we hold inventory out in China
and we fulfill with an agent.
So we do have some stock.
It's a totally custom product now.
Do you have any advice
for us and beginners with dropshipping?
- Yeah I mean,
the thing about dropshipping is
that there's a lot of people that are trying to do it.
And usually with beginners right?
They're looking for the strategy?
They're looking for the best way to get started?
I think the best thing is really
to try to become a better marketer,
like really trying to sharpen your skills
because when starting any business,
it all comes down to the skill that you acquire.
So really learning marketing, understanding copywriting,
understanding sales,
and also graphic design and video editing.
Those are the things that I would focus on
instead of just some strategy
or some secret winning product.
- In terms of ad account bans,
have you had them before
with your dropshipping experience?
- Yeah, it seems to be pretty inevitable
even with the brand,
even with my brand with fully custom content,
good feedback score,
we still would run into bans from Facebook.
So I've never been able to fully get around it.
It's definitely happened to me many times yeah.
- What are your strategies to deal with that if any?
- Well I've tried it all it seems like.
And I did figure out a way now
that has me running this account for over a year
without getting banned.
But prior to that,
I've tried just doing appeals with Facebook that has worked.
I've tried setting up new accounts
with a like a friend or a family page that has worked.
But all these are temporary solutions.
What I had to do and it's super complicated,
but I had to use another computer in another location
and log in with AnyDesk.
It's like a remote desktop software.
So Facebook doesn't see my internet
or any of my IP.
Super annoying.
And keep in mind,
This is with my brand
that has my own custom content,
my own con . . .
like everything it's mine.
But it just it's whatever.
So Facebook's very picky nowadays.
- People are using VPs to access agency accounts,
and that seems to be working for a little bit.
And then they obviously cracked down on that as well
for probably no reason in your case.
You've obviously got amazing reviews
and you know, a good differentiated product as well.
So pretty frustrating stuff.
- Yeah they're pretty picky,
but it's part of the game you know.
Like you kind of have to deal with it.
In any business,
there's gonna be some challenges.
So that's just one of the ones we have to deal with.
And thankfully there's a lot of other platforms too,
especially for beginners out there.
TikTok seems to be the one.
If I was starting over today,
I would probably be putting 80% of my time
into TikTok or more.
- That's great advice.
Resilience and perseverance,
I love it, man.
Thanks so much for taking the time out today.
- Yeah, no problem bro.
I appreciate you for having me on.
- As you can see,
Jordan is also an expert in this space.
You're probably looking at these successful people
that are making lots of money in this space and saying,
"Why can't I do this?"
The truth is dropshipping can make you money.
People see dropshipping as a whole business model,
but the truth is it's just the first stage
of building your brand.
It is the product validation stage.
It should only be used then.
And also you should be paranoid
about compliance in that stage
so you don't get banned before you even get started.
So how do we avoid getting banned?
On Facebook it's pretty simple.
First don't use other people's content.
Don't even use
the factory's content. (buzzer buzzing)
Chances are that someone else has used it, scammed people,
and that content is now either blacklisted
or is just gonna get you banned.
Don't use low quality content.
Facebook wants to make sure
its feed is aesthetic and engaging.
What's your Facebook account quality score.
What you need to do is go into your settings
in your business manager to check that.
Make sure you're checking it every three days.
Make a habit of it.
Make sure you follow all the steps,
such as registering your business,
putting your ID in the settings of your business manager.
Make sure your products are also compliant.
Read Facebook's Terms and Services.
Make sure that you're not selling anything too sexual
or something related to drugs.
Also make sure your landing page experience is good.
Build the Shopify store correctly.
Put proper customer service channels
and make sure they get answered very, very quickly.
If there is a shipping delay or something like that,
just communicate it to your customer.
This will reduce the amount of chargebacks you have
and avoid the risk of your payment platform
banning you as well.
Once you've sold that 30 to a hundred products,
then you need to make a plan
to get out of the dropshipping phase.
What does this look like?
This phase is going to look different
depending on your business.
What I would try to do is differentiate my product somehow.
This may involve a product designer
or even just graphic designers
to brand your product differently.
You may also need some capital to get started.
Ask some friends and family
or look at raising some money from investors.
If you have a good account,
good website with good role ads,
as people will be willing to invest in you.
You then need to talk to your supplier
about shipping the product internationally.
Make sure you do your calculations
because now there's going to be new import duties involved.
making sure that your 3PL is actually cheaper than
actually dropshipping in the first place.
You're gonna get shorter shipping times and more margin.
I suggest picking one region to sell in.
Go into your ad account or your Shopify store
and see which region is giving you the most profitS.
Once you know what country you're exporting to,
then you need to find a 3PL.
just do a simple Google,
or you can head over to our Facebook group
and ask our community.
a 3PL operates very similar
to how your supplier was operating.
The order will feed in through Shopify or tier 3PL system.
And the 3PL will then fulfill it.
If you feel like you're operationally sound
and your product suitable,
you can even start a warehouse yourself.
Because you've changed a process in your business,
you also need to change what you're focusing on.
For example, you need to start focusing on forecasting.
You need to do some level of prediction
to make sure that your 3PL always has stock.
You need to understand your lead times for the product.
You can hire a merchandise planner or a demand planner,
as well as a supply chain manager on Upwork
to help you with that.
Make sure you also start advertising
your really short shipping times on your website.
If you've got a few drop shipping competitors
with a better branded site, shorter shipping times,
you're gonna wipe them out of the market.
If you want to learn how to make a brand,
I've started a whole series on it
where I'm developing a cleaning product.
Go check it out.
As you can see, dropshipping is not a whole business model.
It is great to learn your Facebook marketing
and how to find product market fit.
If you have any questions about today's video,
please leave them in the comment section
and I'll try to respond.
Don't forget to like and subscribe.
Peace. (upbeat music)