This Industry Is Too Competitive: Dropshipping Edition
Literally every entrepreneur forum and subreddit and everyone you talk to about online business in every single form says, “The golden days are over! It’s too competitive now!”
And I know that there’s a gold rush period for everything. I know guys who made thousands a day selling fifteen page smutty short stories on Amazon a couple of years back. There are people who were spamming the hell out of blog comments for money a few years ago.
And the gold rushes do dry up. Absolutely.
But anyone would think there’s no money to be made in anything online, and I’ve never found that to be the case.
Even if the gold rush is over, a sustainable business is still a sustainable business.
Anyway, let’s move on.
I know a few of you have read variations on this rant before on the site for other things, but bear with me. In this article, I’m going to talk about the competitive state of dropshipping and physical product ecommerce and then I’m going to give you some pointers for moving forward.
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Dropshipping Is Like Candyland
I have been going through my friend James Holt’s course “Start Dropshipping Stuff” over the past week or so. I’ll give more thoughts on that in a future article, but for now: It’s a great purchase if you want to take serious steps towards getting into dropshipping and a physical products business in general. I don’t think you can enrol yet, but here’s the product page for when it opens in a few days’ time.
I tell you this because this morning I was on AliExpress looking at products to sell.
Now, I don’t recommend AliExpress dropshipping on its own as a long-term shipping model – but more on that, again, later.
But for getting a start and doing product validation, AliExpress is absolutely worth looking at and sourcing from.
So I found a good niche and some good products. They’re at a low price point yet are part of a niche that’s good for a) having a non-critical audience and b) luxury/discretionary spending purposes.
Again, more on that later.
Anyway, I found a nice looking product that costs between $7 and $10 depending on which option you choose. Add on $2 shipping and you have a $12 product at most.
Now, such is the nature of the beast that you could sell for 3-4x that to the US and that’d be about right.
A big issue I’ve found with dropshipping is a race to the bottom pricing war.
So I googled the product to see who else was selling it.
The first result: $84.99!
That was for the $7 option.
That’s a 12x increase.
I thought to myself, “This is crazy.”
Then I continued to look.
There were people selling these exact items with exactly the same pictures and even the same crappy product descriptions for up to $399.
Let’s take a deep breath.
Dropshipping Is Too Competitive
Whenever someone says, “The gig is up and this market is dead!” I cast a sceptical eye over proceedings.
The above is the reason why, and explains why a lot of people have real headaches with dropshipping, and why you don’t have to.
When you dropship an item that’s worth $7, it has a certain quality to it. When you dropship, things take a while to arrive, and so you have to make up for that negative experience with other things.
How do you think someone is going to feel when they spent $400 on an item that’s worth $10 – and at a push a retail value of $40?
Added to that, how are they going to feel when that product takes three weeks to arrive?
Now, maybe the guys selling this item are doing the right thing, targeting a luxury market and killing it with their funnels which I’m not privy to.
But here’s the thing: They probably aren’t. they probably watched a few YouTube videos and think they’re going to be millionaires by selling $10 stuff for $500.
They’ll probably make no sales ever and then go on to their favourite entrepreneur forum and bemoan how dropshipping is dead or dropshipping is too competitive.
(As a side note, it’s going to get a lot more competitive for these guys because I’m probably going to do some serious undercutting with these products. And that’s another danger regarding the competitiveness of dropshipping.)
How To Not Fall Into This Trap
No business model is going to be a case of “just do this really simple thing that anybody else could do and you’ll be printing money based on screwing suckers.”
And that seems to be what dropshipping’s lowest common denominator sees it as. They’re out to make a quick hundred pounds at the expense of duping some poor person into buying something they think is something else.
You don’t have to be like that.
Instead, use dropshipping – or whatever business model you prefer – to create something of value. Don’t take the piss out of your customer, treat them well and give them a great experience, and the long term value will come as a byproduct.
With dropshipping, people who fall out because of its competitiveness aren’t providing something of value; it’s a skim off the top business model. But it doesn’t have to be:
- Create a better shopping experience
- Use good copywriting to establish the benefits of the product
- Provide excellent customer service
- Eventually move away from pure dropshipping and turn your store into a solid business
All of these things are achievable, but not if you’re going to try and swindle and put in the minimum effort.
The great news is this: 99% of your “too much competition” are the above. They don’t know what they’re doing, won’t put in any effort and are too busy counting imaginary millions to be a threat.
After this article, you know better, and are equipped to mentally eradicate the competitors.