Dropshipping is dead
If you've heard that dropshipping is a risk-free way to make a lot of money on the side and that somehow seems too easy to you, you might be right. But let's take a closer look at the whole thing! Find out everything that dropshipping gurus don't tell you and that you always wanted to know about drop shipping 😊
You might also be interested in: dropshipping products
What is dropshipping?
Dropshipping (also called drop shipping or third-party trading) is often referred to as the simplest form of e-commerce, which also requires a comparatively small amount of capital to be tied up.
The process atDropshipping is easy to explain:
The customer orders an article in your online shop. Instead of sending this item from your own warehouse or warehouse, as an online retailer you forward the customer's order to a wholesaler or order the goods on platforms such as Aliexpress and enter the end customer's address as the shipping address.
So you are not one of those suppliers who have to take care of shipping. The entire logistics are therefore eliminated because the provider takes care of it. And it's usually easier to scale too.
The advantages are obvious:
As an online retailer, goods do not have to be kept in stock in a wholesale warehouse and, in the end, the whole thing can be operated from the living room without a huge capital commitment. There are no storage costs. The wholesaler takes care of the packaging and the subsequent dispatch.
The profit margin is the difference between the buying and selling price of the goods minus all costs.
As a rule, you only get to see the products when they are returned.
So much for the simple explanation of this business model and your role as a reseller.
We will look at possible pitfalls for online retailers, disadvantages of the model and everything else related to this topic in the following!
A story about bullshit
A long post in an Amazon FBA group on Facebook was decisive for this article. Here are the highlights from it:
“FBA is Out, Shopify is In! Many are already generating millions in sales with Shopify! Commented with "Info" and I will send you a PM. "
This post received an infinite number of comments.
Of course, the post didn't really say what it was about. So “Shopify” is the wonder drug that makes millions these days.
Didn't know that a shop system alone is a business model, but you never stop learning!
What was it about?
Of course, that was just a strategy to then send people an affiliate link from Shopify via PM and earn on the commission. I have nothing against affiliate marketing and I also use it myself to finance free content.
What I find not OK, however, is when beginners in the field of drop shipping are exploited in this way.
We already had the same thing with the wave of “helpful” people on Facebook who sent a cover letter with:
“So how is your business going? Do you already work with ClickFunnels? ”.
Of course, it wasn't about anything other than earning the commission for your registration via their affiliate link.
I personally have the term "Dropshipping”I picked it up over and over again in the past few years, but never really bothered me.
I then went a little deeper into the business for the first time at the beginning of 2017.
Meanwhile, I work full-time in a small team with e-commerce and dropshipping.
There is also something fascinating about the dropshipping business. You go to AliExpress, buy Shopify, install Oberlo and place ads on Facebook.
Selling without having a warehouse.
Somebody else takes care of the logistics and the wholesale warehouse and also of the shipping. Your only job is to maintain the goods and keep an eye on the scalability.
At least that is how the business model is always presented and told.
However, it is not so important what you are told in all of the YouTube videos, but rather what you are NOT told about online dropshipping. And that's exactly what it should be about today.
First of all: It is not about verbally giving some “Internet marketer” a mouthful. Many do not even know what they are actually doing.
That's why I won't give any names. And if you are an internet marketer yourself and deal honestly with your customers, you are not addressed here either!
But what you should never forget: In most cases it is linked to the sale of a course, seminar or coaching.
Either directly or indirectly.
That means, of course, you won't be told that there are a number of legal hurdles that can cost you thousands of dollars and that it's not enough to buy Shopify and you're done.
And yes, many actually believe that!
What has to be mentioned about this article is that I only promoted that everywhere "Aliexpress dropshipping”Treat. Drop shipping in and of itself is nothing new or extraordinary and has more or less been around forever. Many companies in online retail use it to save themselves the logistics.
Dropshipping legal information
Here we start with all the topics that most “dropshipping gurus” never tell you about business and like to leave out.
I only take up the biggest issues here. Of course, there are a number of other regulations and laws in business. However, the following are the most discussed and the least clear about them.
DISCLAIMER:I am neither a lawyer nor a tax advisor. All of the things you will read here come from my own experience and research. But that also means: If something is wrong and you act accordingly, you cannot say “But Martin said it like that…”. No. If you want to be 100% sure, please hire a tax advisor and a lawyer.
Which products from China should I keep my hands off of?
In China, different laws and regulations apply to product safety. This means that additives are sometimes used in production that are prohibited here for health reasons.
The products are also often not adequately tested for safety. The wholesalers there are often not interested in the subject either.
The legal framework in China simply allows manufacturers and suppliers more leeway when it comes to additives and safety precautions.
Of course, all of this does not mean that each and every one of the products mentioned below is definitely hazardous to health or dangerous and that they must not be sold under any circumstances.
Personally, however, I do not take these risks in our company.
Which (untested) products from China should be avoided:
- Creams, ointments, cosmetics
- Everything with a battery
- Everything electronic
- Toys (Yes, cuddly toys too! Explanation below)
- Everything that is for babies and children
- Clothing (skin contact)
- Jewelry (possibly toxic heavy metal parts)
- Licensed products (everything that looks like Game of Thrones, Star Wars, Disney, Gucci etc. and is plagiarism)
So if a product falls into one of these categories, I refrain from shipping.
Which products require CE marking?
The CE mark was created so that the consumer does not have to worry about certain products (health, safety, tolerance, ...).
Goods in the warehouses of your partners from China usually do not have a CE mark or if they have one, it is counterfeit.
Not all products require a CE mark, but some do. The most important are:
- Protective equipment
- Medical equipment
About toys: This means toys for children. Some lawyers are also critical of cat and dog toys as children could confuse them. But that is a matter of interpretation.
Regarding electronics: USB cables, for example, and low-voltage products should not be included. However, there is no 100% reliable information about this.
Product liability - who is liable if something happens to the customer due to a defective product?
Simple and difficult basic rule at the same time: The manufacturer is liable.
But watch out! We cannot get away with this business without risk.
You will probably think "Everything is fine, the manufacturer is somebody in Asia".
Unfortunately, it is not that simple, because the “manufacturer” is not automatically the producer and the role can change depending on the commercial relationship.
And yes, now comes Bad News: "Manufacturer"Be on Aliexpress dropshippingyoubecause China is a non-EU country.
You are therefore liable if something happens to your customer as a result of the imported product (for example if the product had a fault or contains harmful substances). There are advantages in this point if you have a wholesaler in Germany or the EU.
If the customer cuts themselves with a knife, it's not your fault, of course! 😉)
If you don't have a GmbH as a company, you are personally liable. This means that you are liable with your private assets and if there is nothing to be had, then with your television set, etc. Strictly speaking, a GmbH does not protect against gross negligence either.
PS: I will add the subject of packaging and the packaging law later!
Dropshipping: import sales tax and customs duties
Since the goods come from warehouses abroad, this issue is important.
One thing in advance:Import sales tax andCustoms duties are always confused when it comes to the subject of “customs”.
Up to what amount fallsno import sales tax at?
It's yours, by the waypurchasing price with your partners in China who usually also print this on the packaging, not the selling price at the supplier.
Customs fees are a separate issue and are only incurred in Germany and Austria from a value of 150.00 €.
Do I have to register a business?
Yes, you have to register a business as soon as there is "profit intent". This applies to every business and company.
The business registration itself is no drama, but it does result in ongoing monthly costs such as contributions to compulsory insurance.
Does my shop have to have an imprint?
Basically, the laws of the country in which you are based always apply. For customers in Germany and Austria this means: Yes, you need a complete imprint.
If you're only targeting the US, you don't really need one. At least that's what US law does.
However, the TMG in Germany is interpreted by most lawyers in such a way that you also need an imprint if you are at home in Germany. Even if your target group is in the USA, for example.
The following applies: No matter which country you are targeting, with an imprint you are legally on the safe side.
But it must also be said that probably nobody will be interested in a missing imprint if the online shop is only aimed at customers from the USA.
Every company has to decide these risks for itself.
General information on warnings
In Germany there is - unfortunately - a pronounced "Warning culture”.
There are many lawyers and law firms that specialize infind any bugs on websites and online storesjust to send you a warning in the amount of a few hundred to a few thousand euros.
Unfortunately, almost EVERYTHING can be warned. If a lawyer wants to find something with a company, he'll find it.
It is enough if an important word in the terms and conditions has been forgotten. For this reason, companies often set aside their own budget for warnings.
In Austria, for example, things are a little different and every law firm is not allowed to receive warnings all over the place. So it's a lot quieter when it comes to this topic.
Is there an insurance against warnings for dropshipping online shops?
So far, when someone has asked me in the comments whether there is insurance against warnings for dropshipping online shops, my standard answer was "No".
I just didn't know anything in that area. Everyone I asked didn't know anything, my research didn't reveal anything and to be completely honest: I couldn't even imagine that such an insurance would exist.
Before you continue scrolling disappointedly, stay here for a moment, please! 😉 Because that all changed when I happened upon "exali".
Exali insures web shops against things such as:
- Infringement of industrial property rights such as trademarks, domains, licenses, copyrights, names and personal rights
- Violations of the information obligations such as basic price, shipping costs, cancellation policy, guarantee provisions, included sales tax, etc.
Incidentally, that was only a tiny extract from the insured cases.
I encourage you to take a look at the whole thing for yourself and convince yourself:
Click here to go to exali.de (Germany) →
This way to exali.at (Austria) →
From my personal point of view, insurance is an absolute must for anyone who works in e-commerce online and wants to sleep peacefully.
The best is yet to come: With the Coupon Code"Martin10de" (for Germany)* and "Martin10at" (for Austria)* you get a 10% discount on the first insurance premium (1 year) at Exali 🎉!
As some of you know, I only recommend things here that I use myself or where I am a customer. Incidentally, this is also the case here 💯!
A few words about insurance and about exali itself:
- If you have a dropshipping shop for the USA, this is a special case and is not automatically insured. In many cases, Exali can make you an individual offer.
- Even if gross negligence is insured, this (of course) does not mean a free ticket to do any nonsense. On the contrary. It is in your best interest to concentrate on your dropshipping business. Find out about the necessary laws, do not steal any pictures and otherwise work as cleanly as possible. First and foremost, you are doing yourself a favor, and laws are sometimes laws.
- You can insure a maximum of 3 months in the past. You specify this when ordering. So it can be worthwhile to take out insurance before starting your own shop.
- The insurance is also available for the POD (Print on Demand) T-shirt business and "normal" online shops, not just for dropshipping.
- From my own experience, the people at exali are super-nice and explain everything to you in detail if you have any unanswered questions. You can arrange a callback in the menu above on the exali website and they will then contact you!
Was that just advertising? Clear! Was that useful advertising? Well, I really hope so! 😉
Dropshipping and taxes
DISCLAIMER:As noted above, I am not a tax advisor and the article does not constitute tax advice!
Dropshipping from a non-EU country such as China is one of the most complicated tax matters in tax law. It goes so far that even many tax consultants are barely familiar with this topic.
In short, if you are at home in the EU:
With Aliexpress dropshipping, you have to pay sales tax in the country to which you are shipping your products.
This is due to the complicated constellation that the goods from a non-EU country (China) are sent directly to the customer in an EU country and you are also located in the EU.
It would be different, for example, if you had the merchant from China send the goods to you and only then to the customer. But that would no longer be dropshipping 😉
- You live in Germany and send goods from China to customers in Spain. In this case you have to apply for a tax number in Spain and pay the sales tax there.
- You live in Austria and send goods from China to customers in Germany. In this case you have to apply for a tax number in Germany and the 19% VAT there. numbers.
Dropshipping to the USA: That shouldn't cause any tax problems and actually be easier to handle than, for example, from China to the EU.
In plain language: The tax can be paid normally in the country in which you are at home (for example Austria or Germany) and you do not have to pay any taxes in the USA.
Please note that this applies to the constellation from Aliexpress (China) to the USA, where you are located in the EU.
If your wholesaler as a supplier is also based in the USA and ships from there, things can look completely different again.
And as with everything: To make sure you are doing everything right, the best thing to do is to consult a tax expert.
Do I need Shopify & Clickfunnels?
First of all, it is important to define what Shopify and Clickfunnels are all about.
What it is definitely not: A business model or something that automatically makes you money.
Shopify is aShop system, in which you can upload your products.
With CF, on the other hand, you can build sales funnels.
All too often, these two systems are presented in such a way that you first need Shopify or another platform to get started as a retailer.
This is of course nonsense. All these people want is for you to click on their affiliate link.
What you need first is a good concept. Products that can be sold. Ideas and creativity. Marketing & Sales Knowledge. A reliable wholesaler through whom the supply of goods is guaranteed.
That sounds less fancy than “You can make millions with XYZ”, doesn't it?
Personally, I think it doesn't have to be Shopify and / or ClickFunnels, although they make things a lot easier. Both systems have their place on the market because they are easy to use and beginner-friendly.
The disadvantage is that you are not particularly flexible with this system, both charge a monthly fee and record the percentage of each product sold.
Everything that Shopify and Co. can do and beyond, can also be implemented with WordPress + WooCommerce. Here you have a slightly longer familiarization period, but you get away with it cheaper, your shop looks individual and you don't have to give up any of your sales!
However, this solution is only recommended for people who have already set up shops with it and are familiar with the subject.
Especially for ClickFunnels: I'm a big fan of founder Russel Brunson and his marketing is really good too! However, one also has to say: CF is nothing special in terms of functions. In the end, you can only click together on websites on which you present your product. This is nothing unusual and can be implemented much cheaper with WordPress.
Conclusion: If you don't want to learn WordPress or if you are still very new to the whole topic of “online shops”, use Shopify as your shop system or ClickFunnels for funnels.
In fact, many professionals rely on a 100% Shopify solution for various reasons.
However, if you are familiar with WordPress and Woocommerce, you can save yourself money with them. But be aware that you will need some time to get into the whole thing.
Where can I find dropshipping wholesalers?
With suppliers on Aliexpress, the matter is clear: persistence and negotiating skills are primarily required. Basically, however, all potential dealers are gathered in one place. Alternatively, you can take a look at Alibaba.
But not everyone wants to dropshipping their goods from China. In this case, wholesalers from the EU must be used.
The best-known supplier that dropshippers from Germany and Austria like to use is Bigbuy.
If you want to hear my personal opinion on this: With the margins with products from BigBuy, I think it is hardly possible to operate the third-party business profitably.
It may work if you already have an established brand, but starting from scratch, using ads etc ... difficult.
The advantage, however, is that all goods are already in the EU and legally it is far less problematic than via Aliexpress.
Even if the selection at BigBuy is quite large, of course not everything is available. In this case there are two options:
- WLW.de (who delivers what)
- Google (recommendation!)
I have had good experiences with Google! To do this, look for your niche + "dropshipping". Tip: Don't just look at page 1. Many good suppliers hide themselves several pages further.
Dropshipping via eBay or Amazon?
A few years ago you saw it often: Dropshippers opened a dealer account on Ebay and as soon as a customer ordered, the goods were ordered on Amazon and the customer's shipping address was given. Classic resale.
So the shipment went through a company that didn't know anything about it. The effort in logistics could thus be saved considerably for the online retailer (except for returns).
Sounds like a good idea to some, but in practice is faced with a similar problem as mentioned above: The margins are simply too low to be able to do the whole thing on a large scale. I don't know anyone who really makes money in online trading using this method.
Should I start with dropshipping or not?
You will now be asking yourself the question of whether you should start trading online with Aliexpress dropshipping or not and there is only one answer to this question: You have to decide.
You should only be aware of the responsibility that you as an online retailer are taking on. Even if, strictly speaking, you are not one of the suppliers, you have similar responsibilities and liabilities.
The whole thing is a real business and should be seen that way - with all the legal obligations that exist in online trading.
Personally, I think if you're interested in trying things out, dropshipping is a great way to learn about ecommerce.
Tip: Take care of automation right from the start, for example to query things like the inventory etc.
Just don't be fooled by “gurus” who make more money selling their courses to you than with dropshipping and their online shops themselves.
I've been in these areas for a while and not only believe but know that there are far too many fakers walking around ...
A small (big) motivation ...
A friend of mine started an online shop at the beginning of this year and over the past six months € 700,000 turnover made with a pre-tax profit of 40%. Of course, I can't tell you the product, but I have a few points:
- It was and is a damn good product of which there are many different variations. (It's such a good product that I almost got jealous that I didn't think of it myself)
- On the one hand, the product is a long-running hit, which as a man you would not come across in a moment, but on the other hand, luckily, it is also currently a little hype, which has benefited the whole thing.
- Main target group: women between 35 and 50 years of age.
- The shop itself does not look extraordinary and has no special features, but has implemented all the basics well.
- Traffic comes exclusively through Facebook.
- Fewer returns or other risks in connection with the goods are to be expected.
So much for the people who think dropshipping doesn't work anymore!
Another general note: Many will not consider the above number to be possible and I even understand it! I would have thought it was a fantasy number in the past.
I now know people who are making (yes, still today!) Millions in this field. However, these online retailers fly under the radar and usually do NOT give interviews on YouTube 😉
Correctly employed there is a lot in dropshipping and possible disadvantages can be minimized through a planned procedure.
How much money do i need for dropshipping?
Everyone who wanted to build something up here probably asked himself this question at the beginning. All too often, gurus then quote amounts that sound nice as a budding online retailer, but have little to do with reality.
Even if we have no storage costs, you have to keep one thing in mind: Traffic has to be bought and is one of the biggest cost factors.
In plain English: Facebook Ads and Instagram Ads.
Here are a few costs that you can expect:
- Traffic: social media ads, influencers
- Shop system (e.g. Shopify) or hosting
- General terms and conditions and other legal texts
- Tax advice
- Legal advice
You may get some of it for free or you may even be able to do it yourself.
But at least you will not be able to avoid the first two points. As already mentioned, the majority of this is the traffic.
In most cases you will have to test a lot to see which ads work and which don't, who your buyers are, etc. A lot of money can be burned at the beginning.
Anyone who has ever been interested in online trading knows the "€ 5 per day strategy". That may have worked once. Not today, but definitely not anymore.
Now of course everyone would like to have specific figures as possible, which I understand. That kind of gives a certain security, doesn't it?
The thing is: No matter what number you call, it can be just as wrong as it is right in individual cases.
Since the costs of dropshipping depend on a large number of components and are different for everyone, there is hardly a generally applicable amount that you should have at the start.
Nevertheless, I'll put a number in space that I consider more or less realistic for the typical semi-professional dropshipping store: € 3,000 (almost unlimited upwards, by the way 💵).
If we assume that you will set up the shop yourself and that you will be helped with the legal part, that is an amount with which you can start something.
Incidentally, if that's too much money for you, don't let it discourage you. There are certainly enough examples that started with less money in online trading and, especially at the beginning, many will also want to learn first.
As long as you don't believe in fairy tales where the prospect of surviving as a small middleman with 150 € in the shark tank, everything is good!
How do I start dropshipping?
In the end, all you need to start dropshipping is an internet connection, good ideas, some start-up capital and time.
Here's how to go about it:
- Find one or more products that are 1. easy to market, 2. which cannot break much, 3. are light (weight) and 4. have a high "perceived value". The latter in particular is a very important factor for success with your target group. The second advantage is that you can set a much higher margin. If you do dropshipping via platforms like Aliexpress: only accept products with ePaket shipping. If there is no ePackage, write to the retailer whether he can set it up for you. If it doesn't work, look for another dealer. Alternatively, look for providers in other sources. It can also make sense to have individual packaging designed.
- Think about a name for the shop (but check beforehand with the DPMA register whether it is already taken so as not to run into problems), reserve a domain, which you can then connect to Shopify. Yes, it's also free if you use a Shopify subdomain (e.g. "yourshopname.myshopify.com"). Please leave that, it seems unprofessional. Take a "real" domain.
- Maintains the products in product categories and ensures that the design is as uniform as possible. Don't forget the product descriptions. Take care of the payment methods (SEPA, credit card, PayPal, Klarna). Incidentally, dropshipping professionals order the products home beforehand and take their own photos! And the really professionals even have everything checked in the laboratory and a plagiarism check carried out.
- Take care of the subpages, which must be available in a shop (cancellation policy, data protection, etc.). You can find a lot of information about this on trustedshops.de. Alternatively, take a look at another shop in your niche to see which subpages are linked in the footer.
- Now it's time to test Facebook & Instagram Ads & hopefully your first sales! Direct shipping now goes from the warehouse to the end customer!
But ... is that REALLY all?
The honest answer to that is yes and no.
The guide is in fact very simplified.
You will quickly notice that the individual points, especially at the beginning, take an incredible amount of time.
Things won't work out the way you imagined and maybe you want to be the towel in many places. The subject of ads in particular is a science in itself.
And in addition to all the costs, there should also be a nice profit margin.
But these are the challenges you face everywhere in online retail, not just in dropshipping.
But there is no wholesale warehouse for this and it is more scalable, as you can often ensure the supply of goods via several channels.
More questions and answers about dropshipping
In this section I will collect and answer common questions and answers about dropshipping.
Where can I find good communities to learn about dropshipping?
Anyone who is REALLY interested in a certain topic (in this case dropshipping) will notice after a certain time that there are closed circles where the "right" stuff is available.
Ok i admit That wasn't very helpful now. But the thing is: as a dropshipping beginner, there is little chance of getting in there. And these groups are not easy to find for a reason.
My advice? First, collect your own experiences. Fail and win. Be attentive and network. When you have reached a certain level, you will meet the right people (online & offline) who will show you a whole new world.
How does Oberlo help me?
Oberlo helps you on the one hand with fulfillment, but on the other hand also with the search for products. You can connect Oberlo to Shopify and use it as a Chrome extension.
When the end customer orders something, the order is forwarded to the wholesaler, who checks the inventory and sends the item to the purchaser by direct shipping.
Oberlo makes your work easier in many areas and also offers reports on your drop shipments, in which you get a breakdown of sales and costs.
If you don't sell anything in your online shop ...
... then buy my course and get rich! No, little fun 😛
But I still want to give you a few tips.
The most common reason is that mostly absolute Basics in sales and marketing absence. Simply entering the articles in product categories and forwarding the orders to the provider is not enough.
That's something I've seen so many times in typical dropshipping shops.
In many online shops things are not actually "sold", but goods are just lying around. Many advertisements do not induce a purchase, but are simply lifeless scraps of text.
To be successful in selling, you really have to learn to sell!
And in the end, these are skills that will help you advance anywhere in life. And I know that sounds kind of harder and more boring than an e-book called “Become a Dropshipping Millionaire in 30 Risk-Free Days”.
In the long term, however, you are extremely far ahead of your competition if you acquire and apply the right knowledge in these areas!
From the many books I have read on these topics, I can recommend the following if you are just starting out in these areas.
Simply click on the picture or the link and you will come directly to Amazon 🙂
Before that, a short thing, because many people were interested:
Book update 2021:
I would like to recommend a book to you that I would call a real insider tip.
It is a more or less complete work on 300 pages, which is essential in the e-commerce sector in order to be successful - from A-Z.
Best of all, it really ispractical and without a lot of swagger, as one is often used to.
So if I had to recommend only one book on the ecommerce topic, it would be this:
With the book by Tanner Larsson you basically get everything at hand and it is one of the few books that are also recommended by professionals! If you want to go a bit deeper, I recommend the following books, which primarily cover the subject of marketing and psychology:
For the absolute basics of what works in marketing, from the legendary marketing genius Claude Hopkins. Perfect for beginners!
The first book by Russel Brunson gives a first and very (!) Good insight into online marketing.
Probably the best book for learning how to write and design sales texts.
* Asterisk: I link to products that EXCLUSIVELY I own or use myself. So my promise is that I will only advertise things that I really think are good! If you buy a product via the links marked with *, a commission or an advertising allowance can be paid to me. This enables me to operate this site cost-effectively and in return to pass on knowledge to you free of charge. Thank you for your support & have fun or success with my recommendations! :-)
What is your opinion and experience about dropshipping?
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