I make over $100k per month running Drop-Ship product websites (proof inside).. AMAA

What is a drop-ship website? Perhaps an example? And how did you get into it?

I find suppliers who warehouse and ship high margin products "blind" which means it has my company label on it.. Then I market the products on my own niche websites. Every time someone places on order on my sites, the supplier ships it to the customer for me.

For example.. I'll sell a TV for $999 and the supplier will charge me $450. So I make $549 profit without any work besides running the website.

How does someone find out about your site though? For example, if I wanted to buy a TV online I'd probably buy from BestBuy.com or Target.com or Amazon.

He'll SEO his site for keywords like "BRAND X 50" LCD TV". Those searching for such a thing will find his site at the top of the results. Most people click the first result.

Exactly.. Broad keywords on the homepage, then Category specific, then finally Product specific including Brand, Size, Color, etc.

You'd be surprised how NON-SAVVY people are at shopping online. They just find what they want and buy at the first place way more often then you'd think.

How long will it be before you get Panda'd?

oh trust me, I've been Panda'd before! haha.. gotta push some limits though or it's no fun ;)

What kind of a financial loss do you experience when you get Panda'd? Or can you simply relaunch under a different domain name?

It's not as common as some make it sound.. Just be careful and don't be spammy.

Content.. Titles.. Keyword relevancy.. Internal link structure.

Stay away from heavy "link building".. That's SO 2003.. just getting ONE good link from an authoritative site related to your niche can do wonders. You don't need some SEO "guru" blasting 500 links to your new site... That's a quick way to get Panda Express'd

Why do wholesalers do that? If they're doing all the work and giving you half their money, wouldn't it be easier and cheaper for them to just hire some developers and build some websites, also guaranteeing their incoming rather than relying on a third party to make sales for them that may or may not happen? Don't they want to be in control of their income?

It works the same way in real estate. There are people who are brokers, brokers then manage agents. Agents have to sell the house, while the broker gets commission. It can be split 60/40 on big companies like century 21, or 80/20 on smaller companies. It's hard to sell things.

Yup this is right.. Do you think Kellogs is worried about giving 50% of their cereal margins to Walmart or Target?? Hell no.. The VOLUME is what the wholesalers and suppliers are after.

So how's come these wholesalers don't contact Amazon or NewEgg, and sell their products on websites like those? What do you have to offer that they don't? Also, how do companies (maybe a start up company?) even know to contact you rather than Amazon?

They do. Of course they do.

Just because Hanes sells socks and underwear in Walmart doesn't mean they still won't sell to Kmart.

to just hire some developers and build some websites

Building a website that has internet marketing power is not that simple. The average business owner in my area who has tried to make a website has failed utterly to make any presence online (those are the people I try to help). Its a different skill set and most web developers don't specialize in it.

true.. it's like saying why don't you just "pop up" a few big box stores and cut out Home Depot and Lowes

Where do you find the suppliers though, I'd imagine most Googling would find middle-man sites like yours?

I've answered this many times already.. It's all about RESEARCH. It's time consuming and it sucks and nobody likes doing it. But you just have to get on the phone and call around and ask all the questions.

As someone who is in the infancy of this business, is there anything that you know now that you wish you knew when you started?

Yes! I wish I had never bought ads or PPC from anyone besides Google and Bing.

When I started out, I tried EVERYTHING.. Yahoo, Shopping engines, Banner Ads, buying email lists, countless bullshit.. Nothing ever converted besides targeted niche PPC terms from Google and Bing.

Also.. Do not ever drop ship from China.. USA wholesalers only, or else the long shipping time and no returns will kill you quick.

How do you find a company that does drop shipping that is worth using? There are so many of them, it is hard to pick out the worthwhile ones.

Most people will notlike my answer because it's WORK.. Once I find a product and I've researched and determined it's worth devoting the next 6 months of my life to, then I find the top 10 suppliers and interview them all. Call each one and have a talk about pricing, stock levels, discounts, shipping, returns, damages, everything. It's time consuming, but it's important.

And the secrets out, you have to do some work every once in awhile. ಠ_ಠ

Thanks for doing this AMA and congratulations on your successes for working hard!

Thanks! Hopefully this is helpful to anyone who wants to start a legitimate online product store. I've made many mistake that I've outlined in my replies. It took me 18 months of breaking even and fucking up to finally start making profit and then it snowballed once I knew what worked and what didn't.

Probably the most engaging AMAA I've ever read. Good day.

Thanks! I'm trying my best

Could you give an example of an online store like yours? I'm just wondering what the storefront looks like.

www.MyWhiteWalls.com

simple. clean. easy to navigate. not spammy.

This is amazing. I am also into web development and SEO I mostly make money from Google Ads and not through selling actual products. Very inspiring.

QUESTIONS: 1. How much of the $100K sales per month is your actual profit (minus expenses)? 2. Do you focus on selling high profit margin products / expensive products with smaller number of sales or high number of sales but cheaper products / smaller profit? 3. Last question, having 4 years of experience and seeing how the internet now works - do you think people can still jump into this right now and can still catch up / be successful as you or has the shipped already sailed?

Thanks again for doing this AMA and congratulations on your success!

I answered this somewhere else, but here it goes...

I currently have 6 websites that are profitable. Half of them are seasonal, so my sales go up and down all year. Let's just take last month for example..

March 2012 ended up with around $220,000 in total sales. Average margin around 50% then subtract $30k in advertising and another $2k in bandwidth.. So my net profit last month was around $78,000.

I tend to stick with higher ticket items simply because the low price/high volume niches come with SO much headache dealing with employees and customer service.

Anyone can still do this. However, DO NOT try to jump into a popular product market like Supplements, Electronics, Clothing, etc because You simply cannot compete with Amazon anymore.. Find something niche and unique with high margins. It takes time and research, you gotta think about it for awhile and brainstorm a dozen ideas then whittle it down from there.

I have no aversion to hard work. I've scoured your IAMA and I can't find an explanation of how to find 'the top 10 suppliers'. Can you clarify this? (For example, if I wanted to find the top 10 beanie babies suppliers--I don't, it's just an example--would you just google 'beanie babies supplier'?)

Also, how do you get on the phone with someone capable of answering your questions and authorizing a working relationship with you? Do you have trouble having them take you seriously?

Good questions...

When it comes to finding suppliers once you have a product in mind, it's really as simple as Googling. I don't have any tricks up my sleeve, I just search around and find as many companies as I can who manufacture or distribute the product I want.

Then you have to call them all. Having a website already built helps a ton with getting them to take you seriously. Large corporations sometimes have strict rules when dealing with dropshippers, sometimes you have to start with a small company and pay a bit more while you gain credibility. This is the tough part, but just call around and ask the right questions:

Pricing.. Stock Status.. Shipping or dropship fees.. Returns/damages.. Volume discounts.. These are all things you need to aks them about.

Thanks for the answers. I've got SEO/PPC experience so I doubt I'd have tried anywhere but Google tbh. Good advice though.

I'm UK based, I know you're not but how would you handle the wholesaler issue if you were? Source from UK only?

Would you recommend staying away from electronic products?

Google is king, but don't sleep on Bing! They have a huge audience of Female shoppers with money to spend. The Bing user base is primarily high income females. Perfect for many of the products I push.

I stay away from Electronics.. Super flooded and the big box merchants dominate on price.

I would source from wherever your customers are located. My customers are all USA so I only ship from USA suppliers.

How does drop-shipping benefit the customer or the warehouse/wholesaler as opposed to "normal" product purchasing? i.e. what's in it for anyone but you? I only just learned what it is right now, so my understanding is limited, to me it just seems like you're a middle-man taking a big cut.

Yes, I am a middle man taking a BIG cut ;) that's literally all I am.

No benefit to the customer at all, it's no difference to them.. The suppliers do this because they're all about VOLUME. I'm moving units and making them money they wouldn't see otherwise.

You should write kind of a brief guide so the information isn't scattered.

Ok, good idea.. I will try to have something written by tonight and link to in the main post as an Edit.

http://i.imgur.com/ITGeT.jpg

dude this is absolutely hilarious! only time I laughed out loud all day

Can you include how you got started, with a ruff amount it cost you to get going. Also a timeline showing from start to now how long it took to make a profit.

For example maybe you started it last year, and just now made a profit.  Just an example of what I mean

These two would be great in the guide.

Another addition would be how to ask the warehouse to drop-ship for you. 

I'm sure you can't just say hey can you drop-ship for me. 

Do you ever use the term drop-ship when asking the warehouse

I have answered these before on a few different posts...

I started with $5k to spend on advertising my first site. I developed it myself and only spend the cash on Ads. It took 18 months of breaking even to find out what worked and what didn't. I mostly wasted money on NON-PPC ads like banners and emails and shopping engines.

A supplier will either drop-ship for everyone or no one.. You can't call someone who bulk wholesales only and talk them into drop shipping just for you. It won't happen. But this is the internet age and many suppliers do it. You just have to call around and ask if they have a drop-ship program. Once you get in and show some volume then beat em up for price discounts.

How can somebody determine the legitimacy of these sort of sites? I'd love to order from them to save money, but I'm always afraid of ID theft or my money simply vanishing.

Good question. This is the number one thing I get asked when a new customer emails or calls before ordering.

Look for reviews online. Reviews are the easiest way to tell. Make sure they are based in your home country. Call them first and see if someone answers and sounds professional. Make sure they have an SSL certificate.

Use Paypal if in doubt.. They will refund your purchase if for some reason your product never shows up.

I like paypal because I can just break my TV if I don't like it, forcing you to give me a refund!

I don't know why you were downvoted.. This is actually very true! As a merchant I fucking hate Paypal. They will refund almost ANYTHING

How do I get Wholesaler prices as a private citizen? Is it possible?

Easily. This is the Internet age son! All you have to do is get a site up and running in a presentable fashion and then contact a few of the top suppliers in your niche. Most of them will jump at the chance to work with you.

This is not always the case with HUGE companies like Nike or Sony though.. I work with mid-size factories and wholesalers.

These factories are in the U.S?

The wholesalers I deal with usually "warehouse" all products in the USA, even though they actually produce them overseas.

When you say "niche," how "niche" are we talking?

Lunar-powered Fleshlights

Please delete this gold mine of a post immediately and send me a PM, you goddamn genius!

Hard question to answer, I've tried a TON of products. I currently have 6 profitable niches ranging from 200,000 searches per month for primary keyword on up to 15 Million per month.

I work for a thirty year old jewelry wholesaler. We love drop-shipping, and we have some very successful programs. Send me a PM if you're interested in working with fine jewelry :)

avg margin?

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I'M WATCHING SERIOUS BIZNISS HAPPEN RIGHT BEFORE MY EYES!!!

How fiscal will the quarterly earnings be?

"Let me get those facts and figures Barry into the Idea Machine!"

HA HA BUSINESS!

love it.. haha

Now that you're flooded with requests from half of Reddit.. Guess I can't compete in this niche! Good job hijacking my thread to get a raise though ;)

How do you deal with customer issues like warranties, support and returns?

this is the only part that sucks.. There will always be 5% of customers who are bitchy no matter what and try to get something for free.

Some of my sites are "all sales final" and others have Re-Stocking fees on returns to help me minimize my losses. However, if something is damaged and it's not the customers fault, then I refund their money 100% and then I gotta go after the supplier or Fedex for the cost.

How many sites do you run? Secondly, why multiple?

This is easy. To diversify his income. Sounds like he's very reliant on traffic from Google. If Google decides one day that they don't like one of his sites, he still has a few others.

I've made dozens of sites.. Some fail. Some succeed.

I currently have 6 profitable sites. I never combine products unless they naturally go together. For example Furniture and Appliances.

So an order comes in through your ecommerce store... does the Volusion software then connect automatically with your dropshipper, or do you (or someone that works for you), then place the order with the dropshipper). I guess my question is, is it automated or are you basically taking the orders, getting paid through a merchant account / gateway and then re-ordering the products through your supplier?

Some of the more tech-savvy suppliers connect directly and it's AWESOME!! However, not all are like that. Once supplier I actually have to FAX my orders to.. But it's worth it because they have by far the best prices.

How did you meet the minimum order quantities from the wholesalers when you were (or are for new sites/product lines) first getting started?

Most suppliers who are willing to drop-ship will not require any minimums.. You may pay a slightly higher price at first, but then after you show some good order volume then you have the upper hand and demand lower prices.

If your wholesalers ship for you, how do you maintain branding? Do you have an agreement with your wholesalers to include your logo, and to make sure the package doesn't have any marks to indicate it came from a third party? ie Product communication in English and not Chinese.

It's called "blind dropshipping" or some call it White Label.. They use my logo on the invoices and do not include any of their information.

How did you start out and what was your budget?

Also, what would you advice someone who wanted to get into this buisness?

Cheers.

$5k budget all on PPC ads.. I did my own SEO and web design.

Do your RESEARCH above all else! Research your niche, competition, keyword volume, PPC prices, everything before you decide on a product.

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I've had the same Escalade for 6 years now.. I've got 160,000 miles on it and it's still going strong! Love it, but maybe I do need something new soon

How much did you initially invest into this? I've always been curious about doing something like this, but have never had the capital to get started...

I invested $5k into my first drop-ship site.. I used to do SEO consulting from 1999 - 2008 when I started this business. So I did all my own search optimization and web design. Just invested $5k into PPC ads to get things rolling.

Be honest...black or white hat SEO.

I keep everything everything super clean.. Occasionally I will pay for a link or two, but only if it's a very authoritative website that's been around forever and relates to my niche.

More of my sales come from PPC than anything else.

How long does it take to ship your products?

I'm assuming your drop ship wholesaler is in China, so it'd be a 3-4 week period. Are your customers willing to wait that long?

Or do you implement a different strategy to reduce shipping time? ie. warehousing 20% of the inventory locally.

No not at all, I never deal with China anymore. Takes way too long and customers get pissed off and want refunds.

There are countless products found right here in the USA that have 50% margins all day long. Just do your research and talk to many suppliers once you find a high profit niche.

EDIT to answer your first question... 3 - 5 business days shipping for all my products in the USA.

wow.. thanks for the advice!

I thought of creating a drop ship business with Chinese wholesalers (alibaba), but I'll rethink that plan now.

yeah don't do that.. I've already made the mistake of trying Alibaba and Doba.. You'll lose your ass fast and customers will hate you. Shipping takes FOREVER.

Find some high margin products with high search volume and relatively low competition (no pills, electronics, eCigs, etc).. Then talk to all the suppliers you can and get the best price.

I don't see how this can exist these days. Every possible niche is flooded with popup stores like yours, especially the high search volume ones. High margins like what you're claiming are almost impossible to come by.

There are more niches in this planet then you could possibly imagine. You've just got to find them.

Furry dolls? Somebody wants to buy them.

Correct. Very true. Just because "diet pills" AND "plasma tv" stores are flooded doesn't mean you can't dominate the market for "emo t-shirts" or "flat foot shoes"

What would you say are the most important things to know about SEO in general?

As for Web Site development of a drop shipping business, how extensive does it need to be? Would you be willing to post a link to a good site as an example?

CONTENT.. Title Tags.. Keyword Density.. Internal Linking Structure

The site needs to look professional, easy to navigate, SECURE with an SSL certificate.. Easy to reach via Phone, Email, Chat

Check your PM for example.

Do you rely more on SEO or PPC? Do you use programs for your SEO of buy link building services from forums?

I cannot build a website (no skill) but I have capital (some) and free time. Any suggestions on how best to utilize both of those assets?

PPC unfortunately.. I wish SEO was greater, but PPC is just so damn easy to target exactly what I want and see immediate results.

I'll PM you some info..

How do you manage your phone line(s)? Do you outsource this out or use a 3rd party? I imagine putting your phone number on these sites will cause a lot of calls at all hours of the day/night.

Who manages your customer service?

I don't get nearly as many calls as you'd think. Most people just place the orders online. I probably only get 1 call for every 15 orders that get placed. Usually an older person who "doesn't trust the computer"

What were you doing before you started this up, and what is your education/experience background?

SEO consulting for almost 10 years.. Companies would pay me to optimize their sites for Search, PPC, Product feeds, etc. I never went to college, I started my SEO business right out of high school.

Awesome, I am following in your path. I quit my SEO job last year, after 5 years, and started a drop ship website. I started with a product niche, I'm at about 20k a month revenue, now I'm thinking about getting into the health food niche, what are your thoughts on starting something like this?

Its somewhat saturated, but if I do the right SEO, shopping feeds, and marketplaces, I can move a lot of units.

Nice! Health products in general are FLOODED with competition, however the profit margins can be huge. It's a gamble in my book.

PM me if you want a couple ideas.. I have some good niches that I cannot get back into because of Non-Competes (sold sites)

Can...can I work for you?

haha.. not too much work to be done besides managing PPC and processing orders. I put my girlfriend to work when I get overwhelmed!

How old are you and what do you do with all this income??

I am 29 years old. Right now I am investing in new sites mostly.

What do you use for inventory management?

I use a service called Volusion for my inventory and store management. The "pros" of Volusion are numerous, is super easy to use and optimize. It also sends my newsletters and has built in analytics.. However it gets expensive if you start getting a ton of traffic. The bandwidth if overpriced.

Have you looked at Miva Merchant? Just curious as our web designer opted to go with that for something similar. I wasn't involved with the decision.

Haven't seen it but I will check it out. Thanks!

Hey, I'm working with Volusion now!

Great software for the most part. Makes things easy on me.. But it's overpriced for sure.

Do you know the success rate of a website? Did you have many failed sites before one or two struck gold?

I worked hard on my very first site for over a year and made it work.. Since then I've had half a dozen successes and a few failures also.

When something "fails" how much money do you lose?

I stick to my $5k rule pretty strictly.. I know enough about PPC now and am pretty damn good at it. If I launch a site and spend $5k on PPC and it doesn't at least break even, then I trash the site immediately. Live and Learn.

What kind of losses do you suffer from paypal or credit card chargebacks?

Also, how do you deal with returns/replacements?

it's about 5% on average.. Damages or just malicious customers being dicks

how do you figure out what is worth selling?

High margins + High search volume!

If a product has 50% margins and at least 500,000 monthly searches in Google then I'll consider it.

But how do you know what the margins are? Do you literally have to pick a highly-searched product at random, start calling suppliers and see what their prices are compared to average retail price?

Do you follow a lot of leads that end up a dead-end, or have you wasted lots of time researching something that turned out wasn't a profitable product?

Time spent of research is never "wasted".. It's the single most important part of this process. Yes, I've spent weeks researching niches that ended up being dead ends and not working out, but who cares because it saved me from building a site and diving in blindly.

There is no magic answer to this product selection question. You just brainstorm, research, find a few good options then narrow it it down based on what has the most profit and search a lot in Google.