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Why You Should NOT Start Dropshipping (BAD NEWS)

Published on: December 4 2022 by Hayden Bowles

Why You Should NOT Start Dropshipping (BAD NEWS)

Why You Should NOT Start Dropshipping (BAD NEWS)

hey welcome back into another video if
you guys are new to the channel here my
name is hayden on here we post a lot
about business primarily real estate
e-commerce and some fun stuff about cars
now in this video
if you guys are not familiar with what
we typically tok about on the channel
it's a lot of stuff with e-commerce a
lot of facebook ads paid marketing and
things that you can do to directly
control the growth of a business that
you already have
or are going to start things like making
something go from zero dollars a day to
bringing in
thousands of customers every single day
in just a few weeks that's what we tok
about
however the entry point for e-commerce
is usually in some form drop shipping
which means
you don't buy the inventory in advance
customer orders from you
then you order from a supplier that
supplier ships it to them directly
it's just a triangle you don't touch the
product ever and you don't have to buy
it in advance
it's pretty cool it's not per se a
flawed business method it's actually how
so many people got started it's how i
got started
i just want to be able to make sure that
in any argument
i can argue from both sides and there's
pros and cons to everything so in this
video
i'm going to actually share with you
some pretty crazy new restrictions
that might make you think twice about
wanting to start drop dropshipping or at
least doing it in the traditional way
and you can still do it you can still do
everything there's just some things
you're gonna have to do differently that
really aren't that hard but you have to
be aware of so
by the end of this video i'm gonna make
sure that you know that and you're
prepared so that you can start building
a successful
ecommerce business with pretty much no
money out of pocket because drop
shipping is super cool
it's a great way like i said to not only
get in this business get money coming in
but also to learn a bunch of great
skills all right so
if you're excited for that make sure to
smash the like button feel free to
drop a comment at any point throughout
the video if you have a question
on something that we tok about and i
would love to give you a response
after this video is posted all right so
let's start going through this i'm going
to kind of block this out just so we can
stay focused through my little uh
slide presentation here the first one i
want to tok about which is super
important
is the payment processor restrictions
that are pretty much covered imposed
so if you didn't know everything that
started happening since pretty much the
beginning of march
really is when it started hitting
payment processors i know this because i
have a few friends who own pretty big
payment processing companies
what happened is so many companies
stopped being able to ship out their
product as quickly
why well all the shipping stuff got
messed up because
of this disease going on right covet so
understand that it might not have been
their malicious intent to slow down
shipping
but because of that customers might not
have gotten their product then you
factor that into a lot of people
not having as much money as they used to
a lot of people lost their jobs a lot of
people also took pay cuts
i even know people who took pay cuts and
people who got laid off
so combine that with the fact that these
people kind of want money right now
if a product takes a long time to come
in these payment processors started
getting an increased number of
chargebacks
and now well how does that affect you
because that's someone else's stuff
through their payment processor account
well what a lot of people don't
understand about payment processors
especially payment aggregators and we'll
cover the difference
is most banks a lot of people file to be
a their own bank through the uh ftc i
believe
don't quote me on all the regulation
stuff but so what happens is
they'll have like i have a friend owns a
payment processing company they have a
bunch of restaurants and stores and
retail shops that's like one division
they also have a bunch of normal
e-commerce businesses and then they mix
in some high-risk e-commerce stuff
because they make more margin on that
yeah the chargebacks are higher and
there's more issues but they make more
profit
and that is diversified and what happens
is with these payment processor
companies that again most people don't
really realize
they have one payment processor account
so they have one
and might stack hundreds of thousands
some even probably millions of accounts
beneath it and so they diversify it out
and if someone has a lot of chargebacks
but so many people have none
it dilutes it and they can stay under
their threshold for whatever they have
to be
and so they're just up charging on fees
and things like that and they've gone
through all the application process
so that affects you because now these
processors have to be a lot more careful
when approving new accounts now how does
that impact drop shipping while drop
shipping is normally going to be viewed
as the riskiest of those
just because you know suppliers can take
a while to ship it out you don't have
your own inventory at the end of the day
it's not in your control as the person
opening the merchant account
it is in terms kind of controlled by the
supplier we're going to tok
about suppliers in this video but
understand payment processors now
are asking for more information
verifying more and denying more accounts
than ever before
one of the most basic things they're
going to be asking you for is a supplier
agreement
well what is that how do you get it what
happens if you don't have it
usually if you can't get it you're not
going to get a payment processor account
now you can pretty much make one of
these yourself but it's pretty simple
write up a document that you know agrees
between your company or your person
it doesn't you don't have to have a
company but between you and the supplier
explaining that you know basically the
business sense how it works you know
you're gonna pay them and then they ship
out the product
on what frequency at what volume and
then you just have them sign it it
doesn't have to be a legally binding
document just something in writing
that'll usually make the payment
processor a little bit more apt
to open up an account for you so just
understand that it's harder with payment
processing
and they're being a lot stricter now
with you if you're having a chargeback
increase or a lot of chargebacks and
disputes coming in
so you have to have to be careful
usually keeping it much below that
industry standard of one percent
so for every thousand orders you have
you should not have more than eight or
nine chargebacks you do not wanna
approach
that one percent that's when you're
gonna start having some problems okay so
that's the payment processor side of
things which is just one now let's tok
about facebook a lot of what we toked
about here on this youtube channel is
facebook ads
that's where i make pretty much all of
my money that's what i do on a daily
basis facebook has continued to increase
their limitations
especially for people who are in the
e-commerce space
so there is something that they imposed
i think was a year ago maybe even less
called the feedback score and this
basically gives facebook the ability to
almost
interview but more so ask a question to
the customer who purchase your product
and they'll time it out they'll do it a
few weeks after they ordered so that
they can ideally make sure they already
got the product and then get their
feedback well
now customers more so than ever on
facebook
have a voice and that voice definitely
can hurt you and it's only gotten worse
and worse and more restrictive
so with drop shipping the reason i bring
this up because it's not a problem
in fact if you have great feedback that
actually works in your favor
facebook will boost you more in their
algorithm even though they'll never
publicly admit that they will so that's
why with drop shipping it's commonly
referred to as kind of the sloppy side
of the business
most people don't have good support set
up the shipping time is terrible
everything's bad
well you can still drop ship as long as
you make sure you have those things good
i'm just bringing this up because this
is a huge restriction
you need to make sure that you have a
good feedback score and i've actually
seen facebook
starting to disable more and more ad
accounts who are decreasing in feedback
score but haven't yet dropped below
their threshold
so facebook has a threshold of two where
if you drop below a two feedback score
you're like you're gonna have problems
you might not necessarily get disabled
right away
but they're gonna slow down your ads and
slow down the results
i have seen facebook for no other reason
that i can even think of
disable more ad accounts than ever
before that are on the decline they
might have just hit two
or about ten two or a little below
because if they see you continuing to go
down they know it's going to become a
problem and it makes them look bad
because as an advertising platform
they have someone on there who's not
delivering a great service or at least
who isn't getting great customer
feedback which at the end of the day
those are facebook's customers
not necessarily yours so they have to
keep their brand and their business in
mind so
the kind of simple solution for this
just the first two things we've toked
about
which this will help your chargeback
rate make sure you have good shipping
time
and make sure you have good support set
up for your store
on top of that the third component would
be and this should be obvious but i
always like to say it
make sure you have a good product
quality if it is a crappy product
you're gonna have problems hayden how do
i know if it's a good product if i'm
drop shipping and i don't have it
order it it might only take two weeks to
come in order it okay order these
products they're not that expensive you
know if you're selling for 40
you're probably getting it for 10. order
the product verify that it's at least
decent and you should know what that
customer buying experience is like what
is the packaging like
how easily does the packaging open is it
in a little plastik thing inside of that
pack like
understand that experience that'll just
help you from a marketing perspective
even better okay
so that's kind of the basics there
number three if you mess up
once or if your supplier messes up once
the store name can pretty much be ruined
i've been seeing this happen
a lot but uh people buying like
different spam
bots on facebook where just thousands of
bad comments will flood your facebook
flood your instagram and it's not good
because it definitely does
impact sales so you have to just be
careful this is more so with every
business but
especially if you're newer people can
kind of understand that now
okay they don't have a lot of likes on
the facebook page they clearly don't
have that many reviews
they can hurt your business and people
do read the comments
so it's just making sure that your
suppliers on point communicate with them
build a relationship with
them trust but always verify i actually
got screwed over in march of this year
maybe april it wasn't that long ago and
it costed me about 15 million dollars in
sales and i'm not joking
and the supplier did that only because
of thirty two thousand dollars worth of
orders
it wasn't my fault it was at the end of
the day because it impacts me
but it was a supplier i've been working
with for a year and a half for whatever
reason they tried to not fulfill 4 500
orders
of a product didn't send it out said
that they did and that screwed me over
and it costed a
phenomenally large amount of money very
upsetting it caused issues with my ad
accounts it caused issues with the brand
name
and it caused issues with my payment
processor that's a brand i've been
running for two years we had to do a lot
to get that back
of course refunding each of those
customers and out of our own pocket
so two three times expense now we paid
the supplier initially they never sent
it out we refunded everyone so that's
double payment
and we also sent them the product again
so thirty two thousand thirty two
thousand thirty two thousand
just to try to make things right and we
still got nailed
because of this absolutely terrible so
always verify
now i have someone who verifies every
single order that is their job
that's an additional expense now but you
know what it's worth it because if
there's a problem again
we will catch it okay so just simple
things like that it's always going to be
a learning process there's going to be
mistakes
but just understand if that supplier
screws you over
you can blame them all you want but it
hurts you at the end of the day so
definitely uh you know just watch out
for that now number four the final thing
i want to tok about inside here
is the idea of drop shipping a lot of
people tok crap or drop between it's
not a business this that the other thing
okay i'll give an example i have a pool
at my house i have a pool guy pool guy
cleans the pool pool guy has a pool
cleaning company
i asked him hey can you do a bunch of
repairs on the rocks next to like the
waterfall in the slide
pool guys company can't do that okay
well he referred it to someone else
that's in a way drop shipping he's
referring and they pass referrals i
think he gets it cut it's just simple
things and so many businesses do this
drop shipping is not a new idea it's not
a bad idea it's not a bad concept
it's just all about your structure and
your setup people who say that drop
shipping
is a scam or is bad clearly
doesn't understand any form of business
because there's tens of millions of
businesses
that do this format of work there's now
something called drop servicing
people sell services and then go
outsource it on
websites like fiverr and upwork i know
people who do that at a small scale and
people who do it at a very large scale
so it's just an idea of business it's
all about how you set it up to make sure
that it works correctly
you know everything in business is
getting something marking it up
selling it that that's that's business
drop shipping is just one format of that
so
just make sure that you are aware of all
these things with the payment processors
with your marketing doesn't just have to
be on facebook
but also with um you know pretty much
anything like the supplier
making sure that you're not going to
have a problem with that again trust but
verify is a great saying when it comes
to this industry all right
so if you have questions feel free to
leave it in the comment section down
below
these are some reasons as to why you
should consider potentially
not drop shipping now i don't mean not
doing e-commerce there's different
routes you can go
you can work with the private supplier
who they might have inventory
and you can chip off a piece so that you
don't have to be ordering from a
supplier in china
then they make the product and then they
ship it out which causes this huge long
timeline of at least two weeks
in most situations but depending on your
supplier you can get that done a lot
faster it might cost you more but again
just understand the mechanics behind it
understand what potential things could
go wrong
and try to figure out some solutions
around it there's there's ways to get
really fast shipping even without buying
the product in advance
okay so most of my stuff i hold
inventory for but i do have multiple
stores
where i work with suppliers i still have
six to seven day shipping time window
a six or seven day shipping time but
that right there
i don't have to buy the product in
advance for those stores so it's just
finding the right person to work with
that's going to come over time
over having bad experiences you can't
really avoid it you should just try to
be as aware as possible
all right that's part of the learning
process so if you guys want help with
anything like this i do have a program
that covers every single possible little
thing
it focuses more so just on facebook
because that is the primary source
of where you're going to be bringing in
sales and i like to teach that skill
because it's the most tiknical
it's the most in-depth and it's the most
misunderstood skill so a lot of people
they might have a great payment
processor
they might have a good supplier they
might have a beautiful website every
possible component
but they don't understand how to do the
marketing and that right there you're
done okay
if you don't understand that one piece
which is the most valuable high
income piece you won't make money okay
even if you just know facebook ads
you can go to a plethora of different
businesses millions of businesses
and they'll pay you for your services so
it really builds that skill and that's
what i like to focus on again that's
what i do every single day sitting right
here
or in my office down the road so it's
pretty simple
it just takes a lot of work to learn the
tiknical side of it and go through all
the different scenarios which again
is what we cover live in the program
down below it's only a few hundred bucks
i will drop a discount for you guys
through this link directly so if you
want to check that out feel free to see
it jump inside of there and learn
there's been hundreds of success stories
created out of that
so it's been super awesome to see and
again if you have any questions at all
it can be about payment processing i'm
sure there's going to be questions
about which one i use i don't really
like to say because in
all actuality just being honest it's
ruined payment processors
before and so i've had payment
processors where i
basically publicly announced which one
i've had friends that tried to help
promote their company i actually brought
one of my friends company an extra
15 million dollars a month in revenue
just from referring them as a payment
processor and it ruined it for me
for me at least because it got flooded
with people that created issues
and new restrictions got imposed and
there was all sorts of problems
so i no longer publicly give that advice
from that side of things inside of the
program i
mentioned some stuff on payment
processors i give you some good routes
that you can take
i have multiple not just one company
that i work with but there's so many
different things you can do
from a supplier perspective again i have
multiple it depends on the store and the
brand that i'm working on
but again inside the program we do give
you some contact information for
different suppliers
that you can utilize to at least make
sure that when you're starting with drop
shipping
you can be successful and not have a
problem and that right there is
invaluable
okay so i'm sure there'll be questions
feel free to drop in the comment section
down below understanding that program
linked below as well is going to answer
all your questions and show you
everything that you need to know
especially from a facebook ad
perspective so hope you guys enjoyed
this video this is just a lot of current
updated stuff that's been changing
i want to keep you guys in the loop with
what's going on inside of the industry
especially more so like that entry point
like a little entry point is getting
harder
that window's getting smaller but
ecommerce is a massive industry
obviously and you should still tap into
it for sure
so feel free again let me know if you
have questions i hope you enjoyed this
video if you did make sure to smash the
like button
don't forget to subscribe and with that
being said i'll be seeing you in the
next video
peace

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