What Is Drop Shipping / eCommence Arbitrage? [5/6]
I came across drop shipping a few months back when I was seeking for an alternative way to monetise my niche site. I also wanted to diversify my Adsense’s earning and possibly increase the overall income.
However, after spending hours consuming every pieces of content I could get my hands on. I decided not to work on it, will get to the reason later on.
Drop shipping has been hot these days. There are people selling courses with the promise of making quick passive bucks online with little hours of work.
It also has a few very active Facebook communities around the interest. Most groups have members exceeding thousand. Occasionally, you would find yourself looking at the newsfeed with screenshots like:
It’s very motivating to look not just at the figures but also the success stories of others. It gives you that imagination that you could be the one next. I wouldn’t be honest if I say I wasn’t temped by it. But I felt drop shipping is quite gig-like. It is true that money can be made fast with some lucks and a bit of skill, but often short-lived. Mainly, the nature of the model would not allow you to be profitable for long. And I prefer something sustainable. Ops, I still have not explained what drop shipping is.
What Is Drop Shipping
Drop shipping is a form of online retail arbitrage where one takes advantage of price differences between various markets. Erm…. actually it’s not that complicated.
Let’s use the most popular platform and marketplace as an example.
First, you set up an online store using an eCommance platform called Shopify (like wordpress to blogging). Second, you list the product from Aliexpress to your store with identical description. Third, you promote the product through Facebook advertising. At this time you hold no inventory while waiting for the Facebook traffic to convert into sales.
Then when a customer purchases a product and payment is received via Paypal. You then head over to Aliexpress to purchase the item. But instead of shipping it to your home address like you normally do for online purchase, you ship it directly to your customer.
That means as a marketer you never see or handle the product. Your time will be spend on tweaking Facebook Ads, improving copy and testing product demand.
You profit from by buying the item at lower cost at Aliexpress and selling at higher price in your store. Typically at a 20 – 30% mark up.
Why Would People Buy?
First off, the kind of product you will be selling are usually interest or hobby-based items. It could also be fashion accessories. The main catch is the item must be low cost and high perceived value. It can as cheap as below USD 4 so you could mark up to $8 – 10 and sell it at a profit.
Yes, some items are ridiculously cheap! Looking at the images alone, don’t you think you can sell it at a 20 – 30% mark up?
If you like to find out more about it you can refer to the below resources: