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How to Use Drop Shipping to Kick Business Into High Gear
Going back six years, the concept of owning an e-commerce business where you could set up a site, sell a physical product, and never have to hold stock was extremely appealing. That concept has died down in recent past. Today we have someone on the podcast who is here to report that drop shipping is not dead. It is sustainable if it’s done right. We’re going to hear how our guest is perpetuating that sustainability with his business.
Anton Kraly is the founder and CEO of DropShip Lifestyle & eCommerce Lifestyle. His business is focused on empowering people through eCommerce and effective marketing. From a book that he absorbed in one week, Anton got his website up and his business going. He learned all about AdWords and how to make it so his site got those clicks. Anton takes us on his twenty-year journey from delivering a physical product, then moving onto product listing and inventory on a larger scale, to eventually going back to the true drop ship model. A successful drop shipper’s job is to build a store with a desirable product, make it look good, have excellent customer service, and then sell, sell, sell.
- Benefits of drop shipping versus building your own brand.
- The disadvantages of drop shipping – if any!
- Anton’s tips on where to find products.
- The average order value Anton recommends.
- How to convince the manufacturer to take you on as a seller.
- The best platforms to use for sales and website examples to review.
- How to advertise and where to find clients.
- Marketing channels to use other than Google.
- The importance of self-management/DIY when building.
- We discuss the Amazon factor and its implications for the drop ship model.
- How to use drop shipping as a stepping stone to building a brand.
Mark: About five or six years ago Joe we had an e-commerce business … man maybe even more than that, maybe seven years ago or right around the time you started at Quiet Light Brokerage. I remember like the hierarchy for e-commerce businesses right at the top was having a drop ship business. Because people love the idea that you could set up an e-commerce physical products business but never actually have to touch the product like oh this is beautiful. Today they’ve kind of fallen out of favor. We don’t see drop ship business as often and I think it’s because people think that they’re just kind of easy to spin up and then they get wiped out. But you had somebody on who is in the drop ship world and loves it and is doing a great job.
Joe: Yeah. Anton Kraly ‘s been doing it for about 20 years. He actually started in New York. He had a bakery route where he had a truck literally delivering bakery products to different retail outlets and set up a website and started dropping shipping bakery products all around New York online back 20 years ago. Fast forward to today he really talks about the differentiation between owning a physical products e-commerce business and large amounts of working capital rolling like crazy and taking all the profits putting it right back into it and [inaudible 00:01:56.5] that story versus a drop ship model. A drop ship model; he really hones in on the fact that it is mostly pure profit. You’re focused on advertising dollars; that’s important. We talked about the average ticket size and why it’s important to be larger rather than smaller and US manufacturers and how to find them. Like you said five, six years ago it was all the rage. I think it’s a great model, to be honest, we think it’s fantastic. It takes less working capital to get started if you do your research and really focus in on some of the things that he’s talking about. I think it’s a great opportunity for somebody to start their own business versus buy. I know you had Amanda on the podcast about that. I think it’s a great opportunity to go that route if there’s not a ton of money for startup capital and you really don’t want to do imported from China which can be complicated.
Mark: Yeah. Look at one thing and think about these ideas of fading niches and fading business styles is that if you find a business today that is in one of these fated business setups like drop shipping; if it’s doing well today that’s most likely a highly sustainable business. We look at these things and we say oh well drop shipping didn’t work because it’s just not sustainable for the long term. If somebody has been doing it and is doing it now today then there’s something sustainable about it. I would agree that the old model of just taking a product feed and throwing it up there, yeah there might be some problems with that. But drop shipping is still viable if it’s done right. So I’m interested to see what he’s doing specifically for that sustainability and protecting against that competition and hearing how this will all work. And this is fascinating. Again this is kind of a blast from the past but how it works today. So let’s get into it and see what he has to say.
Joe: Let’s go to it.
Joe: Hey folks it’s Joe from Quiet Light Brokerage and today I’ve got Anton Kraly with me on the line. Welcome Anton, how are you?
Anton: I’m doing very well Joe. Thanks for having me.
Joe: It’s great to have you here man. You know the process; we’ve talked about it just before the recording started here. Why don’t you give the folks a little bit of background on yourself and what you do with Drop Ship Lifestyle?
Anton: Sure. So yeah my name is Anton Kraly. I built my first e-commerce store way back in 2007. I started off then selling cookies online and basically just got into the business after reading I think a book that got most of the entrepreneurs [inaudible 00:04:07.8] started which was the 4-Hour Workweek. I mean it introduced me to back then Yahoo Stores and AdWords. So I spent a week figuring it out and it worked. I since then kind of been working my way up selling more and more expensive products and transitioning from what used to be an importing model to the drop shipping model.
Joe: One week? You took the book 4-Hour Workweek and in one week you got a listing up and running and a business off there?
Anton: Yes but before that, I thought that e-commerce and building websites was like this big thing that took a team and $100,000 plus and all these … you know just technical people. And that book what all it gave me was you can go to YahooStores.com and spend $29. And the website was ugly. It was very ugly but I had a delivery route for a bakery in Brooklyn, New York. So I had this idea that I could build a website. I had access to these bakery products. I figured out Ad Words and just said hey we’ll use keywords like New York Bakery, New York Cookies, and said I think my little descriptions were moved out of New York and missed New York Bakeries? Click here. And yeah I started getting sales like almost right away on that.
Joe: That’s amazing. I love it. I love the story and I love the action in terms of just doing it and getting things done. It didn’t have to be perfect. If you waited for it to be perfect you would still be working on it for sure. I think I built my first site for $50 so congratulations you got me beat. So … but you were actually physically owning the products in terms of the baking goods and at one point you worked in to just drop ship. Can you touch on that a little bit?
Anton: It’s funny actually I was I guess technically drop shipping then but what I had at that time … I was 21 years old right out of school and I bought a delivery route for a bakery in Brooklyn.
Joe: Ah okay.
Anton: What I had basically was the rights to pick up boxes of cookies and sell them to a section of Long Island where I was living. And once I started this business at first I was just shipping them myself like literally having USPS pickup branch boxes and then I just said to the bakery like hey can you guys just ship these things for me and they said yes. So that was drop shipping. I didn’t know what it was but after I was doing that … not for long, probably a few months I just was thinking like okay I’m selling $20 boxes, $30 boxes making like $10 per sale if that net so why can’t I sell something that costs $200 or 500 or a thousand. So my initial plan back then or is my plan of action and what I did was go on e-Bay, look at completed listings and just looking for things that sold consistently. I buy at now prices, basically identified some items, I still don’t know what drop shipping was so I found a website Alibaba.com and started importing. So I did that probably for two or three years import only. Bringing in dozens of containers from China to Long Beach in California and all my e-commerce stores back then were on that model. As I did that again after a few years of traction and doing really well growing like doubling over year over year I actually started to have companies reach out to my stores. And they would say hey we saw your website, we see you sell these things, we make these things do you want to sell ours? And they basically introduced me to drop shipping. Because they explained you don’t need to buy this, you don’t need to put it in your fulfillment center. You can just list these products, you sell them, and we’ll ship them for you.
Joe: Let’s define that then. For people that don’t have the experience set that you and I have go ahead and define drop shipping and how it’s different from owning your own brand and physically owning the products and shipping them yourself.
Anton: Got it. Drop shipping really is a high level term so if you Googled it you could find probably 10 different business models that technically would be drop shipping. And the way that we do it is basically we consider ourselves Internet retailers. So the way I like to describe it is if you went to a shopping mall and let’s say you went to Dick’s Sporting Goods right? They’re a retailer. You go there and you buy Nike shorts and maybe Callaway golf clubs and whatever brands make kayaks and they sell other people’s products. So that’s how we do drop shipping. So again instead of building a site and let’s say … you know I have a sofa behind me, so instead of making sofas or private labeling sofas we would just go out there and find the top 50 or 100 whatever it is sofa company is for us in the US because that’s where we do business. We would reach out. We would say hey you know we see your products and we own this site and would like to sell them. And the arrangement on the drop ship model is they give us their full product catalog. They give us all their descriptions, their SKUs, their images, they just give us all the content and then us as retailers it’s our job to make them look good on our websites. Basically, make sure we’re taking care of customers and then, of course, our job is to drive visitors and then turn those visitors into customers on our online retail stores. Again the difference is I wouldn’t ask those 50 sofa companies can I buy ten of all your best selling products and ship them to my warehouse. I would just get the sales on my website after the sale is made the order gets forwarded to whatever brand it is. The brand ships it direct to the consumer. So again your job as a … and the way that we do it your job as a drop shipper or internet retailer is to build a good store that has great product descriptions that actually has existing customer service and that gets really good at finding buyers bring them to your website.
Joe: Yeah. So you touched on some things that I think are advantages of drop ship over owning your own brand but I want you to go ahead and give me two or three there and then we’ll talk about them for those listening in the audience.
Anton: Yeah; definitely, so back again let’s … maybe 2008, 2009 when I was only importing. Basically, I was limited in terms of growth, in terms of revenue because every time I place an order with China I had to put down at least 30%. Before the container got to California I had to pay the balance.
Joe: A container … I mean we’re talking about a tractor trailer load size—
Anton: Yeah. [crosstalk 00:09:32.2]
Joe: —a lot of money there.
Anton: Yeah. That’s right a lot of cash. And basically, that’s what happened. Our growth back then was limited based on how much cash I had. Again I had … only I had what was coming in so it was a bankroll sitting there that I could draw from. So basically yeah that was an issue. And then also if I wanted to add new products, back then I probably had between 10 and 20 different SKUs. So I couldn’t just say I want to sell … I want to double the amount of products we offer and sell those. I just didn’t have that option because again it was cash prohibited.
Joe: Number one might be … I mean if someone is starting out on their own and they don’t have a whole lot of working capital they may seriously consider drop shipping versus finding, building, designing, private labeling their own brand and then ordering some from an overseas country.
Joe: So working capital. If somebody is strapped and doesn’t have tens of thousands of dollars to start off with.
Joe: Okay. I got you. What kind of working capital do you think the … an average drop shipper that’s someone that you train needs? What’s the ideal situation?
Anton: So it depends if you want to outsource things. Again like when I first started I built all my own websites and I created all my own ads and I wrote all my own emails and I did it all myself. So if you want to be the type of person or if you are the type of person that does all the work it really doesn’t cost that much as far as a budget. Maybe honestly like a thousand dollars, $2,000 in the high end is like that’s okay, again, if you’re willing to do the work. If you do want to outsource things like uploading products and having unique descriptions and having content created for your website, I wouldn’t recommend outsourcing ads at first but if you wanted to do all that then maybe 10,000 bucks and you can get set up with a nice looking store that’s pretty much ready to go.
Joe: So drop shipping is not dead right? You know I just … before we started recording we’ve just had a very attractive drop shipping site go into contract in the in the mid million and a half range actually. Most people that are out there looking for a business think physical products and own their own brand so that they can in many cases they do it on Amazon or a Shopify store. What are the disadvantages that you’ve experienced by being a drop shipper versus owning your own brand … well owning your own brand, you still own the customers as a drop shipper.
Joe: But what are the disadvantages?
Anton: So we’ve done it both ways and let’s go to it. We can talk about this but if you are again we’ll just keep using the sofa example. If I sold for 50 different sofa brands and I had a successful store I would know what the top 20% of products were. I would know what sells the best. And then again what I used to do … I don’t do this anymore I’m planning actually my move to Charlotte is to get back into this but what we used to do is introduce our own brands then on our website. We basically just okay we have 50 brands now we have 51, one of them being ours where we could sell our versions of the top products and maximize profit there. So that’s the biggest advantage if you have your own brands. The margins just simply are higher. You can make more money because you’re not paying for someone else’s brand equity basically.
Joe: Okay, I got you. That makes a heck of a lot of sense.
Anton: Yeah the other one is we usually … I mean you could speak about this but sale price. If you want to sell your store and you have your own brand that could be a bigger package. It could be more valuable to a buyer that wants that. But that would be another advantage.
Joe: Maybe. Yeah, there are a lot of advantages and attractive features about drop ship. Number one, no working capital required. A lot of the people that own their own brands and launched their own business with a brand starting out they do it bootstrapped. Maybe they don’t have … maybe they have got 5,000 instead of a thousand or two like you talked about for drop shipping business but every ounce of profit that they make if the business is growing like crazy and they’re just trying to keep up with volume of orders and inventory so they don’t run out what I see is for 24months they’re taking all the profit and putting it right back into buying more inventory and there’s hardly left … any left over for them; its discretionary earnings, its taxable income, because they’re buying a lot of inventory. But they don’t get to pull a hold off out of the business and I sense that with a drop shipping business and I’ve seen it there’s a lot more pre-working cash flow because you’re not actually buying that physical product and so you’ve taken the order and have the money hit your account right?
Anton: Yeah and that’s the beautiful thing. So like you mentioned with building your own brand and constantly having to reinvest if you’re growing to purchase more product, typically with that the payday does come when you sell the business. That’s when you get all that money out. As the business value grows but your cash flow doesn’t … or your free cash flow. And with drop shipping yeah if you do this the right way and you’re working with the right type of suppliers and of course you’re not overspending on traffic you really do control your costs. So most of your costs are variable so having … even if you’re in reinvesting like a little bit more into traffic and trying to raise your budget it is realistic to have a 20% net profit every month in cash that you can then again determine what you want to do with. If you want to invest it into a business or do you want to take it out? So our cash flow from day one is much much higher than when you’re going to be trying to scale your inventory.
Joe: Okay. So let’s talk about I want to start the drop ship business, I’m convinced I want more cash flow. I’m not worried about a big sale down the road although they are very, very sellable businesses. How do I find the products? How do you find manufacturers that are willing to allow me to sell their products on their behalf?
Anton: Yep. So as far as finding products there’s so many things out there but basically what we look for for some general rules of thumb is expensive products. Our average sale price we want to be usually a thousand dollars or more. We do sell products for less than that but that’s the average order value we’re looking for. We also look for different product types where customers really don’t care what brand they get it from. So an example I sometimes give is let’s just say someone heard oh a thousand dollar products price. I want to sell televisions or high end gaming monitors. Well, I would say that’s a bad idea because if someone wants to buy that they’re going to buy a Samsung TV or an LG monitor and that’s not a company you get approved to sell. But if you wanted to sell something like sofas or books shelves or any of these products types no one cares … no one says I want this brand name sofa and I have to have that. So things that … yeah, there’s really not brand loyalty. That definitely helps and things where there is a lot of possible variation or colors. So another example I give is chandeliers. So someone buys a new home like we’re trying to do now you want to replace the lighting fixtures. If I want a chandelier I can go to Home Depot and Lowes and see what they have. But if I see something on Pinterest or Instagram and I want this specific size and color and amount of bulbs like I’m not going to find that at a local store. So China might stack the cards in your favor by going for things where customers are usually drawn online, to begin with, to make those purchases.
Joe: Okay so –
Anton: [inaudible 00:16:14.8] to search for a new iPad but something generic.
Joe: Right. So something generic with a high ticket item. How do you find those manufacturers?
Anton: Yeah. So Google … I mean that’s really what we do. And one of the tips I could tell people not to do is don’t look for drop ship suppliers online. Because when you go that route what you’re going to find is directories and middlemen that typically charge like a monthly fee for access to their products. They really are middlemen. What you want to do is always get approved directly with the brands that you’re selling for. So you don’t want to go through a distributor if at all possible. You definitely don’t want to go through any one that calls themselves a drop ship supplier director or anything like that. Again going back to the sofa example, I would go on Google, I would type in whatever I want to sell; maybe three sitter fabric sofas. I would go through Google. I would open every website in a different tab that sells them. I would look for either a page called brands or manufacturers or suppliers. And I would go ahead and then open or make a document with every company name I found there. And basically, I would work off that list. So I would build my own list of not … again like I wouldn’t call them a list of drop shippers, I’d call them a list of brands that manufactures sofas. And then I would reach out to them old school by picking up the phone and saying hey this is Anton from AntonSofas.com, I found your website and these products and thought they’d be a great fit and who can I speak to about getting approved for an account and take it from there so yeah.
Joe: How do you convince them to allow you to be a drop shipper when you haven’t built a website first or is the—?
Anton: We built the website first. So yeah if I was getting into a new industry let’s … again sofas, I build a website. I would upload maybe five or 10 stock images. Everything else would be finished though, the about us page, all of it. Then we have blog posts up there. The whole thing; the phone number would work, the live chat would work. And then when we spoke to them we would say basically we’re launching this website on whatever it is you know March 1st and our plan is to work with X, Y, and Z companies. So mention some of their competitors that makes sofas that’s probably well-known and respected. And we could say our plan is to launch with again these companies, we’d love to have you on board. We think that your products whatever it is X, Y, Z that we found on their website would do really well. If they ask tell them a little bit about our previous experience, how we’re going to get traffic. Tell them about how customer service is everything with our business and kind of go through the things that we know that they’re looking for and the things that … they’re also the things that we know we have to do to make the store successful.
Joe: Okay. So build a website on the product and then start the marketing and we’ll get to that in a second. So in terms of building the website do you have examples on Drop Ship Lifestyle of what one looks like that would be an ideal one to build?
Anton: We do. We have a bunch of different links. I could send you some to check them out but I think one of them that we have a lot now is in lightandchandeliers.com so if anybody wants to check that out. We also have HappyPawsDogStore.com. So those are websites that are built on Shopify using the Drop Ship Lifestyle theme that we had built and they just show again what the site would look like at that stage when you’re ready to start contacting suppliers, get approved, and [inaudible 00:19:17.6].
Joe: So you answered one of my other question which is which platform do you prefer and it sounds like Shopify. Okay.
Anton: For 99% percent of stores, yeah.
Joe: All right so you’ve identified the niche that you want to go in to, you build the website, and then you find the manufacturers and develop the relationship and bring their catalogues into your website. How do you go ahead and find the customers and market the brands?
Anton: Yep so our favorite way is still through Google Shopping by using Google product listing ads. Those are the ads if anybody goes on Google and types in a product name or you can just use the general niche name you’ll see the little images of different products. It’ll show the product’s price. It will show the store name. So we advertise there and then also if you’re … if you search that on Google and put shopping you’ll see all the ads there. And it’s just always been like back in the day I think when I first started it was called frugal.com and like that’s always been our highest converting source of traffic. So we focus on not just having our products there but really optimizing our product feeds to make sure that we are getting a good ROI. Because the big … since again all of our expenses are variable our biggest expense is marketing. So we spend a lot of money on ads. And so I’m just making sure that we are putting it in the right places and monitoring it. Like we we’re always reviewing our ad campaigns. That’s what drives the business. Like you need a high converting website, you need great brands, but if you’re not really active with … inside your Google ads account then it doesn’t matter. So yeah that’s what drives our sales.
Joe: So that initial one to $2,000 that you thought was a big budget initially does that include the advertising budget when you launch?
Anton: Most of that would be going in there. And this is another good thing I should have mentioned earlier but speaking about how these are cash flow businesses with the way that we do advertise to get the majority of the time it’s either coming from a Google product listing at search or someone searching for a brand name or a product name or an SKU number or it’s something that we optimize for on our website where they’re searching again and they’re finding us organically. But by the time people find us they’re typically trying to figure out am I going …with where my going to buy from basically. They know they want product X, Y, Z and they’re looking to figure out where they should buy it from. So we do a bunch of stuff on our websites to have them choose us. But also by the time they click one of our ads they’re either going to buy or not buy typically in like three to five days. So it’s not like we’re spending whatever a hundred dollars today and hoping it comes back to us two months from now.
Anton: Spending money now and if we’re not [inaudible 00:21:34.0] positive within a few days then turn it off.
Joe: Let me just summarize and differentiate the business model between owning your own physical brands folks and the drop ship store. Again I just want to wrap it up and summarize if you’re not wrapping up a summarized. So building the shop … you’re building the store, you’re spending a total $2,000 budget all in and that includes advertising. With a physical products brand, you’re doing that as well but you’re ordering the product from let’s say China, for instance, waiting for that product to come in, putting it up on Amazon, spending some money to get traffic either to Amazon from Facebook or some other source and doing sponsored ads in Amazon. So far we’ve spent, we’ve spent, we’ve spent, we’ve spent, and then you’re going to get paid out every two weeks from Amazon. Your advertising budgets are going to take and blow your credit cards once a month. With Drop Ship Lifestyle or drop shipping, you’re not spending any money on product. You’re building the website and you’re building … doing the marketing campaign. And it sounds like if somebody is going to take … you start getting orders right away after a few days, weeks of advertising again even your advertising budget is with your credit card and you’re not getting … you don’t have to pay that depending upon the time or the month when you launch for another 30 days. So you’re getting the revenue from the sale before you have to buy the product and you’re just sending the … do you send an invoice, an ACH wire, or do you—?
Joe: Or some of your manufacturers take a credit card as well?
Anton: Most of them are credit card. So whenever we can we go credit card and so yeah the points if anybody’s into that is amazing. I haven’t paid for travel in like 12 years so you’ll want to use rewards cards.
Joe: There was a time when I was spending … the highest I ever spent was 50,000 a month on Google Ad Words when I had my business and we furnished our house, we took vacations, everything for the points. Now let me just talk to buyers and sellers, particularly sellers out there when it comes to points. Something like this if you’ve got a drop ship business and you’re doing it this way that Anton’s talking about, if you are spending $100,000 a month on inventory and advertising, of course, you’ve got to pay for it in advance.
Joe: So … but if that’s 100,000 points if you use a point converter or a cash back credit card. That is what’s called an owner benefit. Anton, I want you to pay attention to this and talk to all the folks that you train.
Joe: That is an owner benefit that you should track because if and when you sell your business it needs to be added back to the add back schedule as an owner benefit and can boost the overall value of your business. I just launched one recently and he travels the world and does it all with … no, I’m sorry he buys all of his inventory with credit cards and that gives him an enormous amount of cash back. I think it was something let’s call it $25,000 cash back over the course of the trailing 12 months. If your business is listed at a three time multiple everyone that adds $75,000 to the overall value of the business. For buyers, if you’re looking at businesses and you’re looking for some instant equity if a broker didn’t list cash back points or anything like that and sometimes you’ve got like Anton said travel you can convert those. With our American Express there’s we’ve got a certain number of points and we can convert that to cash. That’s the amount we’re talking about. But that could be instant equity in a business for a buyer if you’re taking over drop ship model and your broker didn’t do that or the broker that listed the business didn’t do that you can. Okay, how much are you spending? What kind of points? You know using credit cards do the math and it’s definitely instant equity. Okay, sorry long rant there. The biggest thing for me and so when I’m talking to buyers and mostly sellers and I’m going to say this for the folks that are listening the biggest mistake you can do … make is not pay attention to the details of your financials and documentation. A little thing like that, we all work so hard when we’ve got our own businesses to drive top line revenue and talk oh I’m doing this many millions in revenue. That doesn’t matter as much as the bottom line number and when you pay attention to that that actually brings more value when you do decide to exit your business. Okay, Joe is done ranting. All right so other than Google Shopping what other marketing channels are there in terms of paths to growing the business itself?
Anton: So the ones that we … I’d say use every time so it varies, so you find some industries where there are certain placements but whenever we’re building a new store we will be obviously Google is our number one. Organic traffic is big. We used to invest a lot of money into it trying to rank major keywords. We don’t do that anymore. What we do now is just focus on site and make sure that all of our product pages especially once we know which our top 20% of products are going to be, we make sure those are extremely unique and optimized because that’s just free clicks and free sales. So organic is big for us. Bing, believe it or not, we advertise. It’s probably 10% of our overall marketing budget.
Joe: I’m not sure if I believe it or not. Okay, 10% all right.
Anton: We’re putting some money there. There are people, they’re sales.
Anton: We can’t scale it. Every time we try to scale it it breaks. But add a small budget and it works. Facebook we are big on but only for remarketing and the reason being we do sell high ticket products. So to put an ad for a chandelier in front of someone that likes I don’t know what interior design they’re not going to buy it so … retargeting though we are big there. YouTube ads actually work really well for us as far as remarketing also. And then one of our other ones that budget depends on what industry are in and what’s out there but advertising on other content sites that already exist. So you can call it influencer marketing but it could either be a business, website, a content site, it could be someone’s personal content site. But either doing like paid promoted articles or taking out ads in the sidebar. Either way but trying to form relationships with people that already have the audience there and then paying them to either have them talk about us or to allow us to put a little banner on their website.
Joe: I got you. And a lot of the stuff you just talked about, we’ve had guest experts on that do YouTube ads or might do influence or marketing things that of that nature. Are you generally finding the people that you work with managing all of this themselves early on how … somebody that doesn’t have the expertise to do that what do you advise them to do?
Anton: Typically if they’re starting from scratch and they want to build a business and with this type of business I don’t recommend hiring anybody from day one. I recommend like learning at least … look do it yourself and get it profitable and then okay look for someone that might want to run your content side of the business or look for an agency that can manage your Ad Words but I really … for most people when they’re starting I say do it yourself. It’s easy to throw money away and I made this mistake early on with my e-commerce businesses. We were profitable but when I look back I spent all this money in like fees into all these companies and I didn’t know enough to know that I was grossly overpaying for a lot of things. So yeah lesson learned.
Joe: That’s the beauty of experience and age and wisdom right? You get to remember all your mistakes and what you might have done differently. Talk to me about Amazon. Anybody got drop ship businesses that are reselling on Amazon and if so how do you do that?
Anton: I’m sure the answer is yes. I’ll tell you we don’t do any drop shipping on Amazon haven’t even ad … I used to advertise there back when they allowed Amazon product ads to go to external sites. But that’s been gone for a few years. Yeah, there’s some people that I work with, some of them are students at Drop Ship Lifestyle that have their own drop ship stores that do what I’ve spoken about earlier where they’ll introduce their own brands into the mix of their drop ship store. And typically when they do that they’ll also have their products on Amazon because they know that people at least a percentage of them will also with Amazon and look there. With the type of brands that we work with typically when we are getting approved to sell for them and we’re signing the agreements, one of them says that you’re not going to sell on 3rd party platforms like companies like e-Bay. They don’t want to sell us to sell there. Same thing with Amazon reason being is because if they’re going to have their products there they usually do that internally. A lot of the times because the items are usually expensive and margin heavy they’re not the type of items that people are private labeling and putting on there. So it’s really at this point I’m sure this will change in the future but at this point, it hasn’t been a huge factor because I think our price points are higher and again the items are usually like too big to be sending over to FBA and paying storage fees. The numbers don’t work at this point with that model.
Joe: Do you foresee any danger as a drop shipper that the Amazon business model is going to be a challenge for drop shippers because those manufacturers can go directly to them and guys like me anytime I want to buy something I go to Amazon first?
Anton: Yeah I do. And I’ll say at this point I’m not like freaking out like oh my God like I … were gone but I do think that five years from now 10 years from now, if Bezos gets what he wants then Amazon will have the entire market share of everything. So I … you know I’ve talked about this before but I think like we’ll see. Like that’s definitely where they want to go. I think they’re pretty upfront about it so unless someone else steps in or unless the government breaks them up from getting too big then yeah we’ll see what the market looks like. Again I don’t think it’s coming anytime soon but maybe call it 10 years we’ll see what things look like then. But I’m in no way confident that they’re going to just back down and say we have enough. They’re not about to stop.
Joe: Yeah well I think your approach to larger ticket items that higher value, not easy to ship, not easy to store at an Amazon warehouse kind of eliminates … they can’t have everything right? I mean Jeff—
Anton: They’re not now they haven’t. I mean they’ve taken over pretty much every market in that call like $100 sub priced product range and even electronics; like I buy some of my electronics from them. But as far as the types of products that we sell it’s been that one area that they haven’t really stepped into at least not in a big way. Like they sell basically … at this point, they sell cheap versions of the stuff that we sell. So you know if you search for a lot of the brands we sell they wouldn’t sell for those brands but they’ll sell like an inferior type product I would say at this point.
Joe: I got you. I know that I say the first place I go is Amazon and I rarely buy anywhere else but them but when I find a certain brand I will go to that website and I would certainly buy from them. And I know my wife will certainly buy from the brand manufacturer or in many cases we built our house three years ago and she was that person looking at 30 different websites for the lighting fixtures and probably brought from one of you guys at one point.
Anton: Probably, but for anybody that’s like thinking about that and kind of like worried like well yeah that probably is going to happen. I think one of the biggest things you could do is look at sites now that are … I don’t know I would say going above and beyond like don’t do the bare minimum as far as content and as far as usability and as far as like everything; the whole experience. One website that I buy from all the time is the bnh.com. They sell you photo and video equipment. And they do have a huge store and warehouse in the middle of Manhattan but most of their orders now are online. And I think that all that stuff that I buy from them I could buy from Amazon and I buy it from Amazon all the time but I like the experience there better for that type of product. So if anyone wants inspiration check out B&H and see how they do things. They do a great job.
Joe: Thanks. So I think this whole podcast has been inspirational for those that are looking to build an e-commerce business in this case specifically drop shipping. It’s a great alternative to the risk and cash outlay of building your own brand. Any last thoughts in terms of what the benefits are anybody should think about in terms of drop shipping versus e-commerce?
Anton: Yeah I think for anybody even if you’re listening to this and you’re like oh that sounds good but I already have half a million dollars in the bank and I just want to build a brand. I still think you could do both simultaneously and it’s a great idea to start with a drop ship model in whatever industry you want to private label or manufacture in. Start drop shipping, build a website, build an audience, get sales, see what people buy, see what they like and don’t like about products. You’ll have all that market data you’ll be making money and then you can go ahead and start your own brand with all the information and really increase your chances of just hitting on your own bit.
Joe: That’s great Anton. Your website is DropShipLifestyle.com you’re helping folks understand the drop ship model. What’s the best way for them … anyone to reach you that want to chat? Should they just go to the website is there a—?
Anton: Website, DropShipLifestyle.com click contact, and everything is linked up off there.
Joe: Fantastic. I appreciate your time today. I look forward to doing business with you in the future.
Anton: Definitely. Thank you, Joe.
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