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Dropshipping Risks

Dropshipping Risks And How To Avoid Them

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Anton shares the biggest dropshipping risks, and what to do to avoid them.

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Transcript

What's up everybody, Anton Kraly here. In this episode, I want to talk about different drop shipping risks and more importantly, how to avoid them. Now, if you're not familiar with myself or my company, I've been doing this stuff for over a decade now. I've been helping others to do the same since 2012. You can learn more about that at dropshiplifestyle.com. What I want to do in this episode is address some of the biggest risks that I hear people bring up day after day, but not just tell you what they are, also tell you how to address them so you don't get yourself in a situation where you're losing money or you're losing time, or you just find yourself in a situation where you're like, wow, I wish I would've known about this sooner.

The biggest one that I hear about is ad costs. I am a huge fan of paid ads. I preach them day in and day out, and that's probably why I hear about this one so much. The risk is what if you invest a bunch of money into paid advertising and then a week goes by, a month goes by, a quarter goes by, and you're not profitable. You don't make a sale or even worse, you get sales and there's no money to be made. Listen, this is very simple to address, and it does not need to be a big risk. With the type of ads that we run and that I would encourage you to run on a brand new store, they are direct response style ads, but specifically ones that are run on Google shopping.

Now, if you go to google.com right now, search for any product, you'll see these images of the products with the product price, the store name that's selling them, and you can click through and buy right there. Now, if you have those ads running for your store, that match up with the keywords of the products you sell, that is what I consider a direct response ad on Google shopping. In the beginning, that's what you want to start with for a couple very important reasons. One, because they typically have the best return on ad spend, meaning for a dollar you put in, you'll typically get the most back with targeted Google shopping ads. Now, another reason is because the turnaround time or payback period, as I like to call it, is very, very short with these ads. Again, when they're set up correctly, you'll know if they're profitable within one to three days.

You launch a new campaign, a few days go by, the people that are clicking the ad are going to make the decision of whether or not they're going to buy from your store very shortly. It's not like you're sitting around waiting months on end, like, when are my ads finally going to take off? No, you'll know very quickly, and if they don't work, then you can start making shifts, making adjustments, and moving from there with the data that you have in your account.

Now, another quick tip for anybody that really is on a limited budget and worried about the risk of ad costs, just exploding and disappearing out the window, first, is to make sure everything is being tracked properly so you know what ads are actually working and what aren't. Now, I do this through Google Analytics with enhanced eCommerce tracking turned on. You should do the same. If you're a member of Drop Ship Lifestyle, I teach this in module six.

Another tip that is very important when it comes to your paid ads here, is especially in the beginning where you need your return on ad spend to be as high as possible, is to follow up with every single person that comes to your store that doesn't buy. This can be with a small budget remarketing campaign, this can be with live chat on your site, where you're proactively engaging visitors to talk to you, this could be with follow up emails that are manually sent to abandoned carts. Doing everything you can to turn every visitor into a sale so your ad costs don't exceed your profitability.

One final tip. I know we're spending some time on ad costs here. That's just because I know it is a real concern to people. Whenever you are creating your new ad accounts, whether it be for Google or whether it be for Microsoft Advertising or for Facebook Ads, you're able to get ad vouchers. Sometimes they're $50. Sometimes there are 100. Sometimes they are 150, but basically what that means is you can get hundreds of dollars in free ad money. As you're testing with low budgets and seeing what's profitable, it doesn't have to be on your dime if it's a new ad account for a new business. Keep that in mind.

The second drop shipping risk that definitely can be real, that I hear people bring up all the time, is what to do about refunds. Let's say your story gets up and running. You're running ads, you're actually getting sales. Well, what happens if you do 1000, 5000, $10,000 in sales in your first week and a week later, everybody emails in and says, I want my money back. Well, you're going to have a bad time, right? It's going to be stressful and it might put you out of business, but just like everything else, there is a way to keep this number as minimum as possible.

I'm not going to get into detail in this section, because the easiest way to have low refunds is very simple, especially when drop shipping, it's working with quality suppliers that have products in stock locally that can ship fast that are of high quality. Again, you don't want to be selling cheap crap from overseas, drop shipping it from China to the states, having customers wait three to four weeks to email you to say, where's my product, and you say, it'll be there next week. Then it shows up in a dirty box because it's been around the world five times already. The quality doesn't match what they thought they were going to get. Yeah, if you run that kind of business, then this is a risk. Again, if you work with quality suppliers that have products in stock in the countries where you do business, this is not going to be an issue. Now, I have more tips on this, on how we actually research suppliers to make sure they're legitimate. If you're a member of Drop Ship Lifestyle, I will link directly to that training video below this episode.

Now, the third risk that people have go through their heads before they build a drop shipping store is probably the one that is nearest and dearest to my heart. This is the time investment. I don't care what kind of business you're building, if you're building something you're investing your time. Yes, you'll be putting some money into it but time is worth a lot more than money. Time does not come back. We can make more money. When you're investing weeks, sometimes months, into building something where you're not getting paid because you're putting in the work that will pay off later, people really get nervous, is my time going to the right place? Is this going to pay off in the long run? Again, I get it because time doesn't come back.

When it comes to drop shipping, specifically the model that we build, the stores that I built, going way back to my first ones in 2008, 2009, guess what? They're still around today. Our student stores from when I first started Drop Ship Lifestyle in 2012, their stores are still around today. What I'll tell you is if you're worried about time investments, you need to stop thinking about it as something that has an end date What I think a lot of people get in their heads is, I'm going to do this and I'm going to give it three months or I'm going to give it six months or I'm going to give it a year and based on what happens, I'll decide if this is something that continues in my life.

If this is something that use as a business, the way to actually make this work is to think, as I'm building this store, it's going to be around in five years. It's going to be around in 10 years. I might sell this thing. I might pass it down to my children. I might hire a team and never even look at it again because I have a new management system in place. If you think about it for the short term, it's not going to work long term. Picture at the time as never ending, but not in a bad way. Picture the time you invest now as something that compounds on itself and the results that that time brings are only going to grow over time. In my opinion, obviously this business model is well worth your time. It's not something to think about. I'll give it a few weeks. I'll give it a couple months. We'll see where we go from there. Don't do that. Go all in with your commitment of how this is going to work because you and you alone are the one that is going to make it work and committing to it is the only way that's going to happen.

Guys, that is some of the most common risks that I hear about people asking me. Hopefully this provided some insight to you. If it did do me a favor, give this a like. If you're not subscribed to the podcast, go to your favorite podcast player, search for it, click that button. If you're new here, you want to know exactly how we build highly profitable semi-automated stores, be sure to go to dropshipwebinar.com. I'll link that up in the description as well. With that being said, I'll be back on Thursday for another episode. See you then.

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