(Transcript continued from the Episode 144 show notes and audio podcast)

Last week in Episode 143 we talked all about drop-shipping. I explained the drop-shipping model, but in case you haven’t had a chance to listen to that episode, the model that we described was this model where you find a fantastic niche that you’re excited about with some products that you can advertise on Facebook. You identify those products and their availability from a place that will ship them directly to your customer. The company that I recommended for this and a model that is very popular right now is a company called AliExpress.com.

The business model works like this…

You advertise a product that you found, you can source from AliExpress.com. You advertise that on your store, which I recommend that your website and store be hosted on Shopify. Once you have that advertised and up and running on your site, then you drive traffic to that product on your website using something like Facebook. That’s usually a really good place to start.

Eventually someone buys that product from you and gives you their money. You use part of the money that you got to pay for your Facebook ads, part of the money that you got to order the product from AliExpress and have it sent directly to your customer, and part of the money goes in your pocket as profit.

As you might expect, once I described that on Episode 143 I got some outstanding questions back from listeners, both directly in email and over in the Late Night Internet Marketing Facebook Group where we had some discussion about the episode. I wanted to share those questions with you in this episode, because the one thing that I know about teaching, that I learned when I was in graduate school teaching kids about semiconductors, mathematics, and everything else that I got to teach in graduate school, was if one person has a question the chances are a ton of people have exactly the same question.

Before we get started and fully cranked up, at the end of the episode I’m going to tell you about a webinar that you can go get on. There’s nothing for sale there really, it’s a free webinar about drop-shipping, about Shopify, about Oberlo, and about AliExpress, it’s about the exact things that I’ve been talking about. It’s a free webinar that is offered by Shopify because they’re hoping that you’ll buy Shopify and use that for your cart, so it’s not some big up-sell thing. But I don’t want to tell you about it yet, because I want you to listen to the episode first and then I’m going to give you the link for this amazing webinar and I want you to go watch that webinar, so stay tuned.

The first set of questions that I want to get to are from my friend Amazing Amy. I didn’t really tell this story, but Amazing Amy lives down the street from me and our kids play together. She’s a fantastic woman, that’s why we call her Amazing Amy.

She is actually the one who started talking to me about drop-shipping. I knew about drop-shipping because I’m around internet marketing, but I had never really dug into it. As she started talking and asking me questions about drop-shipping, I started getting more and more interested in it.

Eventually I just pulled the trigger on this drop-shipping experiment that I’m running right now. That’s mostly because of the conversations that I had with Amazing Amy about drop-shipping coupled with the opportunity that I came across with 100K Factory. That was the catalyst for all of that. There’s also this third thing that I wanted to learn about Facebook advertising. That was sort of the perfect storm.

The piece that I hadn’t talked to you about was this Amazing Amy piece. Amy sent me some questions that I thought were excellent questions and I bet you have these questions too. I wanted to answer these both for you and for Amazing Amy.

Choosing Products to Promote

Amy’s first question is a question about niche and products. She asks if I have any thoughts on how to narrow down products to offer. The options seem endless. Do I have any tips on where to start? Starting out, should you simply choose something and learn from your experience? That seems to be her bottleneck, she writes.

I will tell you that Amy’s experience of that feeling of, “How do I pick my niche?” is a general kind of question. There are actually two questions that I read in the question here. How do I pick my niche? Once I have a niche, what makes an actual good product to drop-ship? I’m going to try to tackle those separately.

The first question is how do I pick my niche? This is a common question that we have, even in affiliate marketing, it’s one of the things that stops people down all the time because it requires you to make a decision, it’s a big commitment, it’s going to influence the rest of the things that you do.

A lot of times the fear of making that decision, even if you don’t realize it – it’s not like you’re shaking like you would during a horror film – the subconscious fear of making that decision and that fear of failure can really hold people back in deciding exactly what niche to go into.

For your very first drop-shipping store I think there are really only three real criteria.

The first real criteria is that you have to have a niche where you can source products. That’s a pretty easy matter of browsing around AliExpress and looking at products and imagining those products for sale in your store.

One thing that I think you want to consider here is are there plenty of products in this niche that you’re thinking about. If there are plenty of products, do the prices seem reasonable to you on AliExpress, given the fact that you’re going to have to sort of double them in order to sell them at a profit and pay for ads and costs that you’ll incur in shipping. Do you see products in a niche that you’re considering?

One of the niches that we’ve talked about is the cat niche. If you go look for products that cat owners might want to buy, like last week we talked about that diamond studded cat collar, do you see products like that that you could advertise on your site?

So one things is just looking at AliExpress and seeing if there are lots of good products and kind of imagining this little store on the internet at AmazingAmysCatStuff.com. Not my preferred URL, but you get the idea. Seeing that those products are there and understanding that they’re sourceable.

If are there products is the first criteria, the second criteria would be is there an interest on your part in this niche and these products? At least some interest. Some knowledge would be good, too. The knowledge isn’t necessary, but I think having some interest is. Here’s why.

The first time you go on this drop-shipping adventure there is going to be lots of obstacles, it’s going to take a lot of work, there’s going to be a lot of trial and error. Just like everything that you do in life or specifically in internet business, there is going to be a learning curve. The learning curve is helped along a lot if you are mildly interested in what it is that you’re working on.

For example, if you hate cats the cat niche might not be good for you because you have no absolutely no interest. On the other hand, if you’ve always had cats and you know a little something about having cats and can understand what a cat owner might buy, not only is this going to be interesting to you but you’ll have a little domain knowledge that you can apply to give yourself a leg up because you’re in your own target market.

Now, I don’t think that’s a requirement to run a successful drop-shipping business, but if you’re just getting started out I think it really helps a lot. I think oftentimes the importance of this is underestimated by people who teach affiliate marketing and drop-shipping, they tell their customers to go for the money when they’re teaching these things.

I do think that you need to choose something that is profitable, but I also think that most people who don’t succeed in these types of businesses are people that quit before they’re successful, they aren’t able to make it to the finish line. I think picking something that you’re interested in or know something about is a trick you can use to have more probability of making it through to the finish line. That’s the second thing that I would recommend regarding product selection.

I think the third thing is probably the most important. I’m going to recommend that you start this store by running some ads on Facebook, so I recommend that you search around Facebook for ads of similar products that you’re thinking about.

A little bit of the chicken and egg there, but if you have something in mind I’d start searching Facebook for products that are in that niche that people are successfully advertising on Facebook. If they’re successfully being advertised on Facebook that means that person is making money selling that type of product on Facebook, and that means that you can too.

How do you do this? The easiest way is to search Facebook for your niche and join a bunch of groups that are related to the niche that you want to be in. When you join groups and when you like pages of things that are in your niche, ads will start coming your way. That’s how Facebook works.

In our cat example, if you go into the Facebook search bar and start searching for cat groups that you can join, the bigger ones there are the better. I Love My Cat Facebook Group, or whatever. The more of those that you join and the more cat related pages that you like, the more ads will start being served up in your feed.

Also, you can go to people’s cat related fan pages and see what kinds of products are being offered. You can see that some of these ads, these sponsored posts, will have hundreds or thousands of likes and shares. Those are the successful products. They get those likes and shares because people have spent a lot of money getting those ads in front of eyeballs, the reach of those ads with high likes and shares.

If they’re pointing to a product then you know that they must be having success with that product, otherwise they wouldn’t be able to pay for the advertising and have that be affordable, so you know those are successful products. You can use those examples and that kind of market research in order to narrow down your first products.

That’s my recommendation.

  • Make sure you have something you can source. Obviously you can’t start a store with something that you can’t buy yourself, so you need to actually find candidates on AliExpress.
  • For maximum chance of success, you need to pick some products that you’re at least a little bit interested in learning about, if not already know something about.
  • Then you need to make sure that you see some examples of these products for sale in Facebook by becoming part of your target audience and searching Facebook fan pages for the products themselves.

How Many Products to Get Started

For Amazing Amy’s second question she asks, “What is an appropriate number of products to start your site? I assume that you would want more than one diamond studded cat collar?” See how that works, she picked up my example from Episode 143. Thank you, Amy.

The truth of the matter is if you have one fantastic amazing product that everyone wants to buy and that is profitable out of the gate, then you only need one product on your website. If you had been the first person to recognize that fidget spinners would sell on Facebook you could have a website with one fidget spinner, or maybe two fidget spinners, and that would be just fine.

In fact, if you start clicking on these ads for products on Facebook you will find many times that there are people like us doing drop-shipping in the way that we describe and they only have a few successful products on their website.

So I think the answer to this question is that you really only need one product to get started. However, the truth of the matter is you are going to have a success rate offering products for sale that is not 100%. You are going to find that you’re going to pick a product that seems like it’s going to be fantastic and you’ll test that product with ads.

At the end of the day or at the end of the week you’re going to add the cost of the product, the cost to ship it and the cost to advertise it per item, and you’re going to find that amount of money is more than the amount of the sales that you made and you’re going to mark that product as a failed attempt to drop-ship on Shopify.

As a result of that, there’s no reason to take that product off your store, you can leave it there. That’s not going to be a profitable product for you in your store, so you’re going to try another one.

My guess is you may need 10, or 20, or 30 of these attempts before you find something or find a handful of products that are super fantastic that you can run as the basis of your store. Once you find those two, three, or four products that work really well with advertising, you’re going to want to keep looking for those and adding more and more products that are profitable on their own.

What’s going to happen is someone is going to come to your store and buy your profitable product and then they’re also going to pick up two or three other things that you didn’t even have any ad spend, and that’s going to make you really profitable. So having additional products on your store set up in categories for cross-selling and up-selling in a way that makes sense, that’s something that you going to want to do down the road. I can imagine a store with 20, 30, 40 products on there that are available.

To answer your specific question, I think to get started you really only need a few products. You do not need to spend three months setting up a Shopify store in order to get this thing going. You can go get your store today at Shopify, you can set that up today, pick a product or two out of AliExpress using the Oberlo plugin, and literally be selling products out of your store that has two or three items in it tomorrow.

You could start today and have the store open tonight or tomorrow. That’s one of the magical things about this kind of business model. As you grow that shop out, I see you having 20 to 40 products. That’s easy to do and you just do them one product at a time.

Using Facebook Advertising for the Products

Amy’s third question, “You talked about Facebook ads or how to drive traffic in your podcast. Will you ever discuss how to create a Facebook ad? I’ve done some research, but I’m overall unfamiliar with Facebook ads. How do you know what is an appropriate amount to spend on a campaign.”

That’s a really good question. The first thing is will I talk about how to create Facebook ads. Yes, I’ll add that to the list of things to do. There’s lots of good material out there about how to create Facebook ads and you can learn from amazing people like Rick Mulready, for example, about how to create Facebook campaigns. You can buy courses from guys like that to do this.

In general what you’re doing is you’re going to Facebook and you’re creating a business account in Facebook. That’s free to do and I highly recommend it. You can go to Business.Facebook.com to create the account and it doesn’t cost you anything. Then you’re basically doing a couple of things.

The first thing that you need to do is take the Facebook pixel and add that to your Shopify site. That is easily done and you can Google how to add a Facebook pixel to a Shopify site.

This hooks your store up to Facebook so that Facebook knows if they send a customer to your site whether that customer bought a product or not. They can optimize your ad to show it to people who are more likely to buy. This Facebook pixel is something that I’ve discussed in a previous episode. That’s step one and two, create a Facebook business account and add the pixel.

Step three is to create your first ad. There’s lots of collateral on the internet about how to do this, but basically what you’re doing and what I recommend that you do is create a nice graphic. It can’t have too much text in it.

Let’s say that you’re advertising that cat collar. You get a fantastic picture of that cat collar, probably on a beautiful cat, with colors that pop. The quality of the image is really important. You can usually get those from the supplier of the cat collar. A lot of times you get those straight off of AliExpress and you can use those images.

There are copyright implications around that, which is something that we can talk about another time. What most people do with Shopify stores is they use the images off of AliExpress straight out of the stores there.

Then you can write some ad copy. You can look at Facebook ads to see what this ad copy looks like, but basically you write something that makes sense to you. “Do you love your cat? Isn’t it fun for you to see your cat dressing to the nines? If you love your cat, this cat collar is for you.” Something like that.

Once you have that ad copy, you create an ad in Facebook, you choose the audience that you want to target and you launch that ad.

All of that process of setting up Facebook ads for the first time, creating good images, creating good ad copy, choosing a target audience (which is critically important), and launching the ad, that’s more than a small segment in a podcast episode. We’ll have to think about how to get that covered in a future episode, but that’s the basically the process and there is a lot of information online about how to do that.

I will say that it is important to do this well. That is one part of this business, probably the most important part of this business is the marketing piece. You’re going to want to spend some time figuring out how to do that. Setting up a drop-shipping store and business is the easy part. The marketing part, I think, is the most important part and it is the more challenging piece, at least in my estimation.

The second part of Amy’s question is how much ad spend do you need? The good news is you don’t really need very much. With a few dollars a day – and I’m going to say a few is between $3 and $5 – you can tell within a week so once your ad reaches 1,000 or so people, which you should be able to do with $3 – $5 a day over a week, you can make an assessment of whether or not your product is a profitable product or if you need to move on to your next product.

That’s my answer there, $3 – $5 a day per product. If you’re doing this as a side hobby or you’re trying to bootstrap this thing on almost zero budget, what you’re talking about is $0 to become a member of AliExpress and be able to source products, a free trial at Shopify for 14 days where you can get up and running, and then you’re talking about a few dollars a day in Facebook ads.

You could go crazy and spend $50 a day on Facebook ads, but if you’re just getting started and you don’t know a lot about Facebook ads, I don’t recommend that you do that. You can spend more money later when you have a product that you know is profitable.

Amy’s fourth question was, “How important or necessary is it to have a Facebook page for your store?” This is an excellent question. “Also, how does one promote their store? People are so secretive about their product offerings, so I’m assuming you don’t simply invite all of your friends to like your page.”

You guys can see one of the reasons that I used Amazing Amy’s questions preferentially is not only that she’s amazing but she asks really good questions.

How important or necessary is it to have a Facebook page for your store? The answer is that it is absolutely required if you’re going to run Facebook ads you run them as your page. You need a page so that you can run the ads to your store.

Basically what you’re doing is building up a brand on Facebook. Your page, as Amy correctly alluded to in the question, is going to have likes, shares, and all that kind of social proof that make people realize that you’re a real for sure brand.

So, yes, you definitely want a Facebook page.

For how to promote the store, I would argue that (with the exception of something I’m going to talk about in a minute) you don’t actually promote the store, you promote products. Since those products are for sale in the store, the store will get promoted sort of automatically. When people see your products they’re going to like your store. When they do business with you they’re going to like and share your store. In general, with one exception, you don’t need to promote your store.

When you’re first getting started you can choose to run a like campaign to your store. You’ve seen these on Facebook before where people have an interesting graphic and the ad says, “Like us on Facebook,” or “Share us,” or whatever. It’s simply an engagement campaign to get people to like your store.

You can do that when you’re first starting out your store if you want some social proof. I think that can be good. If people are deciding whether or not to buy from you, one of the things that they might look at is your Facebook fan page. If you have four likes and one of them is your mom, that might turn people off. Having some social proof is good.

It has also been rumored and I’ve heard people say that Facebook support has told them this, that once you get over 10,000 likes on your Facebook fan page that you get some advertising benefits in terms of pricing and ad placement because they know you’re for real then. I wouldn’t worry about that. If you’re running successful Facebook ads, you’re going to get the likes and shares that you need to be a popular fan page.

Don’t worry about it, except to say that if you want to run an engagement campaign at the very beginning of your store for a few dollars a day you can certainly do that. What I’d do is I would get the most interesting cat video, or cat graphic of a cat turned upside down or chasing a mouse, or one of these super engaging cat pieces of content that you see on the internet, and I would publish that to your fan page and run what Facebook calls an engagement campaign to get that out there. People will see that, they’ll like that, you’ll like your page, and you’ll get some social proof right away. You can do that, but it’s certainly not required.

With regard to the secrecy part of the question, yes, people are secret about their drop-shipping businesses because when they find products that are really working for them the last thing that they want to do is let other marketers know what those products are, because they’re worried that those other marketers will actually steal their ideas and compete with them directly. That’s the reason for the secrecy.

I don’t know how big of a deal that really is. Even in my own case, this experiment that I’m running with drop-shipping, I’ve only revealed what that store is to a few people. There is a reason for that.

The reason is exactly what I just described, that I have a marketing podcast and it would complicate my efforts if 30 or 40 people who also wanted to start a drop-shipping store decided to exactly copy what I’m doing because that would create a lot of competition for me in that specific niche with those specific products on Facebook.

We haven’t talked much about this, but the Facebook advertising model is a bidding model. If two people are trying to run exactly the same kind of ads, that creates a bidding war for those ads. If there are four or five of them, that makes it even worse. That would drive my costs up and possibly cause my experiment to fail. That’s my reason for secrecy at this point about the exact niche that I’m in and the exact stuff that I’m promoting.

The answer in general to your question about how to promote your store is when you promote your products your store is going to get promoted automatically as a natural consequence. We’re not selling the store to people. We’re not advertising Target, we’re advertising the product in Target.

You’ll see Target does this, too. When they run ads they don’t run an ad that says, “Target is a great place to shop. You should come shop here.” They run an ad, generally speaking, “We have this amazing toaster oven. By the way, it’s at Target.”

Thanks again to Amazing Amy for those questions. I had a couple more really great questions from Facebook that I wanted to get to. I know that we’re a little bit over time this week, but I definitely want to cover these.

You can be a part of this amazing group on Facebook by going to LateNightIM.com/fbgroup. It’s an awesome collection of people and I really want to encourage you to come hang out with us. It’s super cool, it’s a safe place to hang out, and it’s just friendly and I like. Come on over and say hi to me over in the Facebook group.

Is Shipping Time a Problem

Stephen Cross, who has been a friend of mine for a long time, he’s one of these many good friends that I have on the internet that I’ve been talking to on and off for years that I’ve never actually met face-to-face. At least I don’t think Stephen and I have met face-to-face.

Stephen writes, “What jumped out to me was the delay in shipping. To that end, it seems like choosing a product that is not available via Amazon Prime is critical to sales. Even for impulse purchases, I expect semi-savvy internet shoppers will check Amazon. Is this as I think it is?”

This is an awesome question. Everyone asks this question and it must be answered, so I’m glad you asked it.

It’s true, if you ship from AliExpress from China using ePacket the shipping is going to take from 10 to 20 days. For those of you that aren’t good with math, that’s two to three weeks, roughly. That’s a long time. When I buy stuff from Amazon, like yesterday I needed an ink cartridge for my Canon printer here, so I bought it on Amazon and it was same day delivery.

Is this an issue? The answer is not really. At least the data from 100K Factory shows that there are tons of people with six figure per month businesses that don’t have a problem with this.

The reason is we’re targeting, and I’m going to advise you to target, products that are in the price of $20 – $30 and since this is interruptive marketing the products that are going to do the best are things that are sort of falling into the impulse buy category. People are buying these things because they saw the ad, not because they were shopping for them.

If you’re shopping for something like an ink cartridge for your printer, you need it right now and two to three weeks shipping doesn’t work for you. I totally get that. If you didn’t know that you needed a diamond studded cat collar and it’s not really critical when you get it, in general you may be a little disappointed with two to three week shipping, but in aggregate this is not going to be a problem.

Are you going to have some small number of people that complain about the shipping? You might. I have not had one yet that has complained about the shipping. Here’s why.

One reason is because I am doing interruptive marketing of impulse buy items that are not time sensitive. No one cares how quickly their diamond studded cat collar gets there.

Two is that I’m setting the shipping expectation up front. What I say on my website is that promotional items, of which all of mine are, can take longer to ship because of high demand. This is a representation of the truth, there is high demand for these products and it does take awhile to ship them. I’m just being up front in the sales process saying that it’s going to take me awhile to get you your item so don’t panic.

Then on the receipt I tell people, “As soon as I have a shipping tracking number I’ll send it to you. Know that for high demand items we take two to three weeks to ship.” Then when I send them a shipping notification I say, “Your item has shipped. Please understand that some of these high demand items ship directly from our manufacturer,” which is absolutely true, “and that can take awhile, two to three weeks.”

I just keep repeating this message. Since I’ve set that expectation, it’s not an issue.

The other thing that I do is I give people a USPS tracking number. As I described previously, I ship everything by ePacket and when you ship by ePacket you get a tracking number. This tracking number admittedly is a little shaky, it takes awhile for the data to show up and sometimes it’s wrong, but it’s right most of the time. Particularly, later in the shipping process the information there is more accurate than it is in the very beginning of the shipping process.

That’s good because later in the shipping process is when your customers are starting to get impatient. I find that if they have the ability to check on where their shipment is then they aren’t so worried about it. That’s really what they want, they want to know what’s going on. If they have to wait an extra seven or eight days for their diamond studded at collar they’re cool with that.

Stephen, I hope that answers your question.

Handling Sales Tax in Drop-Shipping

My buddy Mitch Todd, who is one of the brains behind Podcast Dallas where I had an absolute blast – Maybe we’ll talk about that next episode. It was so much fun talking to those guys. – and also one of the founding members of the Podcast Movement Conference, which is an international conference on podcasting, asks about sales tax. “Do you need to worry about sales tax on drop-shipping?”

Yes, absolutely. I’m not a tax attorney and I don’t play one on TV. Your mileage will vary outside of the United States. If you have a nexus in a state in the United States, you need to charge sales tax in that state. I have a nexus in the great state of Texas, so I charge Texas sales tax and Shopify handles that for me.

I’m not a tax attorney and I have not had extensive discussions with my tax accountant on this topic. I do recommend that you do have some conversations with a tax professional. But, that is my understanding and that’s what I’m doing is charging tax in my home state and not charging tax on out of state transactions.

Is There Any Getting Started Paperwork to File

Jared is an active member of the Facebook group and he asks an interesting question, “When it comes to setting up Shopify do you have to worry about UPC codes, listing who your suppliers are, having any special work business wise, like an LLC?” He said he loved the episode. Thanks, Jared, I appreciate the shout out and the props.

No, you don’t need any of that. You just hang your shingle out there and you can do this as a sole proprietor. I do operate as an LLC and sometimes I think that helps as a trust factor for the customer if they see that LLC somewhere. But none of that is necessary.

There are legal implications. Again, I’m not a lawyer and I’m not going to talk about the legal and liability implications and the tax implications of operating as a sole proprietor versus operating as an LLC.

From a drop-shipping standpoint, you don’t need to reveal your suppliers. After all, when you buy something from Target you don’t know where it comes from. I guarantee you that Target didn’t make it. You don’t need to reveal your suppliers.

You don’t need to worry about UPC codes, because nothing is getting scanned at a register or anything like that.

You don’t need to have an LLC. AliExpress and Shopify are very happy to deal with you just as a regular person.

I hope that helps you, Jared. Thank you so much for the question.

Wrapping Things Up…

The last thing that I will talk about is a comment on all of this that really made me smile. I loved this from Jon in the Facebook group. He said, “It was a great episode, but it fueled my conspiracy theories. A couple hours after listening to your episode I got an email from Shopify inviting me to a free 14 day trial with Oberlo.”

Am I retargeting him? No, that wasn’t me. I think that was a legitimate coincidence. As far as I know, there is no retargeting based on the content of my podcast episode. But that really makes me smile.

I have something for you that you’re going to like. For all of you, not just for Jon.

If you go to LateNightIM.com/dropship you will have the opportunity to sign up for an automated webinar that explains exactly how you can start a drop-shipping store today using Shopify, using AliExpress, and using the Oberlo plugin that I talked about, which automatically hooks up Shopify to AliExpress. That’s going to be an awesome place for you to go and get some more information in the form of an instant automated webinar that is going to tell you exactly what you need to do.

The cool thing is that all of that stuff to get started is free. Shopify is free for 14 days, Oberlo is free when you’re getting started, and AliExpress is free to use in the same way that Amazon is free to use.

If you’re really interested in trying this, the place to go is LateNightIM.com/dropship. That’s an automated webinar from the people at Shopify that will really help make this all crystal clear for you.

With that, I’m out. I hope you have a fantastic day. I’ll be playing baseball this weekend. Wish me luck. I’ll give you an update on that next week.

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