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Dropshipping has emerged as one of the more popular "make money online" opportunities.

Its allure?

  1. You can make money selling physical products without buying inventory
  2. You can start making money right away because you can buy traffic with FB ads
  3. Shopify makes it really easy to create an online e-commerce store
  4. You can scale your biz fast because increasing traffic is as simple as increasing FB ad spends
  5. You can capitalize on current trends

So I spent all of 2017 figuring out the biz model myself.

More...

I made 2 successful Shopify stores, my most successful one was selling Shark onesies, which I got to $48K revenue in 1 month, you can read more about that here.

I made some money with dropshipping but compared to the time spent, I concluded that the lead generation business model was more lucrative & less hassle.

Dropshipping as a long-term business model is riddled with issues.

Ultimately I decided to stop my pursuit of dropshipping because of these 5 issues I discovered about this business model.

5 Main Reasons Why I Quit Dropshipping

1. Competitors Stealing Your Dropshipping Business

The biggest problem I have with dropshipping is that the majority of courses will teach you to go out and copy other dropshipper's businesses that's already working.

And its so easy to copy someone's FB ad, funnel, shopify store & the product. (sure this makes it easier to create short-term success but it is not good long-term because what's preventing someone else from doing the same thing to you?)

People opt to copy because only trending products that can get impulsive purchases will convert high enough with Facebook ads to be profitable.

Remember with FB ads, you're paying $$$ for every impression, so without high enough click through rate (CTR) or conversions, you're bleeding cash.

If the product doesn't have some sort of viral component, it just doesn't get high enough clicks on Facebook. 

Remember most people on Facebook ain't there to purchase anything.

This is why dropship guru's preach the importance of testing, testing & testing.

But testing can become expensive as well, what's easier than testing your way to find the winning product?

Simply copy someone else's winning product.

Honestly this is my main issue with the dropshipping model, because its so easy to be copied by competitors, it causes any successful Shopify business you build to be only a short-term success.

This means that every winning product will eventually get saturated as other drop-shippers come in and cannibalize each other.

And this life cycle is getting shorter and shorter as more and more people get into dropshipping.

Making this business model more and more short term every year.

See the issue?

A lot of great people out there trying to teach dropshipping but imo the main problem here-in lies at the very core of this business model.

if you want a sustainable business, you want something that requires some high-level skill like digital marketing (especially being able to rank sites organically in Google which is more difficult skill to master aka most people don't know how to do it).

That difficulty in skill creates higher barrier of entry, which means once you master the skill, you are more valuable in the marketplace because you have a skill that's rare, similar to a plastic surgeon.

In this society, $$$ is assigned to high-demand, limited resources or skill.

Dropshipping to me is like digital ditch digging.

Sure you can make quick buck here & there.

But it's not true leverage because softwares like Clickfunnel & Shopify made the biz a lil' bit too easy for anyone to do.

2. Riding the Wave of Trends Can Be Short-Lived 

Jared Goetz coined the term "drop surfing" because the recommended way of finding the product to dropship is to find current trends and ride that viral wave like a surfer.

This makes whole lot of sense because if something is trending, you don't have to educate the public on it, your ad is immediately going to garner attention because the awareness is already there.

You just turn that awareness into $$$.

The problem though is that all trending products eventually die out.

Which means that dropshipping requires a lot of churning & burning through new product after new product to stay profitable.

Every new product you're dealing with whole new set of variables and more testing is required to get the conversions just right. Such as what kind of ads work best for a particular product?

This means in dropshipping, just like the ocean waves, I've experienced more ups & downs than any other online businesses I've tried.

That inconsistency makes it difficult to scale this business beyond a certain income point.

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3. Facebook Ad Traffic is Far From Being Perfect

It seems like everyone & their sister is hopping over to Facebook ads.

I've spent over $100K in Facebook ads myself, but today I solely focus on generating traffic by ranking organically in Google.

The biggest issue I have with Facebook ads is the lack of control.

Sometimes Facebook feels like a tyrant.

You have to abide by their rules which is changing constantly.

I'd say this is the biggest 3 reasons why I dislike their platform.

1. They can suspend your ad account whenever, and sometimes there's really no good reason for it.

2. Sometimes Facebook seem to show your ad in front of low-quality traffic (the same exact ad can product completely different CTR & Conversions at times, which makes testing very difficult)

3. FB ads run on a bidding system, so over the last few years as more people started using FB ads, the cost per click has gone up, which means lower profit margins and much harder to create a profitable Shopify store.

The cost per click continues go up while these products remain the same price, so it becomes harder and harder to stay profitable on FB over the last few years.

 

4. Order Fulfillment - Returns & Complaints

Dropshipping profit margins are on average 10-20%

Which means if you sell a product for $50 (which is decent price for dropship product)

Your net profit at 20% is: $10

So in order to make $10,000 in 1 month, you have to sell to 1000 customers

As you can see, in order to make decent in come with dropshipping, you have to sell to a lot of customers.

Your job doesn't end at just scaling Facebook ads, once you scale, there's that much more customer order fulfillment you have to deal with.

Including 10-15% of your customers will request returns or refunds.

Therefore the dropshipping business never felt like truly passive income where you can set it and forget it.

There's emails from customers that you have to get to on a daily basis.

Now you may think, yeah dealing with customer charge backs, complaints or returns in part of the business but the issue is when you're picking these random suppliers from overseas, you don't have great quality control.

Unfortunately, it begins to feel like sometimes you're selling knock-offs from China and as the complaints roll in about the quality of the product, it can become tremendously stressful because you begin to question if what you're doing is actually providing value for people or ripping people off.

This is something not too many people talk about in the dropshipping niche, but its the unfortunate dark-side of the business.

So many people go into this model to make a quick buck, and they aren't concerned about customer satisfaction or providing the best quality product.

I've talked to a lot of former dropshippers that are now doing other businesses and this has been one of the main complaints: dealing with on-going customer complaints has been the factor that caused their burnout.

Then they decided they wanted to get into a business where they can actually help others / impact people's lives in a more meaningful way.

 

5. Boredom - Repetitive & No Innovation

Ultimately I found dropshipping to be extremely boring.

You're constantly doing the same thing over and over again everyday.

Checking FB ads, scouring for new trends, dealing with customer complaints.

Its very monotonous. 

No personal contact with anyone.

Just looking at digits on a screen.

I thought with dropshipping you can sell some awesome innovative products, but I come to find out most products you find on alibaba express are not products that's going to change people's lives.

Usually its just cheap products that people buy on impulse that they could live without.

This ads to the boredom of this business because there's no thrill everyday like you're actually helping people or changing people's lives.

With lead generation you actually *feel* like you're changing lives which you are, because leads are lifeline of any business.

Dropshipping is for those desperate to make a quick buck.

But a real business that fulfills you is one that allows you to help others in a meaningful way.

A real business creates something significant, something innovative.

Lack of feeling significant with the dropshipping business = lack of daily motivation for me.

& That's what caused the burnout and ultimately retire from the dropshipping business in 2020.

 

Lead Generation is better fit for me than Dropshipping because of these reasons...

A business model that you want to focus on is one that produces consistent results long-term and that allows you to make incremental progress over-time.

And you should feel good about the business. You're helping people and providing value.

I get it, if you're stuck at your job still, you want to get to the $$$ as fast as possible.

But as I mentioned above, "fast" & "easy" also means the biz will be saturated which is what dropshipping has become.

Selling cheap products from China with a heavy mark up doesn't make you feel like a champ, like you're impacting the world in a positive way.

For me, the lead generation biz model is so much more of a real business because you're actually helping people everyday.

  • In Lead Generation you're making a real BIG impact in people's lives. You're the reason the small business owner can stay in business, go on more vacations & have a better life because you're sending them boatloads of customers everyday.
  • I have lead generation sites from 2014 still making money today, much more long-term & consistent source of income than dropshipping, no trends, businesses will always need leads
  • People can't just come in and steal your business because it takes time & skills to rank sites in Google, HINT: most people have no idea how to rank.
  • Google's organic & free traffic is so much greater than messing with FB ads everyday, its not even funny
  • With leads there's no physical products to ship out, no dealing with customer complaints, or returns, you also make 98% profit margins instead of 10-20% with dropshipping

lead generation also has a significantly higher earning potential.

Because quite simply any business dealing with digital product (like leads) is so much scalable than selling physical products.

This is why Uber has exploded so quickly, its a transportation company that doesn't own any vehicles, Uber is really just a lead generation business.

Connecting buyer with seller.

You get paid for generating leads without having to deal with providing the service for the customer, you allow your clients handle that.

It's a simple yet so powerful and genius imo.

Click here to get started with lead-gen.

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Ippei Kanehara
Founder/CEO Ippei Leads

$52K per month providing lead generation services to small businesses

Ippei.com is for digital hustlers, industry leaders and online business owners.

His #1 online business recommendation in 2020, is to build your own 6-figure lead gen biz. You can learn more here.
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