In the past few years, dropshipping has become a popular type of entrepreneurship with young adults. This is because dropshipping is relatively easy and cheap to set up.
Dropshipping works as follows: a customer orders a product in your online store, after which you send the order through to your supplier. Thereafter, your supplier sends the order directly to your consumer. Operating your business in such a fashion has several benefits: you don’t have to keep stock, which completely eliminates your risk of stock keeping and warehousing costs. Also, you only do the sales side of the business, making good margins on your products. However, competition can be fierce, because dropshipping suppliers usually don’t supply their product to you, but to multiple dropshipping companies. This can cause price wars and reduce the profit margins of the dropshipping websites. Another challenge dropshipping companies face is the long delivery times. As you can imagine, having a package sent from Asia to Europe can take a while.
To young people, setting up a dropshipping company is very interesting due to the low capital costs involved. You can start from scratch, and build it out to a million dollar company. This is what many young entrepreneurs have done successfully. Although this accomplishment in itself can be very intriguing, some of them have decided to extend their success by creating courses dedicated for young entrepreneurs to start their own successful business. You have probably seen an ad of such a course on your Instagram or Facebook: a young person in a big villa with a pool, describing how you should start your own business.
Even though the idea of helping young entrepreneurs build up their business, this is not what they are doing. They offer a short course, which covers the basics of business. Of course, youngsters who don’t know what they want to do, but do know that they want to become rich, are attracted to these courses. In some instances, the course is sold for $1000 or more. You can imagine that when they sell a few of these courses, the “successful dropshippers” have a lot of additional income. It is an ultimate form of an information good: they create the course once, and sell it as many times as they can to young adults who are easily influenced by the promise of becoming rich.
To me, these untruthful marketing of these courses are deceiving and dangerous. What are your takes on this?
Hi Lars,
I have been bombarded with these advertisments lately on all my social media platforms. I highly agree with your stance on the false marketing to youngsters. The advertisments are clearly targeted towards them, with (rented) flashy cars, villa’s, waterscooters etc. The dropshippers selling courses show revenue of some of their students, but almost never mention their costs. Furthermore, they never show what percentage of their students actually makes a profit in the end. The course is not a guarentee for succes! I am afraid it encourages younger people to drop out of school to chase the ‘fast’ money.
I would like to expand on your post in regards to ethics. Is it ethical that these course sellers target young people? Is dropshipping in general ethical (charging high prices, for cheap goods produced in china, which the consumer with a little research could find him/herself). Furthermore, as a lot of stores are run by youngsters simply chasing the ‘fast’ money. A lot of stores expierence the following: No response to customer emails/calls, no shipment of products, no refunds, Websites going down. What can be done against this?
Hi Dave,
Thank you for commenting and raising this additional problem. It is indeed to be expected that people wo try to create a dopshipping company, with no expertise or knowledge of how to run a website (let alone a business) , will fail in many different areas. Instead of helping the customers with their problems, they would rather close down the company and abandon the problems that come with it. The customer has a few options to deal with this (go to court or do nothing, for example), none of which are beneficial in terms of time and money involved. I don’t think there is an opportunity to resolve this problem with tighter regulations, since it would have to be on the basis of how experienced the entrepreneurs are, or banning dropshipping altogether.
Hi Lars,
Thanks for writing this article about dropshipping and the courses that often self-proclaimed guru’s are offering.
First of all, I think that dropshipping in its most popular form (-> reselling from AliExpress) cannot be a durable business model. Just like you stated, in that business model, you don’t own any assets giving you an edge over your competition, which makes virtually all products “die” over a while. So unless you’re willing to do continuous product research and set-up new advertisements and landing pages, this is a no-go for building a sustainable business.
As for the course sellers: there will always be charlatans showing off (often rented or fake) luxury goods to trick young people into buying their overpriced course. This phenomenon exists in the e-commerce market, but also for real estate, affiliate marketing, crypto, forex trading, et cetera. In my opinion, even though I find it morally condemnable when sellers ask extortionate prices for bad quality content, buyers of these courses are responsible for their own decisions, just like people spending all their money in the casino.
Apart from my moral viewpoint, there is civil law protecting course buyers from deceptive course sellers. As you might have heard, one of the most notorious course sellers (Kevin Zhang) is facing a class-action case now (https://www.reddit.com/r/consulting/comments/hef7ho/ex_mckinsey_consultant_get_rich_scheme_guru_kevin/), which shows that when you willingly deceive course buyers, it won’t end up well for you.
By the way: if you’re interested in this topic, follow @ballerbusters on instagram, fun page where more of these charlatans get “busted” :-).
Cheers,
Redeëet
Hi Redeëet,
Thanks for leaving a comment! I definitely agree with you that dropshipping can’t be a durable business model. Especially in these uncertain times, difficulties are to be expected in regard to shipping.
Although showing riches has been part of marketing strategies for years, I do think it is different with this one. They purposefully attract young people (sometimes even under the age of 18). These younger people are often easily influenced, and although you are considered an adult from 18 years and above, some of them do not have enough knowledge to deal with these (almost) fake courses. I would compare them to phishing emails: although I think that people fall for it deserve it for being careless, I also think action should be taken against them. Of course, in this case, the people actually get their “product”, which makes it harder to legislate.
Interesting read for that class-action lawsuit! It is ridiculous that it has to come to this, especially for a guy with such a respectable career path up to that point.
I’ll definitely start following that instagram account as well, seems like fun!
Thanks again,
Lars