The Future

I tried to get rich dropshipping cheap crap to Coachella kids

The online world of dropshipping is a scammy perversion of traditional small business, but it might just be the last thing standing in the way of Amazon’s total domination.
The Future

I tried to get rich dropshipping cheap crap to Coachella kids

The online world of dropshipping is a scammy perversion of traditional small business, but it might just be the last thing standing in the way of Amazon’s total domination.

Say you’re watching the music video for The Chainsmokers’ song “Everybody Hates Me,” released in 2018. You know The Chainsmokers as the pop-EDM group who channeled memes and playlist algorithms to undeniable viral success — in “Everybody Hates Me,” vocalist Drew Taggart even goes so far as to sing, “I’m a product of the internet.” But what you may not know is the story of another product of the internet, the one that flashes onscreen in the video as he sings those words: a creepy light-up LED mask with Xes for eyes and a demented, stitched-up grin. That mask is widely available from any number of online retailers for roughly $20, most likely with free worldwide shipping.

What’s more, if you’re the type of entrepreneurial go-getter looking to sell this mask online, then today’s your lucky day. Just sign up for a Shopify ecommerce storefront, link it to an app called Oberlo, search for something like “LED Light Mask The Purge Election Year Great for Cosplay Halloween,” and then import it into your Shopify store. While you’ll have to pay $6.98 plus two dollars shipping for the mask, you only buy one when someone orders one, and you’ll have the thing shipped directly to your customer. Given that Oberlo recommends selling this product at a price of $21.99, you’ll basically be printing $13.01 bills.

“I ended up doing about $200,000 in sales off that,” Abe, a 26-year-old former landscaper from Vancouver, British Columbia, told me, describing the mask as his “biggest winning product.” Abe, who asked to be identified by his first name for privacy purposes, explained that he found the mask in the fall of 2017 while browsing the Chinese ecommerce megalith AliExpress. When he saw it, he immediately recognized its potential. A successful product, Abe explained, “has to have a wow factor, or it has to solve a really big problem.” In this case, the mask solved the age-old problem of what to wear when you’re invited to an EDM seance, and it was definitely bizarre enough to make people say, Wow. At the time, Abe added, there were only a few pictures of the mask online, and “a lot of people used it for raves, but not a lot of people knew about it.” He sold the mask for eight months, on a web store created solely for that purpose, and by the end the product had reached a market far beyond his control. These days, it’s on Amazon, it’s been on the front page of suggested items on Oberlo, and, of course, it made it into the Chainsmokers video.

Abe and thousands like him practice what is known as dropshipping. Here’s how it works: You find a product for sale at a low price in one place on the internet, and you sell it for a higher price at another place on the internet. When someone makes a purchase from you, you order the product from the lower-priced retailer and ship it straight to your customer. In practice, this almost always means finding a product for sale on AliExpress and taking advantage of low postage rates from China to sell it to customers in North America via a Shopify storefront.

In the business world, this model is referred to as “arbitrage.” Many dropshippers have had success with phone cases, sunglasses, and watches, as well as more unique products like the kitty litter cleanup mat and the galactic moon lamp. If there were ever an opportunity to growth-hack your way into the CEO mindset, to hustle your way to an epic win, to align yourself with the core metrics of accomplishment, dropshipping might just be it. And if this sounds too good to be true, let me assure you that I myself made more than $100 dropshipping in just three months, and you can too.

“Any type of product that you wanted to purchase was always available to dropship,” Dean Maciuba, managing partner for the distribution solutions consulting firm Last Mile Experts, told me over the phone earlier this year. Maciuba discusses global shipping infrastructure with the enthusiasm of an ESPN commentator breaking down the advantages of zone defense, and he views the practice as one that’s integral to the modern economy. On a literal level, dropshipping just means shipping a product to a customer directly from an importer or manufacturer, something that conventional retailers have been doing for years. For instance, companies like Home Depot and Wayfair use dropshipping to cut out some of the transportation costs for large items like appliances and couches. “What are people doing? They’re removing layers. And what do layers do? Layers add cost. So when you dropship, you’re eliminating that middleman handling it,” Maciuba explained.

Instead of the old middleman, you have Scott Hilse, 23-year-old YouTuber and digital marketing genius. Hilse has built multiple successful dropshipping stores, and he also offers a paid online class and mentorship program for aspiring dropshippers. “I have this saying: ‘location-neutral income automation’,” he told me. “And you can’t get more location-neutral income automation than dropshipping.”

Judging by the fruits of Hilse’s labors, it’s safe to say that his income is location-neutral and automated as hell. His license plate reads “E-COM,” and he recently upgraded from a Lexus to a BMW i8 with scissor doors — the only blue one in his home of Clayton, Missouri, he noted in an Instagram post. His Instagram also shows him decked out in streetwear and designer brands while hanging in Beverly Hills, as well as lounging in front of the Monopoly-themed paintings in his living room. He’s fond of riding around on a tiny skateboard, and he dispenses tips on everything from the intricacies of Facebook geotargeting to how to take advantage of credit card points with spunky, down-to-earth charm.

“When anybody starts I tell them, ‘If you give up easily, don’t even start dropshipping because this isn’t for you,’” Hilse said. As he sees it, dropshipping requires constantly refining your techniques and, to some degree, getting lucky with the right product. “The real money is in finding trends, and the real, real money is in creating inventions or just manipulating the game somehow to your advantage,” Hilse said. His own innovation was focusing on a single product, a sticky, “nanosuction” iPhone case, and dedicating all his resources to funneling people toward that single sale. “My conversion rate on my site is, like, 3.7 percent, and the industry standard is 1.8 percent,” he boasted, referring to the number of people who visit his store and buy something.

A perfect concatenation of factors — plug-and-play website creation, turnkey digital advertising tools, and, in the form of Oberlo, one-step inventory sourcing — has enabled individuals like Scott to develop ecommerce operations with the marketing sophistication and distribution reach of the largest corporations. In a more analog world, dropshipping would involve developing a direct relationship with a manufacturer, importer, or wholesaler, none of whom had any particular incentive to ship their products as individual units to customers when they could sell in bulk to large retailers. “Now,” Maciuba said, “the technology allows these single locations to manage that information: shipment orders, shipping rules on how [items] should ship, and the actual generation of bills of lading or shipping labels — the new technology allows that to happen very easily across multiple clients.”

Furthermore, thanks to international postage rate standards negotiated before China’s economy was the powerhouse it is today, it’s generally cheaper to ship small parcels from China to the U.S. than it would be to ship them from state to state. A system called ePacket offers heavily subsidized parcel postage, which means dropshippers can bake “free shipping” — one of the most compelling ways to attract customers online — into the cost of the product and still hit extremely comfortable profit margins. As a result, anyone from anywhere can sell anything, as long as it can ship via parcel post from China.

In this move-fast-and-break-things world of business optimization, sales quickly become less a metric of outdated concepts like “craftsmanship” or “being proud of what you sell” and more a reflection of what will, as what one of the many thousands of YouTube dropshipping tutorials might say, “convert” potential customers into people who just gave you money. With dropshipping, the focus is on finding a “winning product,” which is done by “testing” a wide variety of potential products with small ad buys. The product is immaterial; the process is the key.

Given that reality, it’s broadly in the interest of the platforms that facilitate — and by extension profit from — that process to get more people involved. Shopify has exhaustive resources on its website dedicated to dropshipping, and it heavily advocates using Oberlo, which in turn has a massive content marketing machine offering dropship tips. The scope of resources provided are exhaustive to the point of making the process more confusing than it should be. The Shopify Ultimate Guide to Dropshipping, which is an 81-page PDF file, walks through the advantages and disadvantages of dropshipping as an ecommerce model before launching into a thorough description of how to source products from wholesalers and a brief overview of the legalities of running an online business (BOOOOOORING). But when you’re reading, you’re not converting clicks to dollars, so I decided to start seeing what was out there myself.

To help you get started on your ecommerce journey, Oberlo’s website has a free Business Name Generator. All you have to do is “enter a word that you want your business name to include,” and in return, you will receive a list of perfect Names for your Business. I thought about what kind of brand I wanted to develop and what sorts of words I could feed into a Business Name Generator to make me the biggest thing since Amazon. Whenever I read about celebrities starting their own businesses, they always say they are starting a “lifestyle brand.” And if there is one thing I know about celebrities, it is that they are successful, just as I planned to be once I started making money from my dropshipping store. So I typed the word “Lifestyle” into the Business Name Generator and was promptly fed Business Names like “Optimization Lifestyle,” “Synergy Lifestyle,” and “Accelerate Lifestyle.” Others sounded more like actual lifestyles, with built-in clienteles for a web store: “Cowgirl Lifestyle,” “Mountain Lifestyle,” “SouthShore Lifestyle.” Ideas for corporate empires blossomed as I scrolled through even more results: Samurai Lifestyle (replica swords), Lifestyle Juice (juice cleanses), LoneWolf Lifestyle (wraparound sunglasses), AfterHours Lifestyle (sex toys), TopHat Lifestyle (top hats).

But as much as I love top hats, I wanted something that projected a carefree, yet aspirational ethos catering to the 18-35 demographic. I needed a brand name with an authentic story that inspired genuine customer connection, like “iPod,” or “Coachella.” And then I saw it: Lifestyle Spirit. It was so meaningless that it could mean anything, which was perfect considering I hadn’t decided what I was going to sell. After all, the greatest brands begin with an idea.

The Lifestyle Spirit homepage.

The Lifestyle Spirit homepage.

Since no one I spoke to was interested in telling me what I should stock my store with (as Hilse put it, “Man, if I told you what products to sell, like, publicly, that product would be dead in a couple days.”), I did a Google search for the best items to dropship. According to an article on Cloudways, a web hosting service advertising itself to potential ecommerce entrepreneurs, one of the hottest products for 2019 was the “Child Wrist Leash.” The article noted, “Many women lose their children while shopping in the malls.” Accordingly, “The child wrist leash is a highly sought after product in the US market where most women go to malls for shopping.” If the Lifestyle Spirit brand counted for anything, it counted for trusting in the available market research, so I found the child leash in Oberlo’s handy-dandy product catalog and imported it into my store.

Sensing my brand’s potential as a leader in the music festival culture space, I dubbed the child leash a “Rave Buddy Leash.” Virtually all of the advice I had received about starting a dropshipping store recommended developing a niche rather than adopting what the experts called a general store model. “It makes the customer more confident in making the purchase,” Malik Mufasa, a dropshipper from Texas who also runs a YouTube channel, explained to me. The Rave Buddy Leash could have been my winning product.

The Lifestyle Spirit product page for the child leash/Untethered Lifestyle Rave Buddy Leash

The Lifestyle Spirit product page for the child leash/Untethered Lifestyle Rave Buddy Leash

But I didn’t stop there. The first problem I encountered with Oberlo was that it was too easy to stock my digital shelves. I was facing a catalog of thousands of products, and just about all of them fit into my vision for Lifestyle Spirit. I browsed Oberlo’s “best selling products” page because despite the advice I’d gotten about not copying other people’s inventories, I figured that those products would probably sell the best. I quickly found all kinds of crap, all of it with names like “SUSENSTONE Hot simple necklace Womens Chic Y Shaped Circle Lariat Style Chain Jewelry Necklace,” “USB 300ml Aroma Humidifier Aromatherapy Wood Grain 7 Color LED Lights Electric Aromatherapy Essential Oil Aroma Diffuser,” and “Kid’s Bedroom Fantastic DIY Season Star Projector Light Star Master Astro Sky Projection Cosmos Night Lights Lamp Romantic.”

I began to lose sight of my original mission of automating my income in a location-neutral way and instead became wrapped up in the incomprehensible hugeness of it all. How did all these products even exist? I pictured shipping containers full of this junk sailing past the floating island of garbage in the middle of the Pacific, the very place to which said junk would inevitably return.

On a computer screen, these products are simply data points, but they correspond to real, tangible stuff. The digital infrastructure is frictionless, but the physical infrastructure underlying it is nothing but friction. This disconnect most immediately represents a business scalability problem (you can sell infinite stuff online, but infinite stuff doesn’t exist), but it’s also a problem problem. Plastics, climate change, opaque sourcing that likely relies on exploitative labor practices, the acceleration of global production at the expense of the environment, probably something to do with Donald Trump — this crap represented the nexus of every issue I could think of. My place in the supply chain was less “stately Venetian merchant” and more “partitioned server in a data center ready to be spun up for increased capacity,” an access point into what the writer Alexis Madrigal has termed the “Supply Cloud.”

Nonetheless, I had to know how it all worked, so I decided to add some items to my store that I could actually buy and use, and, to increase my customer base, I asked my girlfriend if there was anything she needed, too. I added some cheap outdoor gear, i.e. a small backpack that said “Sports” on it, while my girlfriend suggested swimsuits (per Cloudways, “A few years ago not many people were buying them online. But after females started wearing them in top movies and dramas, they rode the wave.”). Then, it was time to start branding.

I fleshed out my website’s design on Shopify, picking a template called “Brooklyn” and adding some stock photos from the “Good Vibes��� collection: someone on a mountain, someone carrying a surfboard, some flowers on a desk, palm trees. Nearly every guide to dropshipping I’d read suggested that you should rewrite product descriptions from the ones used on AliExpress to avoid looking scammy, and one case study in particular highlighted the value of naming products as though they were part of an actual line. If you were really trying to build your own ecommerce brand, you might try to take your own product photos and write descriptions based on actually seeing them in person. But no dropshipper has time for that — who would be stupid enough to actually order and wait for a product they hadn’t tested on Facebook first anyway? — so it’s better to pick a product with already great images, or even video.

A sampling of the products available from Lifestyle Spirit.

A sampling of the products available from Lifestyle Spirit.

“It [takes] more than just passion to sell products,” Mufasa would tell me later. He had set up his first store to sell anime keychains, since he was an anime fan, but the store failed completely. This experience quickly taught him a fundamental rule of dropshipping, which is that you cannot have a stake in the particulars of your business. He’s since successfully sold jewelry, fitness products, baby products, and phone cases. He now focuses on hair and beauty products, which he promotes by partnering with Instagram influencers. “I just stick to one niche and try to promote to a specific audience,” he explained.

Fortunately, since my current niche was “Any products my girlfriend and I could buy with the foreknowledge that they would likely be of low quality and take a month to arrive,” my business was not going to suffer yet, per se. My first order, to myself, popped up as a notification on my Shopify dashboard, where I could follow a link over to Oberlo to fulfill it by entering my credit card number. I received a tracking number, and waited for my Sports backpack to travel from the supplier to an importer in the U.S. and finally to the customer, who was me. (While the Lifestyle Spirit store remains live, I listed my entire inventory as “Sold Out” just prior to this article’s publication to ensure my bad online store wouldn’t make money off of me writing this.)

My second order, for two swimsuits, was a little more complicated. Since these products were just links out to other stores, the fulfillment process this time took the form of the Oberlo Chrome Extension, which looked up the products and exported the order info to AliExpress. It kind of worked, although I ended up having to manually re-enter all the shipping information and my own credit card information anyway. It was a bit like being a personal shopper whose one trick was digging through the bargain bins at Marshall’s. I placed the order, for $19.94, on AliExpress, and just like that, I’d made a profit of $28.04 just by having a slightly more navigable website than AliExpress and, to be fair, a slam dunk sales lead. This, I determined, was the way to do business.

As I waited for my first products to arrive, I realized that while I had built a brand and dedicated my Spirit to the dropshipping Lifestyle, I hadn’t actually done anything to get people to come to my online store. Once I had them there, my carefully curated product line would work its magic.

“It’s the impulse” that convinces people to buy stuff from a dropshipper, Hilse told me. “You’re not allowing them time to go and research and go and find cheap prices or anything. It’s all about finding a product that is shocking and viral that they’ve never seen before.” Much like every piece of content on the internet (including this article), dropshippers are in the business of capturing your precious and finite attention and turning it into money, albeit in a much more direct and transactional way than this article could hope to do.

For some people, like Hilse, the best method to do this is by advertising on Facebook. For others, like Mufasa, the best approach is paying Instagram influencers to post pictures of your stuff. For a celebrity like dropshipping legend Soulja Boy, it’s best to spend years becoming a famous rapper, wait for culture and technology to make it possible to easily capitalize on your fame via hawking stuff on social media, and then cut out the middleman and build a dropshipping business that leverages your audience. If you’re not famous, you could just tell your friends about your dropshipping store, although that’s not very scalable and is exactly the kind of thing that makes people suspicious your business is a pyramid scheme.

Lifestyle accessories from Lifestyle Spirit.

Lifestyle accessories from Lifestyle Spirit.

Dropshipping tends to strike the newly familiar as a scam because understanding how it works lays bare two of the main deceptions that keep the consumer economy humming along. First, it’s a reminder that the vast majority of brands — even well-known ones — are in the business of finding cheap stuff, slapping a label on it, and selling it to you at a markup. The second, more relevant trick is that if you have a thing to sell, the enormity of the internet guarantees that there is someone willing to purchase it. The only problem is getting their attention. The solution to that problem, of course, is marketing. In a sense, dropshipping’s only sin is that it democratizes the grift that props up commerce as we know it. And without buying some ads, I wouldn’t be able to get in on it.

I decided to try my hand at creating some Instagram ads, in part because I don’t actually use Facebook. Unfortunately, in order to advertise on Instagram, you have to link your Instagram account to a Facebook advertising account, so I rushed through the process of creating said account, linked to the Lifestyle Spirit email, under the name John Liefstyle (it’s Scandinavian). I launched my first ad buy, a promoted post for some light-up photo clips that I’d decided to add to my store, at $5 a day. I got two clicks and zero sales.

Emboldened, I went to try another ad, a promoted post of a jungle I had been to in Hawaii that would be perfect for marketing both swimwear and outdoor gear, and I discovered that my new Facebook account had been flagged and deleted. While this did give me some hope that Facebook was actually doing something to keep bots off their platform, as an entrepreneur, it bummed me out supremely to discover that making a scammy internet business required some modicum of “being a real person.” I tried again, this time with a dummy Facebook account I’d had to make for an old job. I used it to create a business page for Lifestyle Spirit, which I linked to my brand’s Instagram. But here, my entrepreneurial savvy failed me. When I tried to purchase an ad, I received a message that my accounts didn’t match. My appeal to Facebook was rejected, and I received no further clarification. Unable to use cheap ad buys to test my products, it was impossible to follow the dropshipping playbook. Just like that, my lifestyle brand was deadstyle.

Yet while my ads may have been a transparent scam, it wasn’t just bad marketing instincts that threatened the viability of the business. Insofar as dropship operations have attracted press, it’s often been for their shoddiness as compared to more legitimate ecommerce businesses. A large part of this perception is the simple reality of how order fulfillment works. It still takes a long time to physically move something from China to the U.S., which means that while shipping may be effectively free, it typically takes anywhere from 12 to 30 days, or even longer, to fulfill an order.

"The number one downside, 110 percent, is the shipping time,” Hilse told me. This was a point that was echoed by pretty much everyone I spoke with. At best, the long shipping times lead to customer complaints; at worst, they pose an existential threat to the small-time entrepreneur altogether as two-day, one-day, and even same-day shipping become industry standard.

The “Sports” backpack, in all its glory.

The “Sports” backpack, in all its glory.

I confronted this challenge first hand after about a month, when my orders started arriving. My “Sports” backpack did indeed say “Sports.” It arrived in a clear bag that said “Made in China” with QR code sticker on it. The package listed the “From” address as Dept NJ #73, 1100 Cranbury South River Rd, Monroe Township, NJ 08831-3405. I Googled the address and discovered it was the return shipping address for several other retailers, including an obvious dropship jewelry retailer called Soufeel and, according to Yelp, Hyundai Motor America Consumer Affairs. The swimsuits, meanwhile, were awkward fits.

“Wow no offense this bathing suit is literally the dumbest article of clothing I’ve ever worn,” my girlfriend texted me, after trying on the Sexy High Rise Cut Swimwear Women Plaid Monokini Blue Swimsuit One Piece Bathing Suit Bandage Backless Trikini Maillot De Bain. It turns out swimsuits, an item most people want to fit well and make them look good, are not a great item to sell sight unseen with no plan for processing returns. But — and I’m speaking from the perspective of the Lifestyle Spirit corporate brand here — she has yet to ask for a return, which I believe is what those of us in the retail business call a “win” and what those of us in the relationship business call a “thing I will reimburse her for later.”

I’ve since used the “Sports” backpack some, and while it gets the job done, it’s roughly equivalent to a product I might find at a similar price point at Walmart. As a dropshipping item, it sucks. There is no wow factor, and in an outdoor gear market where brands pride themselves on selling indestructible products backed by lifetime warranties to solve the problem of worrying that your outdoor gear might break, there was no way Lifestyle Spirit would be able to keep up with the competition. All my brand had to offer was a three-week shipping time and, although I would not put this in our marketing materials, a broken dream.

What does it take to succeed in business? An idea? A brand? Lots of hard work? Saying the word “disruption” a lot in front of people who have money? Using arbitrage to cash in on cheap Chinese manufacturing and artificially low postage rates?

In the case of today’s dropshipping gurus, the answer might be something more like: leveraging your short-term success cashing in on a market discrepancy into a more conventional business. While Shopify and Oberlo tout the benefits of dropshipping extensively on their websites, they also make a point of highlighting it as a stepping stone to a more developed business model. Mufasa explained that he currently uses dropshipping primarily as a way to test the market viability of new products, and that his primary ecommerce business now involves a direct relationship with his Chinese supplier.

“[If] you want to actually achieve more and more and think about long-term success, you’ve gotta go and brand out and branch out and be serious with your store,” he said, pointing to scalability issues and the headaches that come from shipping times. Dropshipping is a “viable way to make money for sure,” but “you don’t want to, five, six years from now, still [be] dropshipping.”

Hilse highlighted the marketing data that dropshipping had enabled him to collect, which he has been able to use to develop a brand around something he actually does care about. “It’s like a cheaper and quicker way of getting that [brand] foundation than you normally would and way less risky,” he said. He has since launched an apparel brand called Simplify, which features a colorfully lettered logo across a variety of products.

Sadly, the Lifestyle Spirit brand had a foundation of pure vapor. Over the duration of my store’s run, I had shelled out $29 a month for a Shopify account and brought in just $122.93 in revenue, most of it from myself. Two of my orders never even arrived. I had once again been owned by the platforms. Tobias Lutke, founder of Shopify, made money from hosting my store. Mark Zuckerberg, founder of Facebook, made money from running my failed ad. Meanwhile, Amazon continued to exist. And as it builds its fulfillment network with new warehouses, expanded transportation resources, and increased automation, it’s pushing its suppliers and importers to take over more distribution duties, effectively fleshing out its own dropshipping capabilities and potentially killing the industry as it currently operates.

The iron grip of these platforms is expanding. This is particularly true for Amazon, which now controls an estimated 47 percent of the online retail market. Even Shopify, who was beating me, was losing to them. And though dropshipping struck me as a planet-polluting, get-rich-quick glitch in the algorithm of global capitalism, I also could see how its proponents are the foot soldiers in the battle against Amazon, trying to outmaneuver the giant in the global logistics marketplace, finding little edges here and there. The whole language of a “winning product” turns dropshipping into a game, but the stakes are much higher than the $13.01 bills I dreamed of printing. The dropshippers are, whether consciously or not, trying to keep a chunk of the market in the hands of individuals, while Amazon wants to consolidate it. In a battle like that, who do you root for? On one hand, tear the whole system down. On the other, let the little guys sell the LED Election Year Great for Cosplay Halloween Light Masks. We’ll need them in the purge.