Welcome back gentlemen. Most of you guys know I started my own drop shipping store a few months ago, and tonight I’m going to dive into my entire experience with it and why I ended up selling it.
Starting it was a ton of hard work, but it was totally worth it for learning a whole new world in ecommerce.
I can now use my knowledge (and additional capital), to start my next venture. I have an even better store planned and can’t wait to jump back into the game.
So without further adieu, let’s get it started.
How I Got Into Drop Shipping
I remember first learning about drop shipping 3 years ago when I was working for a catalogue company processing orders over the phone. We had a huge warehouse of products, but we also drop shipped many items from other companies as well.
Just incase you don’t know – drop shipping is when you list a company’s product at retail price, and when you get an order, you buy the product from the company at wholesale, and then you keep the difference in price (the margin).
You then give the original company your customers order information and they then ship the product to the customer. You never touch the inventory.
Anyway, I always thought about what a great concept it was and remember looking online trying to learn more.
Since I was still a loser back then, I didn’t really try too hard to learn about the business model and it slipped my mind for a few years.
Fast forward to October 2015, and I randomly found myself listening to an amazing podcast episode about drop shipping.
I went through the course and worked 14 hour days to get everything perfect for launch day. All my time and energy was put into the business, and I officially opened shop on December 19th.
Two hours later, I made my first sale.
It was an amazing moment as everything I had worked so hard for came together so quickly.
The business grew over the next month and a half before I decided to sell it which I will talk about below.
But first, let me talk about all the fine details about my store/niche. Due to the privacy of the new buyer, I can’t disclose the name of the site, but I will talk about everything else.
The Good Things About My Store
When I was doing my initial research on what niche to get into, there was a HUGE hole that I saw in the niche I ended up choosing.
All the other competitor’s websites we’re very outdated and I knew I could offer a much easier and better looking alternative to the market.
The site was built on Shopify, and me and my coder spent a lot of time designing the site to look great.
After that, I contacted all the potential suppliers in the niche and landed 3 out of 10. Luckily the three I got were big names in the niche, which allowed me to start uploading a lot of products and not have a store with only one brand.
Once I started advertising on December 19th, sales came in immediately. Product Listing Ad’s in Google Adwords are the way to go, and I was averaging a much higher Click Through Rate than my competitors.
Another good thing was that paid traffic only made up about 10% of my overall traffic.
I set up an Affiliate Program and got involved in my niche by posting on forums/emailing other blogs and review sites and established relationships with them.
One review site listed all of products for free in exchange for a higher affiliate commission than my competitors were giving him. This deal established a lot of free traffic for me that otherwise would’ve cost me $3000+ a year.
I also had some banner ads designed and put them on a variety of sites which were very much worth it for the brand recognition and SEO juice.
Overall, 59% of my traffic came from referrals and my store quickly gained prominence in the niche.
In addition, in the short time I owned my site, Google loved me and ranked some of my products very high on the first page. I was converting 2.7% from organic traffic which was awesome.
Lastly, 22% of my traffic was direct, and 35% of my traffic was returning. These were insane numbers especially for a new store. I even had a few repeat customers in the short month and a half the site was live.
For all traffic, average session duration was 3:12, with 3.62 pages per session, with only a 53% bounce rate.
The Bad Thing About My Store
Even though I had a lot of good things going on with my store, there was a very significant problem.
I had an average order size of $150 with 25% margins, but there were so many other costs that ate into my profitability.
Credit card fees, affiliate payments, discount codes, advertising, and additional Shopify apps, all made it extremely hard to be profitable.
Pro tip: Most people will say that an average order size between $100-$200 is high enough to be profitable, but the biggest thing I learned is to sell much higher priced items. I will go over this more in future posts.
I was doing $5k/mo in revenue which was a great start, but I needed to scale up to a much higher volume of sales to get the profits I wanted.
The bad news was, I was already swamped with customer service and order processing.
It was my least favorite part of the business, and it required me to do work at specific times (something I hate).
I was stuck with the decision of hiring someone to do the ordering and customer service, continuing to do it myself (which would’ve made it impossible for me to scale up), or selling the business.
If I hired someone to do it I would’ve taken a monthly loss on the site for a good amount of time, and I really couldn’t afford to do that. I was running out of all the money I had saved when I moved to Florida in the Summer of 2014.
And I certainly couldn’t imagine to continue doing the operational work myself. It was already stressing me out and I needed the time to work on other things.
So in the beginning of February after a lot of thinking, I made the decision to sell the business. I stopped all advertising and took a much needed week to chill.
The Sale of My Store
After the week of doing nothing, aka watching every single episode of every season of MTV’s The Challenge (RIP Diem), I listed the site on Flippa.
Flippa is the biggest marketplace in the world for buying and selling sites, and is probably the best place for listing newer sites.
It draws a lot of people thinking they can just buy a site with no online business experience and make money. (Don’t do this, it will not work).
Therefore, if you list a good site on there, it will be bid up a lot.
Anyway, I listed my site at $100, as an auction to end in 14 days.
At the start, I got a few bids which brought it up to $450.
But for the next 13 days or so it was quiet. I was getting a lot of views, “watches”, comments and messages, but no-one bid for a long time.
At the last day of the sale, I removed the “reserve price”, which means that the highest bidder will get the site no matter what price it’s at.
I certainly didn’t want to let the site go for only $450, but removing the reserve lets the buyers know that you’re serious about selling.
I also didn’t have time to not sell the site, re-list it, and go through the whole process again. I was committed to selling the site and moving on to my next venture.
It was down to the last hour and the auction was set to end at 4am. I stayed up late, constantly refreshing the page to see if I got more bids/messages.
I was getting worried because I would be pissed if I only got $450 for the store. I had spent over 1000 hours on it and really needed the money.
Finally with about 15 minutes left, a new bidder placed a bid. The previous highest bidder immediately bid back and we had a bidding war on our hands.
The price quickly shot up to $1,000 and I was pumped.
Each time someone bids with an hour left in the auction, the auction will give the bidders another hour to bid.
So I went to bed and set an alarm every 30 minutes or so to check on the action. I couldn’t really even sleep because it was so exciting to see that money go up.
The two bidders were going back and forth, and 69 bids later, the site was sold for $2,250.
I was happy and it was right inline with what I thought I’d get for it. I was projecting somewhere between $1,500 – $3,000.
However, that wasn’t the end of the process. Now I had to deal with the buyer.
The Buyer From Hell
The next morning we got on Skype chat and he started asking me more questions about the business.
I was expecting this because I certainly wouldn’t want to send money to a stranger without talking to them first.
But, this dude went on for hours and kept stalling when it came to actually paying me.
I finally just unloaded on him and told him that if he didn’t pay me in 5 minutes I was suing him. I was literally yelling at my computer because I was so pissed at this guy.
Pro tip: If you win an auction you are obligated by law to pay.
After about three attempts at telling him my lawyer was about to give him a call, he finally paid me through PayPal.
What a nightmare.
He was a classic “get rich quick” loser, who had no idea what he was doing. He had never ran an ecommerce store before and was questioning everything I said.
To say the buyer was an idiot is putting it nicely. This guy is so stupid he shouldn’t be allowed to leave his house.
The way he handled the whole situation was the worst possible thing he could’ve done. Now I don’t have any interest in helping him be successful, he totally shot himself in the foot.
PS: He’s already made some horrible changes to the site and I’m guessing he goes out of business in a few months if not sooner.
All in all, I’m upset I had to sell my store. I had no doubt that if I worked on it for a few years it would’ve been a million dollar business.
But on the flip side, I got cash when I needed it and took the risk out of the equation.
Even more importantly, I learned a tremendous amount from this first store and it will make my second store that much easier to setup.
I feel like I’m already extremely knowledge in drop shipping and I’m confident that I can always use this stream for passive income.
It’s also pretty cool to say that I’ve sold a business. Not many people can say that.
Well guys that’s it for tonight.
Like I said, this was a great experience and I’ll certainly be writing more about drop shipping.
Let me know in the comments if you have any questions about my store, the sale, or drop shipping in general, and I’ll be happy to answer them.
Catch ya next week – Brian