We take a look behind the scenes of the dropshipping industry
Dropshipping is still a hot topic for online retailers who want to make a lot of sales with as little effort as possible. Because at its core, this e-commerce business is all about selling products that the retailer never touches or has in stock. They are sent directly from Asian platforms such as Aliexpress. We take a look at the dropshipping scene and show how brand building works without your own products.
You may also come across brands and products on Facebook and Instagram from time to time that you have never heard of. For example, when the fidget spinner hype peaked in mid-2017, the Facebook news feeds of many users were full of ads for the toy. Most of the time, a click led to a typical online shop like this one, where you can choose from hundreds of fidget spinners at reasonable prices.
A typical dropshipping shop
However, there are no retailers behind such shops who manufacture the toys and ship them from their warehouse, but resourceful marketers who set up a shop with the e-commerce platform Shopify and pass on the orders directly to Chinese shops such as Aliexpress. They then send the goods to the customer. The retailer who originally accepted the order never sees the goods.
React to trends without risk
"With dropshipping, the risk is minimized because you can start with a comparatively small budget and - unlike in classic e-commerce - there is no minimum order quantity. At the same time, the retailer can react more quickly to new trends,” says a dropshipper who wants to remain anonymous to OMR. He himself ran over 100 dropshipping shops for a long time and has now outsourced them to "virtual assistants", i.e. freelancers all over the world. In classic dropshipping there are hardly any costs due to the infrastructure and of course none due to logistics. In the end, the main costs are for marketing.
"The typical procedure for dropshipping: identify a trend, set up a shop, lure the target group to the site on platforms such as Facebook with a cheap offer and then, ideally, sell other products as well," says the dropshipper. This is how the number of 100 shops came about. If you want to react to every product trend (keyword: fidget spinners), you have to keep opening new shops – but not a big problem with a dropshipping strategy. "Cheap products from Asia are so popular with dropshipping because high-priced goods can get stuck in customs and cancellations mean more work." Besides toys, phone cases and t-shirts are typical dropshipping items.
“Dropshipping Gurus” on Youtube and Facebook
Because it is relatively easy to create professional-looking shops with Shopify, a certain fortune-teller economy has emerged around the topic, which is also being pushed by the "passive income on the net" trend. Dropshipping gurus try to build up reach with their recommendations on YouTube or Facebook. A typical example is the young Irishman Rory Ganon, who in August 2017 spent a week reporting on the development of his shop and always collected around 100,000 views for his videos. Kris Stelljes from Germany is trying to explain dropshipping on YouTube.
The promises are big. Ganon bets he can set up a shop and make $1,000 in a week. Stelljes states in his video that he earns over 2,000 euros a day with dropshipping. And the guys are quite open about their strategy for success. In his videos, Ganon shows in detail how he creates a shop with Shopify, selects products based on suitable target groups, connects his shop to Aliexpress, runs Facebook ads and then generates sales. As the Atlantic writes in an article about Ganon: “He reverses the whole idea of trading. What he sells is secondary to how he sells.” 
Of course, the self-titled dropshipping millionaires also try to make money with their tips. Kris Stelljes links to Shopify under his video and collects an affiliate commission. Clicking on the link below the interview with a drop shipper leads to a free "drop shipping cheat" from channel operator Eric Promm, for which users have to leave their email address - in order to later receive paid offers from Promm via this channel .
Shopify apps make it easy
“Most dropshippers use Shopify for their online stores. The tool is cheap, easy to use and there are countless apps that are extremely helpful with dropshipping,” says the dropshipper. The crucial tool - and that's why it is mentioned in absolutely all dropshipping videos - is Oberlo. The makers advertise on the website that Oberlo users have sold 85 million products with the tool since the company was founded. The app is integrated into the online shop created with Shopify and allows retailers to automatically copy product information, including images, from China sites such as Aliexpress to their own site. Then the drop shipper only needs to set price rules (always add 80 percent to the changing Aliexpress price) and the "inventory" is done.
The app even forwards orders and customer information directly to Aliexpress, where delivery is then triggered. The app is free to start, only those who have more than 50 orders per month have to pay 30 US dollars per month. Anyone who orders more than 500 pays just under 80 dollars. Oberlo was created exclusively for dropshipping, and it is not without reason that the number of dropshipping shops has exploded since the tool was introduced in 2015.
Oberlo is the main but not the only tool dropshippers use. The dropshipper integrated the Shopify app Product Reviews to manage and drive reviews. There is also an "Order Printer" for invoice management and a tool to create artificial shortages - with displays such as: "Only 3 of this product are available".
Platform marketing is crucial
Once the shop has been set up and automated, marketing decides on its success - and becomes the only task. Dropshipping could never have developed like this if it weren't for platform marketing. “The number 1 marketing channel is by far Facebook. But influencers can also be helpful,” says the dropshipper. With its target group settings in the Ads Manager, Facebook is perfect for the dropshipping business. Placing ads in the newsfeed can work without your own reach – but it becomes more accurate and cheaper for dropshippers with so-called lookalike audiences. These are Facebook users who behave similarly to users you have already reached.
The dropshipper won such lookalikes via specially created fan pages. He built his Facebook pages by grabbing viral videos, pushing them into potential fans' news feeds with a budget, and then collecting likes. For a few hundred euros, there were 100,000 followers. He was then able to address this follower organically with products and at the same time form lookalike audiences and thus reach other Facebook users with similar behavior cheaply with ads in the news feed.
How these ads grab the customer's attention? Sometimes the cheapest prices are promised or products are offered free of charge. The dropshipper sold MP3 players for zero euros - and often only made money with the high shipping costs of ten euros. In some cases, however, users would have "bought" four players directly and then paid shipping costs for each - although he himself had only paid shipping once. The main purpose of offering free products is upselling. If customers land in his shops through the unbeatable offer, they would usually buy more products.
Influencer for dropshipping products 
According to the dropshipper, influencer marketing on Instagram can also work – in his experience, better than Instagram Ads. However, this is only worthwhile for higher-priced products, such as during the "hoverboard" hype. It could be worthwhile for shop operators to pay niche influencers with affiliate commissions, but a fixed payment like that of prominent influencers is unrealistic. Incidentally, Irish dropshipper Rory Ganon chose a shop that sells lion products during his weekly experiment. In this area there would be influencers that he could use.
In the meantime, however, Instagram ads for dropshipping shops are also appearing more and more frequently. Of course, the product has to fit the target group on the platform. That's why, during our research, we stumbled across fashion shops that sell t-shirts, shirts, coats or socks - mostly in the style of higher-priced brands but fully synthetic.
Brand building revolution
Louie Supply Instagram ad
A good example of how dropshippers try to build brands with the cheapest Chinese goods is "Louie Supply". The “company” uses Instagram to promote its shirts and free worldwide shipping on orders over $100. Anyone who clicks on the ad lands on the Shopify store, which looks like stores for so many hip brands – including models on train tracks. In the About Us section, the creators claim to be from Vancouver and to look for little-known but extremely cool brands for their customers all over the world. Like so many dropshippers, they tell a story around their brand – they end up sending orders to China and letting Aliexpress take care of everything.
From the outside, consumers can hardly tell whether such brands are local labels or cheap Chinese middlemen. Dropshipping brands are called Louie Supply, West Louis, Romwe or Hype Clothing. Many of these fashion dropshippers use private labels, i.e. have their brand sewn into the interchangeable shirts or coats in China. This creates a small branding revolution in the business. Instead of investing a lot of money in branding to establish themselves as a young brand, dropshippers rely on inexpensive products in combination with online shops that appear professional to the outside world.
The Louie Supply website
Is the hype over?
The dropshipper no longer takes care of his shops very intensively: “The dropshipping highlight was definitely the time before the US presidential election. Trump products have exploded and we've had some real sales in the US – with flags, t-shirts and mugs.” As already mentioned, he lets freelancers around the world manage his shops. Platforms like UpWork have hundreds of digital workers willing to do the job for $5 an hour. “Dropshipping was still hot a year ago. In the meantime, the battle between countless shops is just too big and it's becoming increasingly difficult to find products that aren't already being sold elsewhere," he says.
Although he describes himself as a dropshipping millionaire, he doesn't believe that there is still a lot of money to be made in the business - especially not without a lot of effort: "Many underestimate the costs incurred by dropshipping. If you really get involved as a one-man company, you might be able to make a profit of 5,000 to 10,000 euros a month, but it’s more likely to be 2,000 euros net a month.”
