Hey guys! It’s Trevor here with E-commerce Paradise. Welcome to the very first lesson in the What is High Ticket Drop Shipping Mini-course.
This whole course is going to be filled with lots of information so you can understand dropshipping in depth and what it's all about. High ticket drop shipping is a pretty simple business model and yet it could be very confusing for those who have never done it before. Ecommerce is just basically selling products online, and drop shipping is the fulfillment method to which you get those products from the supplier to your customer. That's it in a nutshell, but there's a lot you need to know before you decide if this business model is right for you. Let's get into it.
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The Benefits of High-Ticket Drop Shipping
Now to start off with understanding what high ticket drop shipping is and what it isn’t is really important so I’m going to go over some pros and cons for you guys so you can get a better idea what drop shipping is and how it can benefit you.
Less Capital Required
So the coolest thing about high ticket drop shipping is that less capital is required. It really doesn't require a whole lot of upfront investment. Typical business models especially franchises can cost tens to hundreds of thousands of dollars to invest in the fringe, for instance. At McDonald's, if you wanted to start one it would cost you a quarter million dollars just to even be able to apply. And then you have to pay for all sorts of other things after that.
So as far as business models go, an ecommerce store with high ticket dropshipping and fulfillment method can be a very low-cost startup, otherwise known as a lean startup.
You Don't Have To Create Your Own Products
High ticket drop shipping is also a very easy way to get started online and compared to other business models, with drop shipping you don't have to create your own products. You're using products that other people have already created and marketed and you're just selling them and marketing them in new channels, or just remarketing them in the same channels and taking those sales and then helping the customers while the supplier fulfills the orders for you.
No Warehousing or Inventory or Returns Management Required
So as far as you are concerned, managing or paying for any kind of warehousing, you don't have to do that. Your suppliers do that. Packing and shipping your own orders, you don't have to do any of that. Your suppliers do all of that for you. Tracking inventory for accounting reasons, you don't have to track any inventory. That's your supplier’s job. Handling returns and inbound shipments unless you have suppliers that don't take returns and even then you don’t have to handle the returns. There are a few exceptions, but most of the time 99% all the time you don't handle any returns or inbound shipments, and of course continually ordering products and managing stock level that isn't a concern when you're doing drop shipping because you don't have to manage your stock.
Now there are some exceptions to that, of course. For example, if there's a really popular selling product on your store that's out of stock, you might want to mark that product out of stock or at least put on the product listing a backorder notice so that customers don't get annoyed when you tell them that you're actually out of stock when you take the orders. We'll get more into that later.
Low Overhead Expenses and Flexible Location
Another cool thing about high ticket dropshipping and ecommerce is that you really have a very low overhead. Overhead is this thing where you have to pay for all these expenses. In order to run your business, you have to pay for your rent if you have a physical storefront. You have to pay for your displays and stuff like that to display your stuff, you have to pay for employees, you have to pay for insurance, and you have to pay for utility bills. All these things add up a lot and a home office is a part of your home and that's where you’ll be running your high-ticket dropshipping business a lot from. It's very inexpensive to run a home office, in fact, it can be within the same cost as your normal everyday life.
So there's that and then, of course, there's coffee shops and other things like that you can work out of. And a coffee shop it costs like $2 to somewhere between $2 and $5 dollars on average for coffee. You can use that coffee shop for as long as you need or a few hours or whatever and you get your work done and you have a very flexible location. When you're doing high ticket dropshipping, which is super cool, you can travel around the world because really you just need a place with Wi-Fi in order to run your business. You can make Wi-Fi calls, you can do emails, you can do everything from a Wi-Fi location.
So you can travel to Thailand, you can travel to Europe, you can travel to central and South America, and anywhere there is good Wi-Fi you can run your business from. So it's the ideal lifestyle business for someone who wants to travel because it's easy to start up, low overhead costs and it's very flexible as far as your location goes.
Wide Selection Of Products Making It Easy To Scale
One cool thing about doing e-commerce with high ticket drop shipping suppliers is that you have a really wide selection of products so this comes in handy. When you want to scale your business you can get new suppliers, add their products to the site, optimize those product listings, and market those product listings. And it really doesn't cost much more than just doing the marketing efforts. The ads will run on their own once you get them all set up and eventually you'll start ranking organically and you'll get free traffic to those listings. When you sell the product, all you have to do is send the order to the supplier, and the supplier will send the product to the customer and the customer will get the product and be happy and leave you a nice review. That's the ideal situation.
As far as scaling goes, there are way more ways you can scale. Obviously adding suppliers and products is the best way. Another great way is to add more content to your website and to build out sales funnels from those content pieces to the products that are related to them. So, for instance, you could hire writers for writing roundup articles for the resources that are within your niche. You can hire writers to write how-to content, how to solve a problem that that product solves, and then say buy this product if you want to solve your problem.
So there are all sorts of cool things you can do and it is really easy to scale its very cost effective compared to other business models. It is the best way to reach people these days because everybody is either on their smartphone or on their computer and they're shopping and they're very used to it. So that's it!
What You Need To Know About High Ticket Drop Shipping
High ticket drop shipping does have some disadvantages though, and I wanted to go over that in this article because it's really important when you're understanding drop shipping you have to understand both the pros and the cons. You want to be prepared for this because mentally you're going to need to deal with this later on and my best advice is to always just understand the systems that you need to have ready when you're going to encounter these things on how you deal with them. These are called standard operating procedures and whenever something happens you should have an answer to that. So with that said let's move into them.
Lower Margins Than Other Business Models
The first thing about high ticket drop shipping is that generally speaking, you'll have lower margins than you would if you were to sell your own product. If you were to sell an imported product from China or if you were to create your own product like an information product or digital product, the margins are generally 40% all the way up to 90%, but with high ticket drop shipping, your margins are around 10 to 30 percent, maybe even higher sometimes, it depends on the niche. And those are somewhere between gross and net is so usually your gross margin is like somewhere between 30 and 40 maybe 50 percent. And then your net margin which includes shipping costs, fulfillment costs, advertising costs all that stuff will be usually closer to like as low as 5% to as high as probably 25 or 30%.
It really just depends on the product and the supplier, so just understand that it is an easy model to start with, very cost-effective, but since you're not actually creating the products and you're not actually marketing them the way the manufacturer is, you're just doing it as a retailer, the margins are generally lower. And this changes from supplier to supplier. Some suppliers offer better margins because they want you as the retailer to do more marketing for them and some suppliers offer lower margins because they've already done a ton of marketing and they have their fulfillment all setup and so all you need to do is to actually just market the products. So it just depends on the supplier and it can change.
The other issue is inventory. So when you're doing high ticket drop shipping, a lot of the time you won't be connected to the suppliers’ inventory. The supplier may send you inventory updates via a spreadsheet or some sort of a feed or just an email saying this is out of stock or that product is discontinued but that's usually the best you'll get, in fact, sometimes suppliers don't even send any kind of updates at all.
The way you handle this kind of stuff is having a standard operating procedure in place. So when you take an order on your website for an item that's either out of stock or discontinued, you have a way of talking to the customer that tells them that there are other items available in your store that are similar either from the same brand or different brands and if they would like that, and then you can usually offer some sort of an incentive to go with it and it really depends on the customer. Some customers don't care, some will try to eat you alive and try to get as much of a discount as possible. It's up to you as the retailer how much you want to give away or willing to give away.
How To Get Market Share In The Beginning
I usually tell people when they're first getting started, it’s a good idea to take on the same idea that Amazon had when they got started. And that is to get as many customers in the door as possible even if that means losing a little bit of money or breaking even because those customers will hopefully refer you to their friends or talk about your company to everybody else around them.
So the key is to get as many people in the door as possible and out of the door with one of your products. So if there happens to be something out stock, there’s an inventory issue, you just cover it up and give it to them for cost or even a small loss and you have a customer now. And so you ask that customer for referrals. You tell them could you please tell all of your friends and family about it. Take pictures of the product, even do a video review of the product for you.
Shipping Complexities with High Ticket Drop Shipping
The other thing about high ticket dropshipping that can be a big issue is shipping complexities. This especially comes into play when you're doing high ticket drop shipping because you're selling expensive products and shipping companies will often need to ship these expensive products that are often large and LTL Freight instead of regular UPS or FedEx Parcel. That just comes with the niche you're selling in, a couch instead of a phone case for example, so there's gonna be more shipping complexities to deal with.
You're often going to have to hire your own freight forwarder or shipping company which is not that hard. There's a lot of really great services that do this, make it super easy for you but it is something you're going to have to set up and it is an extra few phone calls or emails and that's just the way business goes.
So just understand that when you're getting into high ticket dropshipping, that sometimes you're going to have to deal with the shipping because the supplier doesn't always handle everything for you. You're going to have to take over, for instance, when you have shipping damage issues or maybe even the product didn't show up on time or something like that because of the LTL company's mistake, which by the way, stands for "less than truckload." It's a type of shipping where you put a large product on a pallet and then load it on to a truck that has five or ten other pallets on there and they drop it off in that zone.
What happens is that sometimes the freight company will lose track of the shipment or it just didn't make it onto the truck for whatever reason. The customer, of course, will get upset because with an LTL Freight shipment, for instance, you have to actually call the freight company and schedule that delivery. And if the customer isn't around for the delivery there are storage fees and stuff like that so you really have to be upfront with your customer and tell them "hey, this is what to expect" and if you know for some reason the freight company makes a mistake then you have to deal with that. You have to call the supplier and talk to them, you have to call the shipping company and talk to them, call the customer, of course, and talk to them, and that's pretty much your role.
How To Automate These Day-To-Day Tasks
You get to work from home or work from abroad but the thing is you have to give energy and all this stuff and one of the best things you can do later on down the road is be building the systems so that you can eventually outsource and automate all of these day-to-day tasks effectively.
The last things of course that can go wrong is the supplier themselves can actually make an error. So if you're selling complicated products or products with a lot of different variants like colors or size then your supplier might accidentally ship out the wrong size or wrong color. Sometimes the customers can get really upset about this. Sometimes they don't even care they'll just keep it. It really just depends, so you have to be just extra diligent when you're doing stuff like when you're sending in your purchase orders that you make sure that you make it very clear as to what the variants are. And if you added any free gifts onto the order, make it really clear on that purchase order to add in those accessories and charge you for them, and to ship them with the product and of course you can make things as clear as possible and someone over at the supplier might not be doing their job and that just happens.
So you have to actually take responsibility for that when you're talking to the customer and you have to be able to just say that our warehouse made a mistake you don't say the "supplier," you say "our warehouse" so I'll get more into that later when it comes to how to run your high ticket drop shipping business.
Is High Ticket Drop Shipping Worth It?
But those are just some things to look out for to be aware of, to be mindful of. You are doing what a regular retail brick and mortar storefront does but you just happen to be online only. But you know you have to ask yourself is it worth it? Is it something that you're really interested in doing or not? And that's up to you!
Honestly, do you want it badly enough?
Are you a newbie to internet marketing and is this type of business model something that's ideal for you?
Are you advanced and you have a lifestyle that you know requires location independence and yet you know you're not like the most advanced internet marketer out there creating your own info products and doing launches and stuff like that?
Do you just want an easy to run and sustainable real online business?
High ticket dropshipping is great because it's a fulfillment method in which you can run and build an e-commerce store and scale indefinitely as much as you want to. I've seen some of these high ticket ecommerce stores doing hundreds of thousands of dollars in sales per month and it's truly incredible as to what level you can scale these stores.
One word to warn you guys, of course, is that the more you scale your business, the more hassles you're gonna have to deal with, the more customer service you're going to have to deal with, the more of all of this stuff. I mean real business does turn into this huge thing so like I said from the beginning you have to set your goals and you have to set up standard operating procedures so that you understand what's going to be required in the future and how to scale and so you don't have as many growing pains as you might if you didn't.
That's it, guys! So now is the time. Make up your mind whether this is something you want to continue doing or not. And if you do, if it is something that you decide that you want to do, that's right for your business, right for your lifestyle, right for your needs, your family then definitely continue with this mini-course. Get into the next article and we'll see you there!
Get my list of 99 profitable high ticket drop shipping niches for free: