Dropshipping has recently been a business model that has been very attractive to me. I don’t need to carry any inventory, I don’t ever need to physically ship the customers their purchases, and there’s very little upfront costs.
Here are the results of this month long experiment.
Background and preview of my results
First, you should know that AliExpress is a marketplace in which you can buy virtually anything at wholesale prices from (usually) overseas manufacturers. Most often, Chinese suppliers.
Whatever you think about Chinese manufacturing, there’s no denying that the cost of the goods allows for fantastic business opportunities. As some of you might already know, I had some success using Alibaba to source, manufacture and sell my own products.
AliExpress however (owned by Alibaba) is more of a store than a directory to find suppliers. Anyone can buy anything on AliExpress but most suppliers on AliExpress understand that most of their customers use them to resell as dropshippers.
So instead of having to order hundreds or thousands of items in bulk from Alibaba, I can do one-off orders on AliExpress as I needed to.
Why would anyone buy something from my store when they could find it on AliExpress for much cheaper? Information asymmetry and simple retail arbitrage. Not everyone has heard of AliExpress, and even those that do, when they see my Facebook ads might not think to look on AliExpress first.
It’s all about reaching your customers first with good marketing. That’s where my competitive advantage was.
Shopify is the platform I used to create and host my store. I work on the marketing team at Shopify, plus I have a lot of experience using Shopify to build stores and sell online.
Oberlo is a Shopify app that allowed me to practically automate everything from importing products I wanted to sell onto my store from AliExpress, to processing orders automagically for me whenever I got them.
So instead of having to manually place an order on AliExpress and enter my customer’s shipping address, Oberlo’s Chrome extension made this process quicker. Instead of manually adding each product to my store, I could import hundreds at a time from AliExpress, and make improvements to the product description.
I pretty much had a store ready to start selling in a matter of days.
I chose to sell phone cases and accessories, launched my store called TekAccessory, I used Facebook ads to drive traffic to my website, and sold through the month of May 2016. Here’s my results:
So, I started with my results just to show you what was possible in my first month trying this. But how did I get there? How much work was involved? What did I do? Let me break it all down for you.
Deciding what to sell online
I already knew I wanted to try dropshipping using AliExpress. I already knew I was going to use Shopify as my platform for my store. Oberlo was the icing on the cake. The app made everything so easy.
I began to look at things I could sell by browsing the categories within AliExpress.
I eventually decided on phone cases.
My thought process was since I figured most of my traffic would come from Facebook ads, I wanted something I could easily target.
Facebook allows you to target users based on the phone they use.
So, if I wanted to sell iPhone 5 cases, I could simply target iPhone 5 device users and optimize my ad from there.
Plus, I wanted to avoid branded products. I wanted to avoid anything that was potentially trademarked, a knock-off, or a real intellectual property.
A lot of people buy phone cases with no brand all the time. So I decided something that was a commodity would be a good way to go.
It’s perhaps not the most long-term strategy, but it was just to try dropshipping. Plus, my competitive advantage was going to be my marketing. I was going to reach my customers first with my Facebook ads.
Phone cases also seemed like something of an impulse purchase for most people. I figured most people would be comfortable buying phone cases online, and the potential for a large profit margin encouraged me even further to try it out.
Lastly, phone cases fit my 5 golden criteria for choosing a product to sell online:
- Lightweight and small enough to fit into a shoebox.
- Costs around $1-$10 per unit wholesale or to manufacture.
- Can be sold for at least 50% profit margin per unit.
- Not electronic or food-based.
- Niche product that serves a market of passionate people.
To learn more about my 5 golden criteria and the logic behind each rule, check out my blog post on Shopify.
Creating my Shopify Store
After creating my Shopify store and installing the Oberlo app, there were a few things I had in mind to optimize the website for conversions. I should note first that many of these changes came over the course of a lot of testing.
Getting the look and feel: I chose a Shopify theme that allowed me to display several products in the catalog, while having a “tech” or “computer store” vibe. The theme I used was Supply, which is free.
I tried keeping it simple, too. No slideshow and nothing that detracts from visitors easily being able to navigate the website, including popups.
I also used the top navigation to allow visitors to easily find their phone to sort through the cases available for their phone.
Improving trust and social proofing on the website: When potential customers got to my website, I wanted to give my website the best chance possible to convert visitors into sales.
The biggest thing, especially for new stores with no brand or reputation, is to instill trust.
I used the product pages (where I sent most of my traffic) to instill trust into visitors.
I wrote detailed product descriptions for the products I ran Facebook ads to. I added large badges to catch the eyes of visitors including promises such as a warranty and money back guarantee.
I allowed reviews on products using Shopify’s reviews app.
Lastly, to legitimize this store a bit, I bought a virtual mailbox. A virtual mailbox would allow me to have a real U.S. address to receive any returns (since I was targeting American consumers) as well as instill trust.
Many online stores today hide their address and phone number. I chose not to.
Increase the average order value: I unfortunately only focused on increasing AOV at the tail-end of this experiment, but adding accessories to product pages (again, of the products I was sending traffic to) helped encourage customers to checkout with more in their cart and thus, increase my average order value.
Build in some scarcity: I did two things to build in some scarcity and help persuade potential customers to make swifter buying decisions.
The first was to run limited-time sales for every product I had Facebook ads running to. I used Hurrify to embed an eye-catching countdown timer on product pages.
I also used Notify to display recent orders as small popups. Randomly, every few minutes, as visitors browsed my store, they would receive popups letting them know of recent purchases.
Communicate the shipping times honestly and openly: Because the shipping times from AliExpress can take anywhere from 15 to 30 days, I communicated the shipping times upfront as to not upset customers.
All order emails included the shipping time and the FAQ on the site was open and honest about shipping.
I also installed the Trackr app, which would automatically include a link to tracking information, based on the tracking number the AliExpress seller gives me when the order is shipped. The best part is that Oberlo imports this information for you, which works with Trackr.
Allow for easy communication and manage all incoming questions easily: Not only does having live chat help instill trust and confidence in your potential customers, it also allows you to quickly answer their questions.
Since a majority of my traffic came from Facebook, I thought it only made sense to include live chat using Messenger. I used Facebook Chat by Beeketing for this.
I also created a separate “support@” email in which I setup an autoresponder for any email send to that address. The autoresponder simply told customers that their email has been received, to please wait 24-48 hours for a response, and to use Trackr to check the status of their order.
Track everything: Google Analytics is key. Shopify does a pretty good job on its own, but you should always install Google Analytics. I also placed a Facebook pixel in my store to track conversions as well as retarget traffic.
Deciding what products to sell
With a tool like Oberlo, it can be pretty overwhelming when trying to decide which products to import, especially since you can’t physically inspect them first. Well, you can if you order each product you’d like to potentially sell and wait for them to arrive for you to checkout.
However, I wanted to start selling immediately. Of course it’s risky this way, I might wind up selling crap that customers will complain about, however, being that they were phone cases, I took my chances.
Oh, and I of course did my due diligence. I’m not that lazy.
I installed the AliExpress Seller Check Chrome extension which provides me with third-party reviews of virtually all sellers on AliExpress.
I would also look at AliExpress and sort all my searches by Orders. This would help me find the most popular products on the site for the kinds of products I was searching for.
For example, if I was looking to sell LG V10 phone cases, I would sort my search by Orders. Then, I would look at the reviews for the top 5 cases or so.
The key was that I would use the reviews to look for multiple purchases from one buyer. Instead of looking at the feedback (which is still important), I was more interested in seeing if anyone was doing a lot of repeat business with a seller. This would likely mean they were using this seller as a dropshipper and having a good experience with them.
Once I found a unbranded cases, with a lot of positive reviews and orders, I would then begin importing them into Oberlo using the Chrome extension.
Importing products into Shopify
Importing products into your Shopify store is really easy with Oberlo and the Chrome extension. You can visit AliExpress and import dozens of products at once, to edit later in the Oberlo dashboard, or import and edit one at a time.
I would import dozens at a time and then edit the product descriptions later before publishing in my store.
The first part is going to the product listings on AliExpress, ensure you have the Oberlo Chrome extension enabled, and click the blue icon in the bottom right corner.
This will import the product to your Oberlo dashboard, with all the variations, so you can edit all pending items later before publishing it on your store.
Next, I would change the name, add the product to a collection in my store, add my own tags, write up a nice product description, and remove any watermarked images.
Be sure to go through the images to remove any duplicates and watermarked images.
Lastly, go through the variants to ensure you approve the prices or set your own.
Oberlo allows you to set multipliers where it will automatically set a price based on the cost from AliExpress. Here were the multipliers I used.
Now for the fun part.
Facebook! I knew Facebook was going to be my primary source of traffic but I was unsure how well I could sell physical products to cold traffic.
I knew my best shot was to patiently split-test several different kinds of ads until I fine tuned one enough that was profitable.
My approach with Facebook Ads was to use them to get traffic, not sales. My approach was to send as much targeted traffic to my website as possible, and let my website do the rest of the work, converting visitors into sales.
With this approach in mind, every ad I created was optimized for a high Clickthrough Rate and Relevance Score. I wasn’t expecting to get sales out of any of my ads out of the gate. Instead, I was looking to get my ads to have a CTR of at least 3% and a relevance score of 8.
I started with two ads on very small budgets, $5 a day. I would immediately pause any ad that started off with an abysmal Clickthrough Rate (<1%) and would pause ads after 1 or 2 days if the Relevance Score was too low or it was being outperformed by the competing ad in CTR.
I would usually keep the copy and images the same, but test targeting different interests with each new split tested ad.
Every ad during this month was a Carousel Ad that only appeared in the News Feed and only appeared in Mobile Devices. Also, all ads were for product pages. I never tested creating ads for my homepage or catalog.
I felt Carousel Ads were the best option to show off a variety of different phone cases for a particular phone model.
News Feed ads are usually more expensive than the alternatives, but I felt most of the best attention was in the News Feed, along with Carousel Ads simply displaying better in the News Feed than in the alternatives.
Lastly, Shopify can create some amazing shopping experiences for mobile users.
Do people actually buy things on their phone?
I was not afraid to only target users on mobile. As you can see from my results, my mobile campaigns were very successful. Plus, showing ads to only mobile users is a lot cheaper than desktop. I feel like desktop ads are extremely competitive and right now is a great time to capitalize on the low CPMs for mobile ads on Facebook.
Again, as long as my ads were sending a ton of cheap, targeted traffic, I only had to worry about optimizing my product pages and website for conversions.
When I eventually landed on an ad that had a CTR above 3% consistently, and a high relevance score, I would bump the budget slowly. Facebook ad budgets don’t scale 1:1 with results. Meaning, if I triple my best ad’s budget, it won’t mean it will triple my sales or even my traffic.
You need to be careful to scale your ads slowly to not disturb the success of your best performing ads.
Eventually, my best ad was going for $22 a day, getting me a few sales every day.
Here’s the results from my best ad:
Here’s the ad copy itself:
This ad had a Mobile News Feed placement, targeting United States, 24-36, people who use LG V10 and had an interest in Technology.
This case after split-testing many different ads, testing different interests, small changes in copy, and order of products in the carousel. However, all ads I tested were Mobile News Feed Carousel Ads.
Processing orders using Oberlo
Processing orders with Oberlo is very easy. It only requires you to have the Chrome extension installed.
Once you click Order in the Oberlo dashboard, the Chrome extension takes over and handles nearly everything for you, including filling in the customer’s shipping address.
The only thing I would recommend is to go into the settings in your Oberlo dashboard and click Chrome Extension, and under Custom note, add something like the following:
We’re dropshipping. No promotions & invoices, please!
This will automatically add a note/message to sellers letting them know not to include any invoices in the package, and to let them know you’re using them as a dropshipper.
I also set my default shipping method to ePacket, which might not apply to most items you might want to sell using AliExpress, but for smaller items, is a great shipping option.
ePacket shipping is usually a lot faster than more expensive options, and is a great affordable way (sometimes even free way) to ship small items from China to North America. My phone cases would typically arrive within 15 days to my customers.
Here’s the breakdown for the entire month of May:
- Cost of goods: $567.90
- Facebook ads: $672.00
- Shopify (1 month): $29.00
- Oberlo (1 month): $29.90
- Hurrify (1 month): $6.99
- Trackr (1 month): $9.00
- Notify (1 month): $14.99
- Physical Address (1 month): $5.99
Net income (first month): $228.44
So while the net income isn’t insane, I’m actually surprised I even made a profit my first month. My goal was actually to tweak ads all month until I could be more profitable in the second month. I’m confident that as the business went on, my Facebook ads would become more profitable, especially once I got retargeting ads going.
Here are the results for the month of May in my Shopify dashboard:
Considering I didn’t explore much besides Facebook for my traffic, there’s still a lot of potential with a dropshipping business like this.
Email marketing, social media, content marketing and SEO are just a few of the other things I could explore to increase my sales.
AliExpress is a great choice for people looking for a low barrier entry way to get started with dropshipping. Oberlo and Shopify just make it all that much more easier. If you have any questions or comments, just leave them in the comments below.
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