Thread by @indexsy

I made over $2.2m dropshipping (75% profit) from 2017 to 2019. It's what helped me get started online. Here's what I learned (so you won't make the same mistakes), and why I wouldn't dropship in 2022. 👇

Background story first, my business partner Albert approached me with the idea of a home decor dropshipping store. We decided to pool together $5k as a "write-off" and give it a shot.

I remember clearly that we burned nearly $4k, and we were about to call it quits, but then something in our FB ads just clicked.

One of the latest products we added for testing was getting sales. Then more sales. Then a lot more sales.

I think we hit something like $50k that month, and we were over the moon.

We were able to recoup all our losses in a single day, and it was that day I saw the potential in e-commerce.

Over the next months, we were able to scale to $250k /mo in revenue.

Alright, now for the lessons:
- Initially, you're paying for ads as a way to "buy data" for FB and Google to learn how to optimize for conversions.
- Perceived value determines how much you can charge for a product. Invest in web design and ad creatives.

- Do not try to imitate the big players in dropshipping. If they are selling a specific product, it's likely too late already. Also, they probably have WAY more data than you so their ads are more optimized for conversions.

- Invest in product research and building a brand/niche store. Having multiple products that appeal to the same customer will increase your AOV.
- Pay attention to customer satisfaction. FB will clap you if this drops too low.

- Screen suppliers for product quality/packaging. Better packaging will increase perceived value and help to build trust. Also, make sure suppliers are not putting their promotions in their products (Oberlo Suppliers will never put promotional material in their packages).

Now for the mistakes that we made:
- The single biggest mistake we made was when we found the product winner, we should've immediately private labeled the product and shipped it to a 3PL in the states...

We were too risk-averse and short-term focused to order bulk. This resulted in zero returning customers as they had terrible shipping times and quality control.

We left millions on the table with this mistake.

- We didn't diversify our revenue, our revenue was coming in from 95% FB/IG and we didn't even bother testing out Google Shopping. This was probably another 6-figures left on the table.

We eventually decided to sell the company, but by then, the revenue dropped from $250k/mo to $85k/mo and our margins dropped from 70%+ to under 30%.

We got a terrible multiple, but we were able to sell the company for mid 6-figures.

The final mistake we made here was not taking all cash upfront but agreeing to an earn-out.

These PE firm scumbags ended up claiming to have no money to pay us and ran off.

Finally, I wouldn't dropship in 2022 because it has evolved into something more complex than before. It's not as simple as spinning up a Shopify store and feeding your FB pixel training data (due to the iOS update).

I have, however, seen people have some success with dropshipping but utilizing viral videos on TikTok. Here's an example of a gadget that measures out ❄️😂

If you enjoyed reading about stuff like this, give me a follow 👉 @indexsy.

Also, as a final 🖕 to the PE firm, I plan on revealing the dropshipping store we sold to them, as well as our winning product in my newsletter @indexsy.