‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping
There is plenty of talk in India these days regarding how India can try to pull business away from China in the wake of Covid. Whilst James Crabtree pours cold water on Indian hopes in his piece e in the Nikkei Asian Review, Sirin Kale comes at the issue from a different and arguably more instructive angle. Kale’s long essay in Wired highlights that manufacturing in China and then selling the produce to the West is no longer just the preserve of Fortune500 companies. In fact, millions of entrepreneurs across the world are earning a living doing just that. Kale’s essay describes a loosely structured community of entrepreneurs – called “dropshippers” – living in the Indonesian island of Bali in a town called Canggu:
“The town, once a stop-off for backpackers en route to Ubud’s yoga studios and hippy scene, has in recent years become a hub for self-described “digital nomads”. In Canggu’s cafés, barefoot westerners run fledgling companies from MacBook Pros. When not talking Facebook ads or cost-per-click, they socialise exclusively with each other….Inside the city’s co-working spaces…people are building business empires selling products they’ve never handled, from countries they’ve never visited, to consumers they’ve never met. Welcome to the world of dropshipping.
Dropshipping is a “fulfilment” method. At one end of the supply chain, an entrepreneur identifies a product – usually through Chinese e-commerce platform AliExpress – which they think they can sell to European or American consumers. They create a website using Shopify, and identify and target buyers, typically using Facebook ads, although you will find dropshippers on other platforms, including Instagram, or selling through marketplaces such as online homeware store Wayfair.
When an order is received, the dropshipper purchases the item through AliExpress, and has it shipped directly to the buyer, pocketing their mark-up minus marketing spend. At no point does a dropshipper hold stock: they are simply the middleman in a globalised supply chain.
Successful dropshippers often solve so-called “pain points”. Perhaps you like to go running with your dog, but find holding the lead a chore. A dropshipper finds a hands-free running leash on AliExpress, and targets it via Facebook to dog-loving runners. They’ll create a video showcasing its benefits (videos outperform imagery), and then haunt you with that video until you give in and purchase the item…”
Once you read this piece you realise that this is simply a variant of the way millions of Indian SME traders do business – they identify a need in India, say cellphone batteries, and then find a source in China who can fulfil that need. The only difference is that Indian SME traders are not using social media as effectively as the dropshippers in Canggu who have turned their offices into Youtube or Facebook broadcasting platforms.
In a further echo of what happens in India, Dropshipping is finding takers amongst educated Western youth who can’t land the lucrative jobs on Wall Street that they once dreamt off: ““Most of my life, I’ve never had strong ambitions to have a lot of money,” says Whitaker. “But I really think if you’re poor or middle-class, you’re going to get fucked in the next 20 years. It’s going to get, like, really bad.” Dropshipping offers these men a way to accrue wealth outside of the stultifying confines of corporate culture, and without formal qualifications – many of the dropshippers I meet are college dropouts.”
The economics of dropshipping is however depressingly similar to what you see in large industries with low barriers to entry: a few players make all the money and the rest of the riff raff just runs around frenetically whilst earning very little: “Louden, who is 28, has the affable, languid demeanor of the well-mannered Virginia boy…In Chiang Mai, he met a dropshipper who introduced him to remote working. Louden worked for free for other dropshippers to learn the ropes….This year, his Shopify records show he’ll clear about $90,000 (£69,000) in personal profit. He describes dropshipping as a “real-life video game”, albeit one he doesn’t seem to enjoy an awful lot. “When you do dropshipping and Facebook ads, it’s like going to the casino and pressing the slot machine, and based off what happens, that’s how your emotions are going to be,” he says…Plenty of people never make it. You need money to start an online store and invest in marketing, and it’s easy to burn through cash while trying to figure out what sells.”