Avoiding Common Pitfalls in High-Ticket Dropshipping

Hey guys, welcome to the eCommerce Paradise podcast. I'm your host Trevor Fenner and today I'm going to talk about some common mistakes to avoid with high-ticket dropshipping.

If it's your first time listening to my podcast, don't forget my free niches list and course at eCommerceParadise.com slash mini course. And let's get into it. So number one is choosing a bad niche. And I guess there isn't really bad niches, but there's niches that just won't really work.

And I'll provide some examples number one is of a niche that won't work is one where the suppliers or most of the suppliers just won't drop ship for you it's pretty difficult to get into those niches because you just won't have suppliers to sell products with they you know it's like usually the suppliers are direct to consumer companies that are only selling to consumers themselves or the suppliers want you at a retail storefront this is pretty common when it comes

to really complex products you know like really unique complex specific products that you need to learn a lot about because i really need especially like big products that require service because you really need a storefront and a specialist to deal with those so those might seem more like a good idea because there's less competition but the reason why there's less competition is because it's harder to sell so if it's something

you really are interested in or you already know about you might consider partnering with somebody or doing outside sales or like commission sales for those products instead of dropshipping or affiliate marketing, that kind of stuff but those types of niches are definitely ones to avoid what you really want to figure out is a niche where there's already competition selling it that's the most ideal thing okay so.

When there's already competition, there's like a ton of competition, it's going to be difficult, more difficult to do because you're going to have to do more marketing and promotions than normal. So like other niches that are easier to sell in, you're not going to need to do so much marketing promotions in. What you're going to find usually is that the niches that are oversaturated are actually easier to sell.

And that's why they're oversaturated. Usually it's because the products are simpler, the supplier or distributor catalogs are much smaller. So it's easier to upload their catalogs. The margins are decent. Yeah, that's pretty much the main reasons why. And so because of that, obviously, everybody and their brother and sister are going to want to sell those products. But it's not that you can't compete. It's that you're going to have to do a lot more to stand out in those niches.

So if it's your first time, your first niche, what I would recommend doing is picking a simple product because for you, it matters more to get your website up and running and marketing and ads running than it does to pick the perfect niche that's going to have very few competitors and easy to work with and stuff like that. It matters a lot more that you just get the ball rolling and get some experience and get some orders and sales.

And then later on, when you have experience and you can scale or you can go to a different niche and then you can set up a new store in a different niche that's a little bit harder to establish in, but long run, it's going to be better. So I would just recommend for that. Some people, for instance, if you already have experience in sales in a particular, very specific niche, like let's say you worked as a nurse or something like that at a hospital.

So you already have experience with hospital equipment. You can definitely try to get involved in the hospital equipment niche because there's a lot of expensive products in hospitals and you might already have some hand-on experience using those products. So that's something to consider. Again, another idea is if you worked at a restaurant, like a commercial restaurant in the back as a chef or something like that. And you'll probably already have experience using these products.

You know what they're called. You know what they're for. You know the different types of them, the different brands of them, that kind of thing. So maybe commercial restaurant equipment would actually work for you really well. But the thing about those brands that sell those really complex types of products is that they're only going to want to work with people that know a lot about their industry already or have a physical retail storefront. And you really should have both.

But if you don't have a physical storefront, then you really got to be a specialist. And then you really most likely are going to have to go and meet those people in person at a trade show and introduce yourself as, you know, I come from this background, I want to build a store and I have all this experience and I feel like I provide value. And then if they know you really well, then, and they trust you, then they'll probably set up an account.

But, but if you're just a beginner, has no experience in a really like niche industry, like a really specific, complicated industry, it's going to be very difficult to break into. All right. So just keep that in mind. It just depends on who you are and what, you know, kind of experience you have and all that. Try to choose a niche that fits you. Okay.

But also choosing and working with suppliers that don't have good margins, that's one of the biggest mistakes, you know, and that's just one part of it. They got to have good margins. They also got to have good customer service. They got to have really good warranty support.

And, you know, that really comes in handy because if a product arrives and it's damaged or somebody gets a product and it just doesn't work, the way the supplier handles that issue can really make or break your relationship with them. Because if you ship a product and it comes back and it's damaged and all this stuff gets messed up, you can be out potentially hundreds or thousands of dollars in a single loss from one order.

And so that can make a huge difference, obviously, if the supplier is not going to help you out and make you burden and handle all that stuff. If they're going to send a label to the customer and it's going to be free on you to have them send it back, that's a good supplier.

That's someone you want to work with and keep working with. If they're going to put all the burden on you, that's probably somebody you want to consider not working with or coming up with a win-win solution where you can like split the costs or something with them. But yeah. And then regarding margins, you really only want to work with suppliers that provide you a minimum of 20% profit margin after shipping costs and any other fees.

Because below that, you're just not going to make much money with ad spend. Ad spend is always going to take up about 10% of your margin.

We're always aiming for a 10X plus ROAS, which is return on ad spend, which means that like, for instance, if you get $1,000, sorry, if you spend $100 in ads, then you'll get $1,000 in revenue and so if you only have like a 10 or 15 percent margin right then you're hardly making any money after ad spend so the minimum margin you want to work with is 20 percent because usually you're giving like a coupon and then you have to pay a merchant processing fee so the coupon is

going to be like five percent merchant processing fee is going to be like three percent so you're already looking at like you know eight percent on top of the ten percent on average that ads are going to take just the cost to the acquire the customer. You know, so 20% is pretty breakeven already. So you really want to work with suppliers that are like 25 to 50%. That's the ideal way. If it's like 30, 40%, that's the best level. And those suppliers I really want to work with.

If it's below that, it's like 20%. I don't even want to really work with them. It's just, it's too breakeven. Of course, on your store, you can say that you don't accept coupons, but then there's always going to be competitors that are going to underbid you, provide coupons and whatnot. And then, you know, if you're running ads, you're paying for traffic, it's like, what's the point, right?

So you can come up with a strategy where you have certain brands on your website you don't run ads for and you don't have coupons for depending on the margins, that kind of thing. But just keep in mind that it's going to distract the people that are on your website from buying the products that they're interested in. They're going to see different brands. They're going to think, oh, what about that brand?

They're going to research it. Oh, it's cheaper. Oh, well, maybe I should just go with this one. And if that's less margin, then not only are you selling something cheaper and less margins, you're not making any money, but you kind of sort of inadvertently convince the customer to do that just through having them on your website.

So I've had websites where I had tons of brands on them. and what I decided to do was to actually cut that out and stop doing that and only have brands on my websites that have good margins. That's just basically it. So it's like, now it's like 25% is our minimum but 20% really at the end of the day is like, okay, we'll work with that but 25% and some orders come through and they're less margin and you just got to figure

that out order by order. So you got to figure out, okay, so why did that come in? Was it shipping costs? Was it taxes that the supplier charged us? Was the product just priced too low? Begin with, are we not making much money at MAP? Do we need to raise the price? Usually we'll check competitor's size and see what they're doing. The older competitors usually have already dealt with the issue before, so they've adjusted their price higher.

And then we'll adjust their price higher, but just a little bit lower than the competitor. So that's usually the way to do it, just one by one at that point. But anyway, you want good margins. That's going to be the bread and butter of your business. Make it happen.

The next big mistake is people not taking customer service seriously enough. Helping your customers is so important. And if anything goes wrong, you've got to make sure that you take care of the customer because customers can go and complain on websites like the Better Business Bureau or Trustpilot or whatever and leave bad reviews. And, you know, I've had worse where they, like, submit complaints to, like, the district attorney in their state.

And, you know, like, I haven't had any lawsuits, but I've had people threaten lawsuits before. It's pretty crazy. So just make sure you take care of customers, whatever the issue is. Just, you know, try to think, like, what would Amazon do, you know, and do a similar, even if it's going to cost you some money. Just take care of the customer. Make sure that they're, you know, happy and satisfied. It's really what matters at the end of the day.

But also just following up with customers after they've placed orders with you and letting them know when stuff is going to ship out. The worst thing is if it takes you a day or two to figure out when something's going to ship out, it doesn't mean that you should wait to follow up with your customer. Follow up with them right away and let them know that you're processing their order. And then the next day too, we're still processing your order, waiting for it to be shipped out.

And usually things take a day or two or more to ship, that kind of thing. I mean, just figure out your average times to ship and your suppliers should tell you this and then let the customer know. So, you know, dropshipping is really simple. It's just a lot of back and forth because you are the middleman. So it's just, you know, talk to your supplier, talk to your customer, talk to your supplier, talk to your customer. So a lot of just back and forth, really simple stuff.

Make sure you never neglect your customer. All right, the next one is ignoring marketing SEO. I think a lot of people just, well, I mean, that's not the worst thing, but like setting ad accounts on autopilot. The kind of cool thing about what we do with the ad accounts is that we have a pretty automated system set up so you don't really have to do a whole lot of work. To manage them once they're set up and they're running.

But you should always check them on a daily basis. I always check my ads and I make sure that the search queries are correct and the spend is appropriate. I'm not really doing a whole lot to scale an ad account because in my opinion, you can't really scale ad accounts past a certain amount. You're better off putting money and time and resources into other marketing areas. If your ad account is set up properly, the only way you're going to scale it is really just by getting more suppliers.

And then more suppliers, again, you've got to be careful because, you know, are the suppliers profitable? Are they worth it? Are they bestsellers? That kind of thing, you know? Sometimes I've had sites that got worse because I added more suppliers to them. It's weird like that. You're definitely going to find a sweet spot and a plateau with a website.

Obviously, the potential or the goal with any high-ticket dropshipping site is to get between $100,000 and $200,000 a month in average revenue because that's the sweet spot. You make enough money to have a good living, but it's not too much work to handle. Once you get beyond that, it becomes a lot of work to handle. You're going to have to have a bigger team, more processes and all that stuff. If you're the type of person that wants to scale their business, you can definitely scale it.

But you're going to have to probably end up getting some kind of a warehouse and stocking some of the products or at least having demos, you know, the products and scaling your content that way by doing sales videos and reviews and things like that.

But regardless of your lifestyle, whether you want to have a physical storefront or whether you just like want to travel the world, be a digital nomad, you know, there's just kind of like sort of plateaus and limits you'll reach with this business model. And I think it just depends on your goals and what you want to do. High ticket dropshipping can be a great side hustle. It can just give you an extra couple thousand dollars a month. It can be a great full-time gig.

It can get you like, you know, $10,000, $15,000 a month. It can scale up much higher and you can do your own private label brands and stuff like that. But again, it's just different types of marketing, different stages of the process. And it just depends on your goals. But do not ignore SEO and ad accounts and social media marketing.

And definitely put time into getting UGC, user-generated content, because that kind of stuff can really fuel your business because it provides more social proof and trust. Okay, and that's what really matters in a lot of consumers' eyes, especially with small businesses. They are really nervous that you're a fly-by-night business, so you've got to prove to them that you're not. And the way you do that is by providing social proof. So keep that in mind.

Let's see here with some of the good ones. Key metrics, let's talk a little bit about that. So when you're looking at your site, you really want to know your numbers all the time. That's a good idea. You've got to know how many people are coming to your site every day and where they're coming from. What product pages they're landing on and stuff like that. You can optimize that experience.

You can download an app called Lucky Orange. You can see what pages people are landing on and what the experience was like for them and what they did on the website. You can just look at your basic Shopify reports or Google Analytics and check it out. You want to know how much traffic you're getting, obviously how many sales, how many orders, what your average order value is, what your conversion rate is, what your return on ad spend is, what your cost to acquire a customer is.

These KPIs are really going to help you to stay on track because if you start to drag in one section or another let's say your conversion rate drops to 0.4 from 0.5 or goes up from 0.5 to 0.6 these things are really going to have a huge impact on your business so you've got to keep track of that kind of stuff one day you might have a 2% conversion rate and the next day zero orders so things are going to even out so look at them over time 7 days,

14 days, a month or 2 months, 3 months, whatever but just always be looking at your key metrics and getting an idea of where your business is at what suppliers and products are driving the most traffic from the ads versus SEO and where you should be working on. Sometimes I notice that certain products just get a ton of traffic but no sales. And other products that get hardly any traffic get sales. And so it's kind of confusing, but definitely the ones that get a ton of traffic and no sales,

something is wrong. So you got to look into that. You got to figure out what is the problem there. Don't just ignore that. Do we have a good price? Do we not have a full offer? Are the competitors offering things we aren't? That kind And sometimes it's really simple. All you need to do is update your picture or update your product description or something like that or you're missing an add-on or something like that. You're not offering white glove delivery or an extended warranty.

There's all sorts of things you can do, but just keep track of your metrics. It'll give you an idea. Always do competitive research. If you're not looking at your competitors all the time, you're losing track of the industry as a whole. On a weekly basis, just look at your competitors' websites and see what they're offering, what they're doing, especially during sales holidays, and get an idea. Use that as inspiration. and to drive your own stuff.

Okay, I think that's enough for now. Lots of mistakes you can make in high-ticket dropshipping.

Things you'll definitely learn over time. But the best thing you can do is to create SOPs, Standard Operating Procedures. These are documents and videos that will outline how to handle certain things. And then you should be training virtual assistants on how to handle them for you so that you can make things easier for you in your life. And if you're looking for help with that, I provide a virtual assistant recruiting

and training service. so you can check it out at ecommerceparadise.com slash VA. And also go check out my free course and niches list, ecommerceparadise.com slash mini course, and my masterclass for high-ticket dropshipping at ecommerceparadise.com slash masterclass. And if you want a store built for you, I offer that service as well. Go check it out and book a call with me, and we'll discuss it at ecommerceparadise.com slash turnkey.

Thanks so much for watching, guys, listening to the podcast episode, and I'll see you in the next episode. Take care.