Proven Amazon Course

122 OEA Podcast - Make Passive Income Dropshipping on Amazon

What’s up Empire!

Joshua Woodward here,

If you have been following our Facebook page im sure you have heard the buzz about dropshipping. When Dean first told me about this idea I was supper skeptical. Last I had heard this method was not okay to do on the Amazon platform and there was word that peoples accounts had been shut down due to it. Well Dean being the wizard he is, not only did he find a legal way to dropship on Amazon he found an incredibly lucrative way to do so.

If you want to know more go to, http://theonlineempireacademy.com/dream-dropshipping/

If you want to know more about us and all we are doing go to, http://www.theonlineempireacademy.com

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Until next time Empire,

Have a great day!

Joshua Woodward and the O.E.A. team

---Transcripts Below This Point---

Joshua:
What's up Online Empire Academy? Joshua Woodward here, your podcast host. Today's sponsor is the Yorba Label Company. They're giving us 25% of three thousand address labels. If you've ever shipped Amazon FBA, you know that you need those address labels. It's a great deal, guys. Here's how you get it. Go on to amazon.com, type in "address labels", select "Perfect peel address labels". In the checkout, you're going to use the promo LABELS25. That's going to get you the 25% discount.

It's time to hop in with our guest. Thank you so much for tuning in, and enjoy the podcast. Today we're going to be talking about drop shipping. We just shot an email, if you guys got it, thank you so much for responding, but we got a ton of response on the subject of drop-shipping. This is, obviously I've heard of it before. I've been talking with Dean about it a lot, but I wanted to get the nitty gritty from the guy who is kind of heading this up, and it is my one and only homeboy, Dean Soto. What's up, man?

Dean:
Hey, what's going on? What's going on?

Joshua:
Dude, [crosstalk 00:01:58] I'm stoked. It's going to be fun. Yeah, we just want to talk through what drop-shipping is for those of you who don't know what it is and then how it can actually help your Amazon business. The big question I've been getting is the legal side of it. Is it legal? We are going to talk through Dean, talk with Dean through this subject and I just want the biggest break because I have a ton of questions too.

leveragerandom

Dean first off, tell me how the heck did you get started with drop-shipping? It's so random.

Dean:
Well first off I apologize for the room. This is not my studio. This is my son's room. We have stars and pictures and all our stuff. I got basically kicked out of my studio because it also happens to be where my littlest baby sleeps so I don't get to have the cool mic like you do today at least.

Yeah, it's interesting. I mean for those who know me for a while I like doing the online stuff like not the physical product stuff. I do all the online marketing. Podcasting I used to do, now that Josh is basically way better at that than me. I give it to him and he's like taking it to the next level. Webinars all those different things. I just don't like touching physical product not that it's bad, it's just doesn't coincide with my nature.

It was interesting. Drop-shipping never appealed to me. It's been around forever, honestly. Everyone knows what drop-shipping is for the most part. There's so many different ways to do it, I never actually went into it saying, "Hey, I want to drop-ship some stuff." In fact it was quite the opposite. I was like kicking and screaming on the way to even figuring out how all this worked, especially with Amazon.

Long and the short is that Brett actually when he was part of the academy, he had some things he was teaching. He wanted to have kind of someone to be able to explain sponsored ads of all things which is another popular topic which we will talk about in another podcast. We've wanted to explain sponsored ads and how to read the data and everything. In order for me to do that, in order for me to come from kind of like a more of a beginner or more of like a ... because Brett he has hundreds if not thousands of different SKUs and just does a ton of different sponsored ads. He essentially was like, "Hey, I need someone who could come from somebody who doesn't really do sponsored ads that much." I knew how he was doing it, I knew kind of all the theory behind it and so on. He's like, "I really need help" and I said, " Sure. Sounds great, I guess. I rather shoot myself in the face, honestly, then touch physical product."

His idea, his main thing is that go and find products from say T.J. Maxx or wherever, bundle them together and then send them in Amazon FBA. Then what you can do is you can then ... it's your own unique bundle. You can then start running sponsored ads to see what the data is because really the data is what's important. Say if I put together a knife and a dish set and I put them into and make them into a bundle and make it into a dinner set. I can then see if I have two or three of those and I am able to sell them via sponsored ads I could know what key words actually converted. I know what price points people are willing to buy at. All those different things, really powerful stuff because then I can take that data and use it for any type of dinnerware.

I did not want to do Amazon FBA. I was like, "There's got to be a better way. I don't want to take these things, bring them here then label them." I don't even ... I hadn't done it in like a year and a half at that point in time. I'm like, "I don't even know if I'm going to be doing it the right way" and I'm like, "I'll just merch and fulfill them."

After a series of unfortunate events, Amazon basically did not give me the Buy Box. When I was merch and fulfilling those dinnerware stuff I'm like, "Crap. How am I going to get the data for this thing?" I remember that I actually had contacts with these vendors for some fitness equipment. I said, "You know what? I really don't sell on Amazon anymore. If I get suspended, I get suspended. I don't care." Honestly because it's not going to matter to me because I make my money elsewhere.

I contacted the vendor and said, "Hey, can I drop-ship with these?" They said, "Yup. No problem." I put up some listings on Amazon just so I can show the data and boom, something sold. Boom, something sold. Boom, boom, boom, boom, boom and it was like thousands of dollars of stuff that had sold. I had the data, but then I also had to figure out how to clean my pants because I totally pissed.

You want to get [Swine 00:07:33] pillow? Sure.

Child:
Yeah [inaudible 00:07:36] his pillow.

Dean:
Jen wants to lay on his pillow? Okay, go ahead and get Swine's pillow. Daddy is doing an interview right now.

Joshua:
This is real.

Dean:
Yeah because I was like, "Well, I thought I didn't want my account to get suspended. Hopefully this is like legal what I'm doing." Then ... I love you. Hopefully this is legal what I'm doing. Send out all the items was able to drop-ship them. I actually after the fact looked at Amazon's terms of service and it was completely in line with what they allowed. Long story short that's how I ended up started to drop-ship.

Joshua:
The typical method of drop-shipping in my understanding has always been this idea of I'm sending or I'm buying product ... how do I ... the way I understood it first was that I was going to buy a product on Walmart.com and then I was going to kind of have them fulfill it for me when it sold on Amazon. I was going to make a listing from that item when it sold I was going to buy it on Walmart and have them ship it out. That was my under ... it was super confusing to me. Drop-shipping has always been a confusing thought [crosstalk 00:08:57] process in my mind.

Dean:
Totally.

Joshua:
Can you kind of walk us through what your model of drop-shipping looks like?

Dean:
Yeah, no that's a good question. I was exactly the same way like completely confusing. I actually had a bunch of software that I was going to be doing trying doing drop-ship. This was like a year beforehand and I'm like, "This sucks. I'm going to do it." That way of drop-shipping is actually illegal on Amazon. It's not illegal law wise, but it is against Amazon's terms of service to do drop-shipping in that fashion. This was a recent change that Amazon had. It's funny because a lot of people actually think that Amazon doesn't allow drop-shipping at all anymore because of that change. I think before this you were even mentioning that you had a lot of people saying that.

Joshua:
Totally and I mean in a matter of a few weeks I've probably had five or six people ask, "Hey, you know I'm not sure about this drop-shipping thing. I think it's illegal." I was sitting down with a buddy the other night and I was like, "No, it is legal like the terms of service like I'm pretty sure it's legal."

One of the questions I had for you and I ... you answered a little bit, but because my understanding was well the reputation of your selling account would be in jeopardy if Walmart ... your listing was still up there and Walmart ran out and that's what they don't want, correct?

Dean:
Correct. Well and it's not just a matter of inventory or something like that. The ... first off I'll explain ... read to you verbatim what the policy is with Amazon. Then I'll give you the why behind ... why they don't want you doing say online arbitrage drop-shipping from Walmart to Amazon and so on and so forth.

Drop-shipping policy as of today ... it's not that hard. It says, "One, be the seller of record for your products, the seller of record for your products. Two, identify yourself as the seller of your products on all packaging slips and other information included or provided in connection with them, okay? Be responsible for accepting and processing customer returns of your products and comply with all other terms of your seller agreement and applicable Amazon policies." Okay? That's it.

You ... it's not that much stuff, right? Essentially what they are saying and what makes this whole way and it's not even my way of doing things. This is something that I stumbled upon and now as I'm doing this I'm like, "Holy crap, there's a lot of drop-shippers that do the exact same thing." Wayfarer being one of them if anyone seen Wayfarer. Wayfarer is a huge drop-shipper and if drop-shipping was completely illegal on Amazon then you would not see Wayfarer on Amazon because that's what they do. I mean they are insanely huge. In fact they drop-ship from a company that I actually did a website for over here and I know for a fact that they're drop-shipping for them. They're actually on some of my listings too.

Essentially what Amazon is saying is nobody likes when and this happens with Amazon FBA, retail arbitrage and all that other stuff. Nobody likes when they buy something say for $79 and in the mail, they get a thing from Walmart which happens to have the receipt in there saying, "Hey, thanks so much for shopping on ... here's your receipt. $29.99."

Joshua:
Oh gosh.

Dean:
Who would want that?

Joshua:
Yeah.

Dean:
Who ... Amazon's like, "Screw this guys. You can't do that anymore." We get calls after calls after calls after calls of people who are upset because they are getting things from Walmart. They want you to be the seller of record which means you have to be a wholesaler, okay? You have to have a wholesaler account. You can't just be ... you can't just go buy something from somewhere else, okay? You have to have your name on any associated packing slips or anything like that. Generally if you have a packing slip what most vendors will do, what most wholesalers will do is they'll have ... it'll say bill to like my company, Pro Sulum LLC and then ship to this one, but they won't have the cost because wholesalers don't want to share what the cost is anyway. 99% ... so your name is on there. You are the seller on record. You're identified as the seller of that particular item and you're totally within Amazon's terms of service.

Joshua:
Perfect. That's actually what I was going to ask you to break down for me was that next piece of it of like how does that work? Are you the seller? I just wasn't sure how that whole shipping process went. That's good.

The next question I have for you was what are some pitfalls that you are seeing?

Dean:
Yeah, that's a good question actually. I can tell you I love drop-shipping way more than I love Amazon FBA by far. It's freaking cool to ... I was just recently on vacation in Idaho and I think I shared with you a couple of things, but basically waking up and seeing, "Hey, sold. Ship now. Ship this off." Knowing that because I have different ways of scaling my business and knowing that it's completely taken care of. I didn't need to pack anything, didn't have to do all that stuff. Obviously it's pretty awesome to be able to do that. It's replenishable all that other good thing that comes with having a wholesaler account essentially.

The pitfalls are I mean the biggest one I would say you are the customer service which could be a bad thing or a good thing. It could be a good thing ... I should say this it could be a bad thing if you're bad at customer service. It could be a good thing if you're good at customer service. For example I just had someone over the weekend return, or not return well yeah. One actually cancelled an item and one returned an item. The person who cancelled I was like, "Oh, no big deal. Cancel item, they're happy. Great." Someone who ... another person returned or wants to return an item they were super disappointed. They were like, "This item didn't fit right, didn't do this, whatever." I said, "Hey, you have every right to be disappointed. I'm going to do whatever I can to make it right and so on and so forth." The last thing I got from them was, "Wow. You have treated me so professionally and I ... it sucks that I have to return this thing, but I really appreciate everything."

You run into situations like that. The only other pitfall, the biggest pitfall I would say is if you run out of inventory, but that's really your fault. Not trying to be mean or anything like that. One of the things ... the cool thing is with this kind of method when you're dealing with wholesalers and vendors and things like that staying in contact with them letting them know and ask ahead of time, "Hey, how often do you run out of stock on these things? These particular items. What items do you never run out of stock on? Because guess what? I'm going to hop on all those freaking items and sell as many of those as I possibly can." It helps them and it helps you.

You can use automated software that has data feed and stuff that keep your inventory levels well stocked, but generally if you stay in contact with folks you should be all good. Really the only downfalls that I see ... I've seen so far personally.

Joshua:
Okay. The next question I had was what are some of the successes you're seeing within the industry? What are some of the things ... obviously you've been doing this for a while now. You're seeing things move and progress and shift and change. What are you seeing people do well? Then I'll ask on the back end what are some of the things that you're seeing other people doing the drop-shipping method that they've struggled with?

Dean:
Yeah. It's kind of a hard question because it's not very popular which you can tell. The cool thing is that ... cool thing is that most people think it's against Amazon's terms of service. Whenever I hear that I'm like, "Thank you so much. I love you. Keep thinking that that way you're not my competition anymore. Sweet. Just ... I don't mind that." In fact, every webinar I have I say it. Any time someone says that Amazon doesn't allow it I'm like, "Sweet. You're perfect. You're exactly what I want." Obviously I would like them to buy my course, but if ... I rather them also not be my competitor.

It's kind of hard to say, but generally the biggest successes people have seen is ... I have one guy who he is literally in less than a month, I think it's been less than a month. Yeah, I'm pretty sure it's been less than a month. He's out sold me like a hundred times.

Joshua:
My gosh.

Dean:
The guy is freaking crazy. He's been with the Online Empire Academy for three or four years. He found a niche. He ... soon as he saw what the ... how the method worked. He had a niche where he's selling items that cost about $5,000. Now with drop-shipping remember that ... most people were like, "Well, how can you afford $5,000?" Drop-shipping, you're getting paid ahead of time. All you have to do is be able to float whatever you got paid for two weeks until Amazon pays you.

He gets about a 35% margin on these. I forgot, let's see $5,000 times 35% so he makes about $1,750 per ...

Joshua:
My gosh.

Dean:
Per sale that he does. The last time he texted me he said, "Cool, yeah I just had my first $10,000 day." He ... you ... when you ... the best part about drop-shipping in general in the industry is that you can sell things that you normally wouldn't be able to sell on Amazon FBA. This thing is way oversized. It's heavy. It's something you're not going to ship Amazon FBA. Plus, most people are not going to wholesale them either because it's going to cost to much.

On top of that you can sell things that for example, the summer. The summer, what can you not sell? You cannot sell things that melt, right? You can't. You can't ... Amazon FBA wise.

Joshua:
No popsicle guys.

Dean:
You can't sell different chocolate packages. You can't sell different things like that. That's one thing that he actually reminded me of and I'm like, "Yeah, you're right. Thanks." Oversized stuff you can sell. Things that you normally wouldn't be able to send Amazon FBA because they might be considered haze mat or they might be too big or they might be too whatever. There's so many that opportunities you can ... so many opportunities with drop-ship that you cannot with Amazon FBA.

Joshua:
Are you buying the items flat out? You said ... I got a little confused when you said float, you've got to float it. Will you explain that a little bit? Let's say someone lists a washer. I was talking to my friend yesterday they were like, "Wait, can I do this model with washers and dryers?" Let's say hypothetically they can do that. It's a $2,500 unit. How would that work?

Dean:
Yeah. Essentially what would happen, let's say you're selling it for $2,500. Typically with a wholesaler account, a vendor account you're going to get anywhere between 35 to a good vendor is going to have anywhere between 35 and 55 percent off of that retail price or the M.A.P. price. What we called manufactured advertise price which is a price you cannot sell below that price. If you do, you'll probably get in trouble with the vendor and they'll probably kick you off and not let you be a dealer anymore.

Say it sells for $2,500 you're going have and I'm going to answer your question, but you're going to have your Amazon fees which are 15%, okay? Then on top of that you might have shipping depending on if they're going to ship that for you for free. I have vendors who ... some who ship for free, some who don't. You got to keep those fees in mind.

What happens is say I'm selling that $2,500 item, you Josh are like, "Man, Hanna really needs me to buy this awesome dryer and washer set and this is the best one I've seen. I'm going to buy it." You go on Amazon and you buy it, okay? For $2,500 plus tax or whatever. What happens on my end is it says, "Hey, sold. Ship now, that washer and dryer." I essentially have that in ... Amazon has the money. They're typically ... they're basically an escrow account. They have the money just like with Amazon FBA, they have the money. They hold the money for ... they actually hold the money until you ship and then I think it's like every two weeks cycle they will give you the money. You paid, they have the money, they tell me to ship, I go tell the vendor to ship the item to you. Once it confirms that it's shipped Amazon says, "Okay, cool. We're going to pay you this next go round." That next go round might be anywhere between a week and two weeks.

That ... until you actually get the money, you have to float. Let's say if you only have $3,000 in your account. Sorry in your bank account or whatever or your credit limit or that's your terms with the vendor. You can sell one, wait two weeks and then resell another one. Wait two weeks and resell another one if you wanted to. The really only constraint is can you float for those two weeks? You're essentially getting paid up front, but you have to wait for Amazon to actually pay you.

Joshua:
Okay, that's interesting. You are negotiating your prices, you're negotiating your percentage with the company previous to listing on Amazon, correct?

Dean:
Yeah, generally there are ... especially if you're new you're going to ... they're going to say, "This is what your wholesale cost is."

Joshua:
Okay.

Dean:
Once you start selling more then you can say, "Hey, can I have a price break on these?" You can actually negotiate prices down. It is very easy to do especially if you're selling a ton for them.

Joshua:
My last question and kind of the one that's been driving me nuts is will I be able to make $1,000 days? I know you said $10,000. He hit that $10,000 mark. What would it take for me to hit a $1,000 day?

Dean:
Yeah, that's a good question. I call that a "How long is a piece of string" question. You know, how long is a piece of string? It all depends right? This is where a lot of people ... a lot of people ... you have to have a mindset shift. If you've done Amazon FBA in the past, if you have done retail arbitrage, even with wholesaling really anything the difference between drop-shipping and everything else is that your money is not tied up. Which is a good thing, but it takes a very big mindset shift.

What is the goal of drop-shipping? The goal of drop-shipping on Amazon is to build your portfolio. Literally all that is, is you're building your portfolio listings because the more listings you have the more opportunity you have to sell.

The downside, I should say one of the biggest downsides with drop-shipping is that you're making between 10 to 35 percent margins. Which most people on FBA doing retail arbitrage are like, "Well, I can usually get a 300% ROI or 50% or a 70% ROI." They look at this and they're like, "Why would I ever want to do that?" Well I just sit back and laugh at them because all I do is I go, "Okay. Let's spend 5, 10 minutes setting up a listing, a bundle for like 799 bucks and I'll make $10, 10% off of this or 15% off of this." I never have to do anything with it again and I'll just go spend another 10 minutes while they're out at T.J. Maxx doing all that other stuff. I'm literally just at my computer creating a new listing and when that thing sells I make 10%, 20%, 30%.

I have a bundle that I created that sold last week that it sells for $699 and I make after fees and everything I want to say ... after fee ... it cost me $384 it sells for $699. After fees I want to say it's like low 600s to high 500s so I make over $100 off of that item. I never have to touch it. I never have to ship it. I never have to ... I mean all the vendor's doing all that. I never have to go and prep and make sure that it's all prepped right and pay ahead of time. I never have to do that stuff. It's really a matter of building your portfolio.

This is what Wayfarer does and I'll end it here as far as explaining. Wayfarer might make 5% off of their items, but they have 100,000 items out there.

Joshua:
That makes sense.

Dean:
Listings. It's almost like a micro transaction model with Visa or Paypal or whatever. Paypal makes 3% off of their transactions or less, but when they have millions of transactions going on you think they care? No because they're able to scale it out.

Joshua:
Dude, I love it. Well I know this is something I'm going to be pressing into and something that I'm going to go through. For those of you who don't Dean has a course. We're going to post those links in the description below. You guys are going to be able to figure out more information about that just if you want to go and take this course because I mean if you haven't ... if you're not part of our Facebook group I would recommend you doing that. Then you're going to start seeing all these different posts about people who are succeeding with drop-shipping. Everybody talks about the living on a beach lifestyle and this for me gets more and more intriguing the more and more I hear about it because it is the living on a beach lifestyle. It's like you just said, "I'm spending 10 minutes making a listing and going for it. I don't have to do anything else." I'm super excited about it. What is the best place for people to get in touch with you if they have any questions?

Dean:
Well, the course is at dreamdropshipping.com, dreamdropshipping.com and really the ... our Online Empire Academy Facebook or the OnlineEmpireAcademy.com I'm always you see me at 2 o'clock in the morning answering emails and things like that. I'm not ... I'm pretty available for stuff, but yeah, I mean I like this. It's and I'm not going to lie it is a side income for me. It's easy side income. I make my money off of other things and I love it. I love the fact that a lot of people are having success with this and I love that I can just put up a listing. I don't have to go out to T.J. Maxx or spend 8 hours a day. I mean the worst feeling in the world is spending 8 hours going and trying doing retail arbitrage. This is why I stopped in the first place. 8 hours and coming back with nothing and knowing that you pretty much failed that entire day. Whereas now I'm like, "Doo, doo, doo, doo, doo. Talking to Josh. Oh, cool, I sold something. Doo, doo, doo, doo, doo." It's nice.

Joshua:
Totally. Well thank you so much for being on. I'm excited we finally got to sit down and talk through this. Empire if you want to know more about him. Go hop on dreamdropshipping.com and/or message us on the Facebook group. Man, we're there. We like to talk about it and I'm excited. I'm going on this journey too with you guys so I'll be asking just as many questions as you.

Well, Dean thank you again for coming on, man.

Dean:
No problem, man. It's fine. My pleasure, I love it.

Joshua:
Thank you so much for tuning in. I appreciate you guys listening and I hope you were motivated by our guest today. Again, our podcast sponsor for the day was the Yorba Label Company. If you want to get that 25% off of 3,000 address labels, I know I already go mine. I'm so excited about them. They're fantastic. Go on to amazon.com, search "address labels". You're going to find them under "perfect peel address labels". Click on it in the check out. Go to the promo section or the promo code and type in LABELS25. Again, that will secure you that 25% off.

Thank you so much for tuning in. I appreciate it guys. Do you want to know more about us and everything we're doing? Go on to the OnlineEmpireAcademy.com. You can also go on to Facebook at Facebook/theOnlineEmpireAcademy or on YouTube same thing guys. I appreciate you tuning in. Until next time Empire, have a fantastic day.

Intro Speaker:
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