Anyone can go to Alibaba or CJ Dropshipping and sell an item dropshipped online. But can you actually make money doing this? You will see people on Youtube selling you courses on how to do it, but to me that’s the first red flag. My theory is if anyone is teaching you how to make money, why are they just not printing money with what they are teaching?
When you are selling the same exact product as someone else, you are most likely in a race to the bottom on price (see Amazon). But if you really think about it, what is the difference between a Casper Mattress and a Leesa Mattress, or a Nike running shoe and a Reebok running shoe, or a Titleist golf club and a TaylorMade golf club? It’s not much, and really it is just their brand that differentiates themselves. A lot of times these brands use the same manufacturers and just put their brand on the product that they sell.
I had a conversion with Marc Gutman (a branding expert) from WildStory again to ask him this question: Can you create a meaningful company dropshipping products from Alibaba? Here is our conversation:
We took a look at two examples that I have been following: FloppyFishy.com and TopTacticalgear.com. And for the second time, our conversation ended up drifting to golf and talking about our love for the Bad Birdie brand.
I have been following Floppy Fishy for a few months now. I first saw their ads on TikTok and was curious to see how much business they were doing (read my first write-up on them).
You can find this exact product on Alibaba (see here). Depending on the quantity you purchase, you can buy these for between $.55 and $2.50 per unit. Floppy Fishy is selling these for $29.99 (with free shipping).
Floppy Fishy is processing 40-50 orders per day, approximately $1200-$1500 per day in revenue. I estimate FloppyFishy.com will generate about $500K in revenue this year.
Is This Sustainable?
That’s not bad, but is it sustainable? As I highlighted before, anyone can go copy this model. Their TikTok ads are shot with an iPhone with some text overlay. Anyone can go source the same exact product and send traffic from TikTok to their website. Floppy Fishy has built no moat to their business. There is nothing special about what they do.
But could they change this by building a brand? Right now, Floppy Fishy is only looking for transactions. And most likely, when enough competition enters the market, their model will no longer work and they will move on to a new product with a similar model.
Creating a purpose beyond selling a product
Floppy Fishy could create a purpose beyond selling just a product. They could use this one product as a launching pad to accomplish their purpose. Maybe their purpose is for pet stimulation. Stimulating your pet’s mind can help them learn, lower stress, curb unwanted behavior, and keep your pet healthy. Floppy Fishy then could go source more products that are the best at stimulating your pet’s mind and become the go-to source for pet stimulation toys.
Top Tactical Gear is another example I found of a company selling a product that could be found on Alibaba. 60% of their sales come from the sale of Tactical Gloves. Similar type gloves can be found on Alibaba.
Top Tactical Gear goes a step beyond Floppy Fishy and does provide a purpose on their about us page:
“We created TopTacticalGear back in 2018 to help you prepare for some of life’s unpredictable challenges and opportunities, in whatever form they may present themselves.”
Top Tactical Gear extended their product offerings beyond just the gloves (Floppy Fishy has not extended beyond their single core product). They also sell Back Packs, Belts, Hats, Helmets, Pants, Watches, and more. All products that fall under their purpose of preparing you for life’s unpredictable challenges and opportunities.
When I last took a look at Top Tactical Gear’s orders back in August, they were processing about 40 orders per day. In September, it looks like they are processing about 60 orders per day. I estimate their September revenue will be about $75K. Their August revenue was around $55k.
Note: These numbers are down significantly year over year (August 2020: $134K, September 2020: $205K).
Top Tactical Gear Branding
Top Tactical Gear has made some steps towards building a brand; however, I feel like most of it is still just surface level (lip service). They tell you what their purpose is; however they have not convinced me by showing me that is their purpose (This still seems to be a business that is more focused on getting transactions rather than building a valuable brand).
They have 18K followers on Instagram but I do not feel that there is a community that loves this brand. They have done a better job of taking a product from Alibaba and trying to differentiate themselves with branding than Floppy Fishy has but there is a lot more they could do if they focused more on brand building.
Milking The Cow
I view companies like cows and the milk they produce as returns. You could try to maximize the amount of milk produced in the short term, but most likely, that will come at the detriment to the long-term value of that cow. You could try to find new cows to get milk from when the useful life of the first cow is done, or you could try not to maximize daily returns but focus on the long-term health of that cow and increase its chances of it producing milk for a long time.
Floppy Fishy is only focusing on transactions, and they will find that strategy will run dry fast. My bet is within 1 year; Floppy Fishy will no longer be in business. They will have to find a new cow to get milk from.
If you want to build the next Allbirds, or Chubbies, or Dr. Squatch you have to be more focused on the long-term health of the cow. Forgo some short-term returns so you can increase the overall value long-term.
This doesn’t mean you can’t start with selling a dropship product from Alibaba or CJ Dropshipping, but you will have to evolve beyond just selling a product online. Figure out what your purpose is, the customers you want to serve and how you can make their lives better.