The Dropship Unlocked Podcast

EMERGENCY: How Dropshipping Has Changed Forever (Episode 134)

• Lewis Smith & James Eardley • Season 1 • Episode 134

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🗣 In this episode, Lewis Smith and James Eardley discuss the dramatic changes in the dropshipping landscape, specifically how the new tariffs are impacting low-ticket products and reshaping the industry. 

With the introduction of higher tariffs on products from China to the US, the dropshipping business model is no longer as simple as it once was.

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Topics Discussed:

  • The Impact of Tariffs on Dropshipping:
    • How tariffs are significantly affecting low-ticket dropshipping.
    • The increased difficulty of importing products from China into the U.S.
  • Pivoting to High-Ticket Dropshipping:
    • Why high-ticket items are a safer option in this changing landscape.
    • How higher price points offer greater margins and a buffer against unexpected costs.
  • The Shift in Mindset for Entrepreneurs:
    • The importance of adapting your business model to thrive in a changing market.
    • Real-world examples of success with high-ticket dropshipping and local suppliers.

Links and Resources Mentioned:

Key Takeaways:

  • Adapt to the New Reality:
    • With tariffs impacting low-ticket dropshipping, it’s crucial to pivot towards high-ticket items to ensure sustainable profit margins.
  • Shift Your Mindset:
    • Embrace the changes in the dropshipping world as an opportunity to improve and build a more profitable business model.

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Dropship Unlocked - Lewis Smith

How to Launch a UK Dropshipping Business Offering Next-Day Delivery...

...Even If You Don't Yet Know Which Products To Sell

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Join Lewis Smith, Founder of Dropship Unlocked, as you build and launch your high-ticket dropshipping business.

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Lewis Smith:

The drop shipping landscape has just changed dramatically, which means that you now have to the reality is that you cannot expect everything to continue as normal now that the tariffs are in place. Instead, we must with that fact alone. You know that you have to pivot your drop shipping approach from now on,

James Eardley:

drop shipping has changed forever.

Lewis Smith:

For the few well informed people, this will become your biggest advantage, but only if. Welcome to the dropship unlocked Podcast. I'm Louis Smith, the founder of dropship unlocked, and with me is our client success coach, James Eardley. Now when we're not recording podcast episodes or running our own e commerce businesses, you'll find us helping aspiring entrepreneurs launch their own high ticket drop shipping stores. So if you're ready to build your own six or even seven figure online business, then head over to dropship unlocked.com. Forward, slash, start now, sit back, relax, and let's unlock your potential with the dropship unlocked podcast, we are in a bit of an emergency situation. There's been tariffs implemented from different countries to other countries, specifically by President Trump in recent history, and that's severely affecting low ticket drop shipping. So in this episode, we're going to be discussing how this change has completely altered the landscape of drop shipping, and how you can make the most of it and identify the biggest advantages that have come for you out of this whole situation. So Louis, for anyone who's been relying on low ticket drop shipping items from China, what do you think these new tariffs and this new situation means for their business? Well, it's not good. It's definitely not good if you're relying on importing products from China, especially into the US. At the moment, things have just been made a significant amount more difficult, and it's looking less and less viable as a business model. We won't go into specific percentages, because by the day, they're changing. And so I want to make sure that this is this is still relevant into the future, but depending on what the tariffs are, by the point this podcast episode comes out, they're significantly higher than they were. Let's put it that way. The reality is, it's looking like it's only going to go one way. These increased tariffs for getting goods in from China mean that businesses who were previously relying on getting cheap products in from China and then just marking them up to an American audience, are going to see a significant rise in the product costs and most likely complexity of getting those products into the US. So then that causes other knock on effects, like shipping delays, which are going to probably come in with these tariff hikes as well, because customs are going to have their hands full and be busy with lots of different paperwork to have to fill out now is going to lead to more frustrated customers, if that was your model, and therefore more lost sales, more negative reviews. And it's just not a very pretty picture. So it's going to take a significant hit on profit margins, because now, with these new higher costs, depending on what the tariffs are, by the time this comes out, the profit margins for that low ticket China drop shipping model are just no longer going to be sustainable, because it's only going one way. In many cases, it's just now impossible to make money on these products. If you account for the product price, that's going to increase the tariff. On top of that, the ads cost to acquire, the sale, the long delivery times the complexity, it's not looking good. It's not looking good look. We're speaking from experience in that we used to do this type of drop shipping. So we understand how pivotal the margins are when you're selling low ticket drop shipping products. I mean, it's the same for high ticket as well. But when you're selling low ticket products, your margin in the dollar amount or the pound amount is so thin that as soon as these increases are added in any way, shape or form, whether that's in shipping cost or in tariffs, then it really significantly can impact your business and how profitable you are. And if you were selling $30 products in the US, that was costing you 10, $10 to buy in China, and suddenly you've got these big increases in tariffs, you can see how easily that $20 profit can be eaten up, and the amount of money you've got to spend on ads to generate these products is even further reduced. So you've got to be really careful with this situation. We'll talk about, and we'll get into what we're doing now to get around this, and how we know that our businesses aren't going to be affected by these changes, which are lovely position to be in, but I think we need to start giving some real solutions for people if they're in this situation, because people will want to pivot away from this, because all of the the back and forth that's going on, the the difficulty to understand what's going to happen next is incredibly uncertain, and it must make people in this business model feel very insecure right now with with their business models. So how would you recommend for entrepreneurs to actually pivot in this new environment to stay profitable? Yes, it's horrible. You don't want. To see anyone who is running a business suddenly have a factor that's just out of their control, impact, you know, whether they can succeed or fail. So it's not, it's not a good situation, um, if your business is in that position, however, like you said, we want to be very solution focused in this, and we don't just want to dwell in the doom and gloom for too long. There are ways you can fix this, there are ways you can make it better. And the first thing that you can do to significantly increase your margins, simplify your business and avoid having to worry about these tariffs affecting you directly, would be to just shift to using local suppliers. So by sourcing products from local suppliers, like those in the UK, or if you're in the EU, like those in the EU, you can avoid most of these tariffs and the impacts that they'll have on your business. There might be effects upstream. If the products are manufactured initially in China, for example, and sent to a supplier, but you're not the one being affected by that. You'll still get your Trade Margin, your profit margin, from your supplier, and then you'll market up to whatever their recommended retail prices. So you're somewhat protected from that. If you do work with local suppliers, you also get the benefit, obviously, of faster delivery, faster shipping, and much easier returns if ever an item has to be returned, which is a huge win for both yourself, the simplicity of your business, your customers experience, and just generally, having a much smoother operation. The other thing that you can do to soften the blow and to build yourself extra buffer is just focus on higher ticket prices. So higher ticket drop shipping, and the best way to do that is to pivot towards selling high ticket items. And these are products that are going to have a much higher price point, they're more premium, therefore you'll get a better overall profit amount. And because of that profit buffer that you build in by selling more expensive items, it allows you to account for unexpected costs, things like this, like changes in government policy, but also just build more profit for every sale that you get, cover that advertising spend and build a more sustainable and long term profitable business. The other things that you can do, if we're thinking about solutions at this stage, are just change your mindset. It's a great opportunity to level up your business. Drop shipping from China to the US has always been a very popular entry level business. You go on Tiktok or Instagram reels or whatever, and you'll see so many people touting this model as like, the great way to make six figures online. The reality is, as we've always talked about, it's it's more complex than that, and there are downsides that you won't see until you're in that business model. And this is now another one of those to kind of tip the scales in the favor of our model, the home turf advantage. So yeah, high ticket drop shipping from UK suppliers, if you're in the UK, is going to make your business more profitable. It's going to make it a lot more sustainable, more enjoyable to run, and it's just going to align better with the current economic situation. That only appears to be going one way at the moment. It is. It's going to continue, as far as we can tell, right now and and what that means is the drum that we've been banging and that you've been banging for a while now, Lewis about the home turf advantage is really ringing true, because the advantage of just being all on home soil in terms of the suppliers and the customers that we're selling to means that we only need to keep an eye on our own government's changes, and we can almost be relieving as We as we as we watch the news and realizes international trade wars are going on, we can look at our business and be so grateful that we're not reliant on importing products from different countries, which is at the whim of these trade wars that are going on the back and forth that we can see happening right now. I'm certainly very grateful for that. So with the solution oriented mindset that we're taking into this, because there's always opportunities when these crises happen. What do you think? Well, something I know that entrepreneurs will be thinking is there's a bit of a mindset shift that we need to have when you first get introduced into drop shipping suppliers are already always associated with being in China very often, and so a lot of people just write off there being any drop shipping suppliers in the UK, or in the EU or in the US directly already. And so it needs to be a bit of a mindset shift to actually find, accept that there are some and then find the UK drop shipping suppliers that are out there. So for someone that wants to catalyze in this situation and find UK drop shipping suppliers, what should they do first, to start taking action on this new business model that they're going to pick up? Yeah, I think, like you say, it's a shift in your maybe even a in your understanding of the definition of what a supplier is, because suppliers might originally create products like the actual manufacturing might not happen in the country where the weather, the distributor, should we call them are based. So, for example, I might have a supplier in the UK whose products originally come from China. So this is what I meant about, like upstream. There might be some effect, because, you know, we're talking here about relationships, I guess, between the UK and China, which we don't even know what that situation is going to end up being down the line. But let's assume there's also some kind of terror. Put on that and it makes things worse, right? Because I don't think, well, hopefully that they'll negotiate some kind of better deal, but, but we have to prepare for the worst case eventuality, I think, as entrepreneurs, so let's assume that there's this massive tariff added onto products from China to the UK in that scenario. Does that then ruin our business model? Well, no, because the the distributor who's in the UK that stores those products in their warehouse, that uses the supplier in China or wherever else in the world. This is kind of universal with any country that they source the products from that yeah, their costs might increase, and so yes, they may pay pass on those costs to us, and we will then have to pass on those costs to customers as well. So that's kind of just the way inflation works, right? It's just going to increase the cost of the same good however, that's going to be across the board. So that's just the reality of it. Like we're kind of just in the middle of that machine. It's like, if costs go up or so will, the margin will remain consistent, the RRP will go up, so the price to the customer, and therefore will just be part of that equation. So I think you're somewhat protected, albeit, if you zoom right out and look at the picture, things are becoming more expensive, but you are somewhat protected by doing that. So that's what I mean about changing the definition of of what we talk about a supplier. Like, if you think, oh, there are no suppliers in the UK, well, actually, there are. There are suppliers in the UK who do even make the products in the UK. But even the ones that don't, they store the products in the UK. They distribute the products from the UK from warehouses. They can provide UK customers with the next day delivery. So to find UK based drop shipping suppliers. If you're in the UK, you want to run a business in the UK, and you want to offer fast next day delivery, then here's how I'd approach it. Initially, start out by just brainstorming potential ideas and niches. So think about markets that interest you, but also markets that have proven demand. We want to serve an existing hungry audience, a group of shoppers that are ready to spend money and want to to buy a certain type of product. You can check for that search demand. So use tools like Google Trends to verify that there's enough search volume so enough people on Google looking for those products to support the products that you're thinking or the site that you're thinking of creating, and check as well. At that stage when you're doing your research, is the best time to check. Are the prices high enough? There's no point doing all of this and then still selling products that are 2030, pounds per item and making hardly any profit. If your average price is too low, you won't be able to generate the profits after spending money on ads to acquire those sales to make this viable. So that's the best time to kind of go through those criteria, validate that there's demand, validate that the products prices are high enough, and then go into business once you've ticked those boxes, and you'll make your path ahead so much more enjoyable in your business, so much more successful, exactly? Yeah, with those two criteria ticked, you've gained the advantage that you would have lost if you were selling low ticket products from China, because your margins may have been wiped out by this recent change. But when you're selling high ticket products and they're sourced and delivered from warehouses in the UK, you get all these advantages of fast delivery, higher profit per order, and no complexities in terms of getting products across the border. So you can follow in our footsteps in that these are the businesses that we run, and I've been through the dropship. I'm not masterclass that you've set up, Lewis, and are now coach for that program, because I followed in your footsteps, originally in getting products verified in the UK already, and there are 1000s of different niches that you can find. But to make sure that you're going to be building a profitable business from the very start, as well as those criteria you've already mentioned, we'll also check a following seven criteria as well. I'm going to go through just one at a time now, so we'll make sure that there's not much seasonality in the niche, so that your products are going to sell all year round. We'll make sure that there's not too much brand domination, so that you're not reliant on a few select brands in a niche. We'll make sure that there's consistent pricing across the products that you're selling in that niche, so there's not tons of undercutting going on. We'll check that there's plenty of brands in the niche. We'll check that there is already competition. So it shows the proof of concept of drop shipping retailers already operating in that niche. And then we'll list all of the direct competition so that we can look at their suppliers that they're working with, and suddenly you have all of the suppliers in the UK for a profitable niche at your fingertips, and you can start contacting them and build a successful business that doesn't have to rely on the international trade wars and how this all pans out. So Louis, just to put this into context about the kind of success that you've seen by following this, not only have you avoided all the complexities and the headaches when these kinds of trade wars happen, but in terms of numbers, let us know what you've achieved. Just to kind of hammer this point home as to why this is such a big opportunity. Unity, yeah, it's funny how quickly your your sales start to add up when you're selling high ticket products. So say you're selling a 2000 pound item, and you make 30% profit margin. That's 600 pounds in net profit on a sale after your costs, right? For one sale, you're making 600 pounds like that. You know that two of those and you've replaced some people's monthly salary in a job, and you can make two in an afternoon while out for a walk or something like it very quickly adds up. And using that exact system, putting in the hard work, initially, front loading that work, and then building those systems. To date, I've generated over 5 million pounds in sales just from using the high ticket drop shipping approach. So the home turf advantage working with UK suppliers to UK customers. There's also a lot less admin than having to fulfill 1000s of orders from overseas and to overseas as well. You know, dealing with like imports and exports and the different currency risk and all of that stuff. It's just for me, simplicity was one of the key factors I was looking for when I was starting my first business. I hadn't been an entrepreneur before. I came from the corporate world, I didn't want to bite off more than I could chew, and I just wanted to make my life simple and enjoyable. And I thought, well, there are a lot of things changing here. If I'm starting a new business, do I really also want to change the market in which I operate and the currency in which I operate if, like all of these other unknown variables that suddenly introduce so much complexity that it becomes a maze trying to make the thing work? And the answer for me was no, I'd value even if I could make more profit, I'd probably still just value the simplicity of knowing that I can sleep well at night, that you know, the business operates independently, without my input, and can make 600 pounds in profit on a single sale like that's to me, that's a once in a lifetime opportunity to create a business that can do that. And those are probably the main reasons that that spurred me on to use that, that home turf advantage model, really resonated

Unknown:

with me all of those points as well. When I was coming across drop shipping for the first time, and I tried out the AliExpress model, and at that point, I was starting to get loads of customer returns and complaints because the products took so long to arrive, and when they did arrive, the quality wasn't great either. So I made loads of mistakes, and I learned from those mistakes, and when I came across the home turf advantage and I understood advantage, and I understood that I could have next day delivery 600 pound plus profit per order, and it would all be in the UK, where I could get my head around dealing with customers and suppliers in the same country as me. Yeah, tick so many boxes, and I've gone on to generate over 1.3 million pounds in my own set, my own first store that I set up as well. So yeah, for anyone who's listening and would like to understand more reasons as to why we go for high ticket versus low ticket. Drop Shipping, we've answered that question in episode 109 of the dropship unlock podcast, and that's called, should you sell one pound or 185,000 pound products? Because we had somebody inside the master class actually generate a sale for 185,000

Lewis Smith:

pound which is incredible to shout about that on that podcast episode as well. So Lewis, to summarize it, and to wrap up, I think there's, there's lots of differences between the low ticket and the high ticket game. I think there's lots going on in the world right now that's pointing people, perhaps, towards more the home serve advantage and working with domestic suppliers to sell to domestic customers. How would you wrap up today? To give people a I guess, end on a note of positivity for people to know that there's a big opportunity out there if you pay your cards, right? Yeah, exactly. That's what we want to do. It's not all doom and gloom. Like things are shifting. Things are changing. There are more difficulties than they were with that, that old model. But then again, in a sense, nothing's changed, because we always said that that model was unsustainable right from the start. So I guess this is just another reason and another thing that tips the scales so that if you were thinking, I think the approach of using the home turf advantage model actually resonates with me more than using the China model, then suddenly, now the scales have just tipped even further in that direction. So if you're listening now and you're thinking, I want to do this, but is it the right time? Well, now is the perfect time to take that leap into high ticket drop shipping for the reasons we've gone through in today's episode, the landscape has changed. It's continuing to change. It's probably only going to go one way, but those who adapt and adapt quickly, are going to be the ones who thrive. So if you're serious about taking your business to the next level, whether you've started one or not, and you want to create one, head over to dropship, unlocked.com, forward slash, start. And we'll show you more and how you can get started today. Are you enjoying the podcast? We'd love to hear from you leave a comment or a review, and we might feature it in an upcoming episode, and for detailed show notes and resources, visit dropship, unlock.com forward slash podcast. If you found value in any episode of this podcast, please. Could you take just 10 seconds to leave us a quick five star review on your favorite podcast app? It helps us more than you can. Imagine, and who knows, you might just hear your comments read out on the show. Thanks for being a part of our community. Your support helps us keep delivering new episodes to you every week. Now

Unknown:

it's time to answer a question that we've received from a listener of the podcast. So remember, if any questions have come up while you've been listening or watching to today's episode, all you need to do is leave a comment beneath the YouTube video version of this episode, and it won't just be answered in the comments. It may also be featured on an upcoming podcast episode. So this week, the question has come in from Elliot and 4602,

Lewis Smith:

and Elliot has asked, How do I sign high ticket suppliers? It seems a crucial part of the model to have quality suppliers on board. Yeah, thanks for your question, Elliot, and you're right. It is an important aspect of your business. They your supplier will dictate the quality of the products that you sell. So first things first, you have to define your niche. You have to decide what the overall kind of group of products that you're going to focus on and sell. So we talked a bit about niche selection and niche validation earlier in today's episode. But if you can figure out which niche you want to go into, you can then start to look at some of the direct competitors who are in that space, who are also using the drop shipping model. And then we can kind of work backwards from that. So once you pinpointed your competitors, you can then have a look and see, well, which brands are they working with, who are they supply or who's supplying them. You can reach out directly to those suppliers using our scripts. We give you phone scripts, email scripts inside the master cast, and that gives you a kind of a direct line to that supplier that you know is already willing to work with you, because they are already working with other drop shippers. So the key to getting those suppliers on board is to approach them professionally and with a a win win proposal. You know, we don't just kind of knock on the door and say, Can You supply me? There's a there's a process, there's a way to position it so that it becomes a no brainer decision for them as well, because they owe you nothing, but especially if you're going into business for the first time and you're new. So you want to make sure you're ticking the right boxes and giving them the right trust signals, so that they see you as a long term partner with them, not someone that they have to take a risk on and potentially tarnish their brand's reputation if it goes wrong. So inside the master class, we teach you the importance of setting up your business foundations first. So it's things like registering a company, having a professional phone number, having a minimum viable website that you know they can check out, because suppliers will want to check out your site before they say yes or no to you. We also give you the scripts, the strategies for finding suppliers, what to say to them, and just helping you position yourself as a credible and reliable business partner with them for the long term. So that will dramatically increase your chances of signing the best suppliers. And so yeah, hopefully that helps Elliot follow those steps and your business will start to come to life with UK suppliers. Best of luck. Awesome. Yeah, great question. Elian, it is a crucial part of high ticket drops you mean to have great suppliers on board. So, yeah, completely agree with that approach. Lewis, Okay, now let's highlight a recent review that we've had for the podcast as well. So a big thank you to SAS G 77 for sharing your thoughts. I'll read out SAS G's review now for everyone to have a listen to, because we love to highlight the reviews that we that we have. So SAS G said, great help. Thanks, guys. I'm already on the course, and it's fantastic. I'm very impressed so far. Well, thank you so much for your review. SAS G, we are really glad to hear that you've been enjoying the podcast. If you found value in today's discussion, we'd really appreciate it if you could leave us a review, just like SAS G did there. It only takes you a few seconds, but it would mean the world to us, and it helps us keep this podcast going. We're always looking to hear your thoughts, and if you leave us a review, we might just be able to feature your review in our next episode.

Unknown:

Thank you for joining us on this episode of the dropship unlocked podcast. We hope you are leaving with new insights and inspiration to fuel your entrepreneurial journey. To kick start your E commerce business, head over to dropship unlocked.com.

Lewis Smith:

Forward, slash, start. It's the perfect place to start and get access to resources that will help you build your business from the ground up. Don't forget to hit that subscribe button for more episodes packed with strategies, tips and success stories, plus, if you enjoyed this episode today, a five star review would mean the world to us, and you might even get a shout out on the next episode. Thank you for choosing to spend your time with us today. We can't wait to bring you more insights on the next episode of the dropship unlocked podcast. You.