We Failed at Ecommerce… Then Scaled to £7M (Episode 160)

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🗣 In this episode, ecommerce founders Lewis Smith and James Eardley get brutally honest about their early failures in dropshipping - what went wrong, why low-ticket “trend chasing” burned cash, and the exact shifts that helped them scale to £7M+ in combined online sales. 

👉 Prefer to watch this on YouTube? Check it out here ➡️ https://youtu.be/GbtpGhyIEUI

Topics Discussed
★ Why the first stores failed: Low-ticket products, wafer-thin margins, angry customers, slow shipping, no brand or positioning.
★ The turning point: Ditching “everything store” thinking and validating niches with demand data, supplier readiness, price points, and seasonality.
★ High-ticket math that works: Fewer orders, bigger profits, manageable ops—why one £2k–£5k order beats 50 cheap ones.
★ UK supplier partnerships: Next-day delivery, fewer support headaches, real relationships, and consistent customer experience.
★ From plan to profit: A step-by-step launch path—store setup → supplier signings → ads → systems & SOPs → removal from day-to-day.


Links and Resources Mentioned
Pick up a copy of Lewis’ book: https://dropshipunlocked.com/book
Get Shopify for £1 a month for 3 months: https://dropshipunlocked.com/shopify
Get a free trial with a professional phone line: https://dropshipunlocked.com/circle

Key Takeaways
★ Model > hustle: High-ticket products + domestic suppliers give you the margins and reliability low-ticket never will.
★ Validate before you build: Check search demand, supplier availability, pricing, and seasonality to remove guesswork.
★ Own a brand, not a gimmick: Positioning and relationships create a durable asset (and happier customers).
★ Consistency compounds: Follow a proven plan, avoid trend chasing, and use systems/VAs to remove yourself from ops.

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Website: https://www.dropshipunlocked.com/

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★★★ Dropship Unlocked – Lewis Smith ★★★

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Transcript

0:00

The first E commerce store that I ever launched was a complete failure. And I guess the reason that it flopped was looking back because if you've. Tried dropshipping before and perhaps it didn't work out, then this time will only be different. If you. And that was the thing really that was killing my chances of ever succeeding in E commerce. And that means that most successful people burn out before they ever see e commerce success. The only reason that I turned it around and ended up going on to them being able to generate millions of pounds in sales was because welcome to the Dropship Unlocked podcast. I'm Lewis 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 business 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 dropshipunlocked.com forward/start. Now sit back, relax and let's unlock your potential with the Dropship Unlocked podcast. If you've ever tried an online income stream before, perhaps you've tried dropshipping and it didn't work out, then this episode is for you. Because today we're pulling back the curtain and showing why our early attempts at E commerce failed dramatically. And more importantly, what changed that helped us to scale over 7 million pounds combined in online sales. So Louis, let's go back to the beginning. Before you were running a multimillion pound high ticket e commerce business, what were some of the reasons that you'd say that you failed first time around? Yeah, first time around I think I fell into the trap of thinking that the lower ticket or lower price the items were that I was thinking of selling, the easier it would be. But the reality of that was all it meant was that other people felt the same way. Therefore, the market I entered was a lot more saturated because I think you see these low ticket items around your house and you see the water bottle and the phone case and things like that, and you just assume that those are the items that you need to sell because they're front of mind and because they're things that are within your peripheral vision. But when you start to really zoom out and look at what other people buying online, you don't have to be your own target market or demographic and that's when it can really start to work. But yeah, the initial trap I fell into was thinking that I needed to sell trending items and you know, it would be a volume game of selling like hundreds and hundreds of. In my case it was men's neckties where I'd make tiny profit margins on them and get to the point where, you know, I'd need thousands of orders just to make a full time income. Not to mention the hassle that then came with like the returns that would be requested because the products were coming from China, took ages to get there were low quality and it just, you know, so many mistakes and flaws in that model that came to be that I soon realized this wasn't for me. The other mistake that I definitely made was not really having a brand or any market positioning. And yeah, I focused on a niche, but it was really just any of the products that I could find that vaguely matched the kind of criteria of what I was hoping to focus my store on, that I could find on AliExpress at the time, import those into my Shopify store and then just hope that people who are seeing those items for sale wouldn't look elsewhere online to see that they could actually buy them for sale.$3 instead of $20. Right. So it, you could just tell that you can only pull the wool over someone's eyes for so long before the whole thing comes unstuck. And it wasn't the kind of business that I wanted to be in. People were becoming savvy to the idea that they could just buy the items from AliExpress themselves. And I think there's still people doing this to this day. If you see an advert on Instagram for like an amazing gadget or you know, some, some item and you think wow, that looks really good and then you see they're selling it for like $49 or 49 pounds, so 50 pounds and go and then search for that same item on AliExpress and you'll no doubt find the same thing for £6 or less. Right. And that's the markup that they're making is all really in that positioning and that marketing of the item. And I just knew that that was a time limited game to be playing and not one I wanted to really play. So I think that was the, the probably the main two low ticket products not really having any brand positioning. No long I was building and I just in terms of the suppliers I worked with, I didn't even know them, that I just direct Messaged them on AliExpress on the chat feature and they would send me a message in kind of broken translated Chinese to English, you know, and it wouldn't really always work. Out because they'd take ages to get the items delivered or there'd be a public holiday in China that meant they couldn't deliver items out for a couple of weeks. And so my customers would just be left waiting. And it just left a bad taste in customers mouths, bad reviews for our business and there was no supplier relationship like we have now. And so those are the main mistakes I really made when, when first starting out. Yeah. And I resonate with those, Louis. I. I also failed my first E commerce business because I also thought if I'm going to sell something, I need to sell something that's trending. And I was kind of obsessed with this idea that I need to jump in on a trend of products like fidget spinners a few years ago, or some mouth tape at the moment, or nose strips, things that are actually trending products in the moment. I thought that was the whole point, is that you jump on and surely there's no products or markets that you can enter that are evergreen. You just have to be doing these burner stores and make some quick money and then have to redo it all over again. And I was so naive and a real lack of confidence as well, which is what brought me into trying to sell these low ticket cheap widgets from across the world that was really underpinning the way that I failed. And there was a moment for me when I knew that this couldn't be sustained anymore. And it was when I was opening my inbox to read messages from angry customers that were getting poor quality items sent to them. And then on another tab, I would go to the next tab, which is my meta ads account or Facebook ads, and I would read the roas that I was achieving and it was far too low to justify continuing to run ads. And I was thinking there has to be something fundamentally wrong with what I'm doing. Was there a moment for you, Louis, when you think back that you realize that it wasn't sustainable anymore. Was there any moment turning point? You think, this is not working, I have to try something else. I think there was just this feeling of I'm just continually pouring money into ads. I'm seeing all this like traffic through to the website, but I'm not getting the sales through. And when I do get a sale through, although it feels amazing, and I'm like, this is so cool. I'm, you know, making money on the Internet. When I then looked at the numbers, I realized I hadn't made any profit. I'd spent way more in advertising than I'd made in profit on that sale. And therefore it wasn't really a business. It was just a little exciting kind of jolt of excitement that would happen when I made a sale. But it wasn't sustainable. I couldn't scale that business. It wasn't going to replace my income anytime soon. And I would kind of look on YouTube and I would search for, how do you do this? And everyone was kind of giving this same, like, muddied, conflicting advice. And I started to realize that actually I don't think a lot of the people who were teaching this were even succeeding at it themselves. I think it was starting to become clear that, like, a lot of these people made their money from kind of showing you this, like, supposedly very easy, very low barrier to entry business model. And the point was that yes, you could make a few sales, but was it profitable? Was it an income replacing business? Was it an asset that you could then go on to sell that business down the line? And the answer in most of those cases was no. So I think, yeah, for me, that moment was probably receiving some of the sampled items that I ordered from China myself as well, just to see kind of what the customer experience was like and just realizing, like, when it arrived and it had the Mandarin writing on it and it said like, you know, $2.75 in terms of the value for customs because they're importing the goods from China. And me thinking, well, I've just charged the customer like $25 or $29. And I just thought, this doesn't feel right. It's not the kind of premium packaging service that I would offer if it was my own brand or my own supply chain. But I didn't control any of that. I had no say in the matter. And I just thought, I can't see this working out for much longer. Yeah, when you realize what the customer is experiencing, you think there's no way customers are going to be coming back or telling their friends. And if that's not happening, then it means you've got to spend money on ads to acquire every new customer and the ad cost will rise over time and it's not profitable moving forward. So, yeah, fundamentally I think we both came to that realization that something had to shift in the way that we were building our businesses. But we were super ambitious. And I'm speaking for myself here, that I knew that although that was difficult to take and I. I'd had a big failure, I realized I needed to learn from it and it wasn't the end of the world. And if I used it As a learning lesson then actually it could be one of the best things that happened to me when I had that initial early mistake. So what was the actual shift for you then, Louis, that's taken you from that position of failing with trying to sell those neckties from China to where you are today? What shift did you make to be able to go on to achieve that success? Well, the biggest one really was the numbers. So it was just focusing on higher value, higher ticket items in specialist niches, you know, so that's like focusing on a group of products that you want to sell. Like, okay, I'm going to sell home furniture, like that's my niche, for example. And then that means that every time I sell a sofa for two and a half thousand pounds, I make, I don't know what, like a thousand pounds in profit, something like that. And it starts to make you realize, well, I, I don't need that many orders per month, maybe three orders a month. And I've got 3k a month coming in in profit from this business. I can keep three customers per month happy. That's not too much admin for me to have to deal with. And it meant also that even if I spent a hundred pounds, two hundred pounds to acquire those sales, it was still very profitable because I have the margin there, I have the profit in each of those sales to cover the ad spend and still make a good profit. I didn't have that before, so that I think was the first one that just dramatically tipped the scales in my favor because I just thought, well, the numbers now just work out and it's very hard to make numbers work with a low ticket. You have to kind of often loss make for the first few orders from that customer until eventually you can build up enough of a lifetime value from them to make profit. But you have to have deep pockets to do that and very, very difficult and slim margins to make it work. And the other thing was not just like you said, chasing a trend or going after a product because I thought it would sell, or I had a gut feeling or I saw someone with it and thought, well, that seems like a good business. It was validating the niche before even doing anything. So before running ads, before reaching out to a supplier, and so to do that I was doing things like checking the search demand, how many times per month in the uk, the market that I wanted to sell to, where people searching for the items that I was thinking of buying, you know, and, and figuring out is there demand there before I go and do it, then looking into what do the suppliers already dropship, are they happy to offer that direct to customer fulfillment service that we will rely on? Because if they weren't, I've then got to be the one to convince them to do that and that becomes again quite a difficult thing to do. So it was all of those things and there's various other like niche validation criteria that I've now put together as like a system to get a foolproof system of getting a niche selected and validated. But I think the other thing that made it much easier to run a business like this and a much better experience for customers, therefore better reviews and more word of mouth goodwill was working with UK suppliers, building relationships with UK distributors, UK suppliers who already have the items that we're looking to sell in the uk. Therefore if we're only marketing the items to predominantly people in the uk, we can have them dispatched often the very next day, making it really easy, a really smooth transaction, nice and profitable. Customers happy they get their goods. If they want to return it, they absolutely can, they can just send it back to the supplier and they'll give them, they'll give us a full refund and then we can give the customer a full refund if that ever happens, which is rare. But try sending a sofa back on a boat to China for six weeks to ask for a refund from the supplier. It's just not going to happen. It's going to be so expensive for you to do that that the whole thing will fall apart. So I think yeah, it was faster shipping, higher ticket products, better margins, reliable suppliers and validating the niche before I went ahead and built the business and those were the shifts I made to make sure that we could scale profitably the next time around. Yeah, and it's, it's, when you talk about it like that, it becomes obvious why that your actual e commerce business today has succeeded so well is because you've built that business based on data, knowing that there's a market there and know that you can serve the market with the business model of drop shipping that you want to, to use. Whereas the previous version, and I remember doing this myself with the first products I started to sell and fail at, I just scrolled through these dropshipping directory websites like AliExpress to scroll through until I found a product that looks like something I'd be reasonably interested in selling. And you think about that as a business model or a business plan to decide your whole business, the products that you're going to sell based on just scrolling and looking at what, what looks Right. Or what you think is trending in the moment versus doing actual data crunching to find out which products are going to be selling for the long term. It's a no brainer when you look at it, but I guess I was just so ambitious I wanted to jump in and get started selling straight away. So I overlooked these things that seem obvious when you look back at it. But yeah, the same for me. Lewis, the E commerce business that I've built now up to over 1.5 million pounds in sales through my own store, which has allowed me to travel to places like Cape Town that I'm at at the moment, was because I also did the data validation before choosing which products to sell. And a big one is the whole model of high ticket E commerce and working with UK suppliers to send those products to UK customers. So I had actual good supplier relationships with real people and they were selling high quality products to customers within one to three days, which is going to be great service for customers. So they'll keep coming back over and over again and telling their friends. So it's wildly different when you think back to it. So Louis, I want to dive into that moment when you've, you realize you failed and the ads weren't sustainable with your previous e commerce business. Why do you think it was that you carried on? Because some people would have quit and given up and said, right, I'm just going to write off E commerce, I'm going to write off making money online. I'm going to go back and just focus on my 9 to 5. What was it that drove you to build a new business and not get put off by that experience? I think it comes back to the book that I'd first read and the Four Hour Workweek by Tim Ferriss where he talked about he was using the dropshipping fulfillment model. I think he was using it to sell like supplements and things like that. So, you know, very different to the model that we now use but still the kind of business model. I knew that there was some truth to it. I knew that it wasn't just these kind of like just loads of false promises on YouTube. I knew that there was a lot of that. But I also knew that deep down this is a model that works. I just need to get to the root of how it works and figure it out. And I remember sitting in my day job at the time and having that moment where I just thought it was almost like I'd just given myself permission and I said, I am now going to do this and I don't know how. I don't know how long it'll take. I don't know how many challenges I'll have to overcome along the way, but I've decided I'm doing this. And that feeling was really exciting to me because I just thought, well, come what may, I'm now going to figure this out. And that, to me was like, you know, it's like a missile having its target in its destination. It's like homing in on it. I really know now where I'm going. And, like, that, for me, is really powerful in my life. That's the kind of person I am. If I have a clear target, I can really go after it, and I will stop at nothing to get to it. And I think that's what I had in that moment. And I just thought, wow, this is cool. Because I was looking around at the office I was sitting in at the time, and I just thought, well, this is like, this is not gonna. I'm not gonna be here for much longer. Like, this, this part of my life, this chapter will be soon coming to a close as I figure this out. And I might get it wrong the first time, and I did, and I might fail the second time, and I did, but eventually I will figure this out. And so, yeah, I think it was just that, that moment of giving myself permission, looking at all of the people that do do this, and we have, like, you know, you go to dropshipunlocked.com forward slash reviews, you. You can hear stories of members of ours that have done this themselves and are telling it to you in, like, podcast form. We've done so many interviews now with members who've done this themselves that you start to realize, well, it must work. These people are all doing it. There must be a model that actually works. And if you've been burned by, you know, false promises and things that didn't work out, or you've just had a bad streak of luck where things just didn't go right and, like, for whatever reason, things didn't work out. Don't give up hope in the model because it can work. It does work. And if you're like me and you want to set yourself a target, it will work. You just need to get through those challenges and get to the point where it does. Yes, you had that conviction that there was a way, and you're inspired by knowing that other people had made it work. So that conviction that you would make it work overcame the fear or the embarrassment or the. Yeah. The feeling of failure that you had from the initial experience and you realize that was just a stepping stone that you can look back at now and talk about. And I remember reading the four Hour Workweek as well, and there's a story in there which I think Tim Ferriss is speaking about, maybe one of the readers that implemented his book, and they were selling French jumpers, French style, black and white stripy jumpers. And he talked about that and that was something that stuck with me. I think he touched on how important high ticket was with that story as well in that they were marking up those French style jumpers so high and this person could sell them online with a big markup and make a lot of money. And it was stories like that and feeding myself this quality information of success stories that really gave me the confidence to continue even though I'd failed the first time. And hopefully with this podcast we can be that motivational success stories into your ears, whether you're commuting to work or in the gym so that you can keep having the right messages put into you even if you fail previously to know that you can keep going and build a business that truly works for the long term. So for anyone in that position then, Louis, what would you say to help them build the confidence back up to do things differently if they're going to restart and start a new e commerce business today? Yeah, I think the best advice has got to be don't throw away the whole business model just because you may be stumbled at the first or second or third hurdle. Zoom out, look at the bigger picture and realize that drop shipping as a business model has existed and succeeded since before even the invention of the Internet was around. Remember those old mail order catalogs like the Argos catalog? A lot of the time the items you ordered from there would have been drop shipped directly to you from a supplier. They weren't, you know, it wasn't some huge outdoor garden table sitting on a shelf in an Argos warehouse. It would have come straight from the manufacturer, the UK supplier who Argos probably had a relationship with. Maybe they didn't call it dropshipping, maybe it was just direct dispatch, but it still worked and it still, you know, was dropshipping effectively. So yeah, don't throw the whole business model out just because you've, you know, maybe done it slightly wrong the first time or you've just fallen into the type of model that we talked about, the low ticket, the Chinese suppliers, the, you know, the profit is not there. But I think the other thing that you mentioned there is we don't have to do this podcast and these. These videos. Like, we enjoy doing this because we're effectively speaking to the former version of ourselves, who we know would have lapped up this information and would have loved to hear these kind of inspirational stories of real members who are doing this. But, you know, we can spend our time just working with members inside the program, just running our own stores and enjoying ourselves, you know, in Cape Town, for example. Like, we do this because we're inspired and passionate about it. And we remember that initial spark of Excite where we first found out about this kind of model online and thought, wow, is that. Is that real? Like, could. Could actually do that. And so we want to be that kind of voice of reason that is showing how this can be done. If you're someone right now who's sitting in the UK and thinking, yeah, but it might be fine for people on the other side of the world to do that, but, you know, can someone like me from here really do it? So that's why we do this. And it's. We hear so many times, again and again from members who join us in the Dropship Unlocked masterclass, where they say, I listen to episodes of your podcast, and it was that. That kind of got me to take the leap and dive in. And now we're sitting down with them at our VIP dinners and we're having, you know, the drinks and canapes, our live meetups with them. Like, that's the kind of journey, I guess, that people take is from that I've lost trust and lost faith in everything that I've seen out there online. That's to do with making money right through to, okay, well, I might give this a chance. Okay, well, this seems legit. Okay, now it's starting to make sense. The next minute, we're in a room together, they're building their business and they're succeeding. And then we bring them on the podcast and share their story. So the whole kind of cycle repeats. So try and use any failures you've had so far, as James very eloquently put it, as just a stepping stone, a hurdle or a signal, some kind of indication that you're. Maybe you just need to divert paths slightly, but learn from it. Don't repeat those things. And if you want to avoid all of the same mistakes that we've made and hundreds of other mistakes that many of the members in our program have made, you can follow a proven framework to make sure that you've got that roadmap, you've got that support along the way. So if you want to do that and you want to build something that actually works this time, not just another side hustle that burns you out and you end up in six months time looking back and thinking, why did I waste so much time on that? Head over to dropshipunlocked.com start there. There's a short video. You can watch it. Book in a call with us and we'd love to chat with you and see if we can help. We'll walk you through the exact system that we've used to go from those early failures that we discussed in today's episode right through to scaling past £7 million in combined sales. 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 dropshipunlocked.com 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 we're going to answer a question that's come in from a listener of a previous episode. And remember, if any questions have come up for you while listening or watching today's episode, then all we'd like you to do is comment beneath the YouTube video version of this episode and we'll answer it in the comments and we may also feature it in an upcoming episode. So that's exactly what Kane Watton 7575 has done. So I'm going to put his question to you now, Lewis. So he said, I really like the content. I just found this channel recently and I'm thinking of joining the Masterclass, but I was wondering, what part of the business model slash masterclass would you say is the most time consuming and difficult? I'm guessing that it would probably be the product brainstorming as I'm not very creative when it comes to ideas. So hopefully that's something that you'll help with on the Masterclass. Thanks Kane. Really glad to hear that you've been enjoying the content and the podcast and that the YouTube channel has been valuable for you so far. So the most difficult part, as you put it, is probably it's a difficult one to say because it's different for everybody. Some people find the ideas part and bringing up ideas for products really Easy. Other people, maybe they need to leverage things like AI a little bit more to kind of spark those ideas and generate some ideas. But yeah, we absolutely do guide you through that process. I think some people find speaking with suppliers quite tough because maybe they're not that confident. Although we've had like non native English speakers succeed with this model where they've signed suppliers, you know, just over email, so it can absolutely be overcome. And other people might be confident with websites because they've got a background in that, but perhaps, like you say, they're not that confident with the niche research side of things. So that's exactly why we don't assume as a member who's joining the Masterclass that you will be confident or not confident with any area. We just assume like zero prior knowledge coming into this. And if there are parts of the program that you're going through and you think, oh, I get this, this is easy, like I've built websites before or oh, no, I understand this I can do, I can chat to suppliers, no problem. Then, fine. Use the information we give you as building blocks, but don't feel like you have to, you know, be amazing at everything because we will help you build the confidence in the areas that you're not confident and in. So we break it all down. Whatever your weak point is, there is a framework to guide you through it regarding niches and product selection. Absolutely we do. We help you. We give you an initial list of 50 validated niche ideas just to spark your thinking. But then from there we ask you to come up with a load as well. And then after you have your ideas, we'll help you whittle them down and validate them. So we put them through, through our niche validation system, one step at a time, so that you're not just guessing, but you're looking at like, the search demand, the supplier availability, the seasonality, the average price point, things like that, so that by the end you know that you are picking a good group of final niches based on data that's been validated. And you think, yep, I'm confident I can move ahead with those five. And then I want to just pick the one that I'm most excited about building a business around. So it's a great question, Kane, but yeah, don't worry, we're. We've got every step of the way covered for you, so we're looking forward to supporting you when you jump into the masterclass soon. Awesome. Yeah, look forward to speaking to you on a live call in the Masterclass soon. Kane. And thanks for your question and well put, Lewis. It's all step by step. So no matter what part you feel scared about or what part you feel not confident with, then you can lean on the course more heavily in those parts to make sure that you are ready to go. Within a few, few short weeks, you'll have a business up and running. Okay, so now it's time to highlight a recent review that we've had for the podcast as well, because we'd love to shout you out if you say something nice. And that's exactly what MonkeyPuzzle23 has done. So love the handle, the YouTube handle, but we found out that they're called Alex. They put that in the, in the comment as well, but Monkey Puzzle or Alex has said that. That was a great episode, guys. Very motivating. Thank you so much for your really nice comment, Alex. We really appreciate it. If you have found any value in today's discussion, we'd really appreciate it if you could leave us a quick review for the podcast. It only takes you a few seconds, but it means the world to us and it helps us keep this podcast going. We're always looking to hear your thoughts and we might even be able to feature your review in our next episode. Thank you for joining us on this episode of the Dropship Unlocked podcast. We hope you are leaving with new insights and inspiration to find fuel your. Entrepreneurial journey to kickstart your e commerce business. Head over to dropshipunlocked.com forward/start. It's the perfect place to start and get access to resources that will help you build your business from the ground up. And 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.