Offshore banking is usually an expensive and complex option that is reserved for the big shots with $500k+ annual income. The fees and the paperwork required make it a non-starter for the regular guys. A few months ago I discovered a very interesting Gibraltar based financial firm that provides MasterCard debit card for individuals earning money in the USA and in Europe. You can use this card to withdraw money at any ATM or you can use it to pay for things anywhere that takes MasterCard . Even better, you can load the card by receiving payments from american and european firms using the US bank account number and european IBAN number they give you.
- Start using VTiger, a free open source CRM software, to do Sales Force Automation for my graphic design studio. Specifically I want every email inquiries by potential customers to get tracked, produce a report of leads to sale conversion rate, then produce automatic email marketing for the dead leads.
- Build an upsell package for my current customers of my graphic design studio. Have it integrated in a systematic sales process for each happy customer we get.
- Write at least one interesting “How I do it” post on this blog
Not exactly drugs, but nutritional supplements. I read a post a while ago on reddit about a guy having major success selling his own brand of nutritional supplements. Go read his post it’s very interesting. Anyway I decided last year that I would do the same thing. The idea struck me because it reminded me of Brainquicken, the initial success of Timothy Ferris. Tim wrote the book the 4 hour workweek. This book was hugely influential in my decision to quit the regular job world for full time entrepreneurship around 2009. I felt that following the footsteps of Tim made a lot of sense.
Choosing the product
The first step was doing research to find a fat niche that is under served where I could get in. I used seo spying tool Spyfu to search for sites related to supplements that spend a lot on adwords. Take a look at the image on right to see how to do that. Sites that have been spending $10k/month of adwords for the last few years are most likely selling enough and making enough to at least cover this advertizing budget. Big spending, probably means big profit.
Gambling is usually a money losing proposition. I recently read about Joan Ginther, a woman who won four grand prizes above one million dollars over about 10 years. Odds of this happening are so slim that it should happen less than once per billion year. So how did this woman with PHD from Stanford achieve this? She did the basic math of computing the mathematical expectancy of scratch lotto tickets.
Around April 2011 I wanted to build a dropshipping website to make some passive income. Most people build something and then get zero traffic because their site is not addressing real pain points people have. I knew that if I were to build a site as someone with no industry contact, no physical store, heck no office at all, I’d have to do something unique. I had to figure out what product to sell and what would be my Unique Selling Proposition (USP)
Now let me tell you a bit about me. I’m a slacker, a computer enthusiast, and a Canadian. One thing that sucks for canadians is buying things online. Shipping is always expensive and slow. Many american sites refuse to sell to canadians, or they bungle the border crossing papers leaving you with a big customs bill to pay to UPS or Fedex. This is major pain point that affects almost all physical products being sold online.
The Market insight: Canadians love free shipping
Ok so the obvious conclusion is that Canadians (pop: 35 millions) are always going to be prefer to buy from the site that clearly states that it offers Free fast shipping in Canada!. There is room for a small player to get this market In any niche where there is no one pitching this angle,
The product: Trailer hitches
A friend of mine in Montreal had to buy a trailer hitch for his Subaru Forester to tow his new fishing boat. He bought it online from a Texas based seller on ebay at very good price. It was delivered for FREE the next day. That’s normal in the continental USA, but it is surprising in Canada. He showed me the shipping paperwork. The hitch had come from some address in a Toronto suburb. I googled the exact address and I found out that it was a warehouse belonging to the hitch manufacturer. Bingo! This manufacturer (Curt MFG) clearly had a dropshipping program and was accepting ebay sellers. More than that, they are giving them good enough prices to beat the local brick and mortar competition. I figured I could get on this gravy train: I’d make a drop shipping website for trailer hitches that exclusively target the canadian market. The manufacturer dropships the product quickly from a canadian warehouse.
This looked like an ideal dropshipping product. Priced between $100 and $200 it allows for decent profit per sale ($30 to $60). However the price is not too high that it causes customers to need to speak to a real person. Shipping is handled by the manufacturer so it’s a non issue. The product is standardized and the brand is well known. This eliminate any doubt on product quality that buyers could have. Local retailer like to sell at a hefty markup. Basically you need buy online if you want a good price.
Clearly defining the USP
The Unique Selling Proposition was: Free shipping in Canada, no surprise. So I quickly built a quick and dirty website (More on that later) with a huger header that said “FREE SHIPPING CANADA-WIDE!”. I registered a .ca domain name instead of a .com at godaddy (approx $10).
“As a Canadian, free shipping from US sites is rare, and using geo-IP recognition to identify Canadian visitors and plastering free shipping offers TO CANADA all over the site is a great value prop that is very motivational for Canadian shoppers to become loyal.”
Getting traffic: Adwords and SEO
When you are starting off with a brand new domain you get zero love from Google. You will not get any traffic whatsoever. Also you can forget about social media if your selling a boring product. No one is going to share with their friend a picture of a cool looking trailer hitch! This leaves us to pay for traffic.
Google adword’s program is usually the best source of converting traffic. It makes sense since most people are going to do a google search before buying something online. Sadly everyone knows this. This means that your bigger and richer competitors are going to outbid you to get the top spot ads. As a small guy with no sales volume it’s incredibly hard to convert adwords traffic well enough to compensate for what your spending on this traffic. The big guys have volume that give them lower cost at their supplier, lower shipping cost, better sites that inspire more trust, etc.
The secret to convert Adwords traffic
The secret to convert Adwords traffic is to get very relevant ads to the right people for the right queries. Ideally it’s even better if you are the only one doing this. My adwords strategy consisted of making very specific ads plus my USP and showing the ads only to people in Canada. My competition at the time on adwords consisted of american competitors making no mention of Canada in their ads.
To outsmart them I only bidded on long tail keywords like “subaru forester hitch”. I made custom ads for each car models. I did this using excel to autogenerate a large amount of ads based on the car models. I’ll show how to do this in another post. So my ads looked like this:
Finding a supplier: the hard part!
I first called Curt MFG knowing that they were dropshipping for guys on ebay. I inquired about opening an account. They flat out told me no. They only open accounts for businesses that have a brick and mortar retail store front. Fuck. I told them “what about those guys on ebay?” Well they dont know about it and they dont feel like explaining themselves. Huh. I have this juicy underserved market and no way to get started without opening an actual store.
I started calling around all the hitch manufacturers, distributors, retailers. They all told me to go away or they were only willing to sell to me above normal retail pricing. I was seriously bummed out. I got my break on amazon.com . I looked up who was selling there:
Basically these guys are the top amazon sellers. They have good pricing. They are selling retail and they are willing to give amazon a 15% selling fee. Clearly for them dropshipping my orders would be a piece of cake. I looked up their websites on google. Then I emailed and called them. Just like I though they were all willing to dropship for me. Nice! I get my start with these guys with no commitment, no store front, no nothing. I just need to start selling and they fulfill for me.
Building the site on the cheap (Minimum effective solution)
I had the product idea, a traffic source, the USP and a dropshipping supplier. What was missing was a website that could convert this traffic. Building a site that sells auto parts is not easy. You cant just list your products and hope that the customers will figure out the right ones for their car model. You have to offer a menu where they input their Make, Model and Year (ex: 2005 Ford Focus) and then display the right products. This feature is not standard in any shopping cart that I know of. I decided to build the site using the free open source shopping cart Magento + VehicleFit extension.
The next hurdle was getting the product description, product pricing and vehicle fitment data. Your typical car part supplier is used to selling to repair shops that call in for each orders. If you ask them to give you their product list with pricing they’ll get scared. These guys dont understand internet retailing at all. Fortunately I had plenty of online competitors with perfectly fine websites from which to extract all the data I needed. I tried my hand at writing a scraping software, but I quickly realized it was that too hard. I had to hire someone to do the job.
Hiring a russian coder to scrape your competitor
Hiring someone that is good at scraping is going to be very expensive if done locally. Being broke at the time, I decided to try odesk. I had good luck hiring russian programmers there for various project. I posted a job there and I found a guy who did a perfect job for $90.
How to outsource your customer service for $2.5/h
My goal was passive income. Once sales and traffic started rolling in I hired someone in the Philipines to do all the customer service, order processing with the supplier, etc. I found someone speaking excellent english willing to work full-time for $400/month on odesk!
The downfall: Curt screwing me out of the best pricing
I was not buying direct from Curt MFG as I explained in the section on getting the supplier. Around December 2012 US-based competitors started getting in my canadian niche. They were offering retail pricing that was lower than my cost at my supplier. I tried calling Curt again now that I was selling a sizeable volume. They gave me the same bs: we only sell to brick and mortar stores. I was squeezed out of my main marketing channel: Adwords. You can only buy traffic that converts well otherwise you are losing money… Still the site now had some organic traffic that was generating some sales.
Selling out on flippa
I decided to get rid of this business on flippa. The site has good converting organic traffic. However the site is ugly and hasn’t been updated with new products. I figure that someone else could turn this around and use the existing SEO to jumpstart things. You can probably take this site making $1k of profit/year and easily turn this into $5k profit/year just on the organic traffic if you got the right contacts in the industry.
Edit: I made a post about question and answers related to this.
PS: I used this exact method to launch several dropshipping sites that are still profitable. I’ve been living off these sites for the last five years. I’m not going to discuss my profitable niches on this blog for fear of bringing new competition.