The TRUTH About the History of Dropshipping


Sarah: You know, it’s funny. When I’m going about in my day-to-day life,
going shopping or whatever, I’m thinking, “Oh yeah, I feel pretty young.” Then I sign onto YouTube and see the drop
shipping videos that it has suggested to me. Suddenly, well, I start to feel really, really
old. I’m sure a lot of my viewers here who are
over the age of 21 understand how I feel that way sometimes. In this industry, I feel ancient. Like a lot of young drop shippers today, I
got into the industry when I was just a teenager, which means that I’ve actually been in it
for quite a long time. But, the one consolation that I have for the
loss of my teenage vitality, energy and sharp mind, is the wisdom that I have acquired through
experience, or at least that’s what I like to tell myself. I’ll tell you now, the history of drop shipping
teaches us a lot, and it gives us some very important lessons that are still relevant
today. Now my guess is, why you’ve been watching
this, you’ve probably be thinking, “Well, why is Sarah wearing this?” Well, it’s because, my friends, today we are
going on a journey back in time to see how drop shipping began, how it’s changed over
the years, and what that means for us today. So let’s go straight to the beginnings of
drop shipping and see where it all began, and it’s origins may surprise you. Now, to be honest with you, I have yet to
actually test this contraption and go back in time, but according to my calculations,
we have at least an 87% chance of making it back safely, in mostly one piece. Alright, let’s do this. Flower crown. Tie dye shirt. Yes, yes, it worked. My time machine worked. We’ve made it to the 70’s. I’m sure that most people who watch my videos
think about drop shipping as something that you do on the internet. But what they don’t realize is that it’s actually
been around way longer than that. One of the reasons why I find it so strange
that people think of drop shipping as some “get rich quick” scheme is because it’s been
around for years and years. It is not some “new secret money hack,” and
in fact, probably the first companies to take advantage of drop shipping on a major scale
where mail order companies. Yep. Some of you over the age of 21 may remember
how back in the day, before the internet and mainstream online shopping, you used to get
booklets sent to you in the mail, and you could order items directly from it. And something that a lot of people don’t know
is that these mail order companies were engaging in drop shipping. You see, there were big companies, like JC
Penney and Sears that had gotten into the mail order business as well, and what they
realized was that they needed to have an efficient way to ship out individual items to customers. So in the 60’s and the 70’s these companies
started to create these revolutionary fulfillment centers to do exactly that. These fulfillment centers, or storage warehouses,
were designed so that you could store lots of items in bulk, yet very quickly find an
individual item that a customer had ordered, and the ability to do this has a term in eCommerce
world and that is to pick. You pick, pack, and ship an item out to your
customer. These fulfillment centers made this a game
changer. A lot of people think that Amazon invented
these pick and pack warehouses, but they didn’t. Though, of course, they are now the best in
the world at it. Well, what happened was that there were mail
order companies at the time, like Compucard, that looked to these fulfillment centers and
they thought, “Oh, hey, what if we worked with them as well?” They could list their items for sale in the
mail order catalogs for a mark-up price, and when a customer ordered an item they would
purchase it from the fulfillment centers and have it shipped directly to the customer. And you know what? It worked. And that is where mass scale drop shipping
was born. But what happened to it next? Let’s find out. Pigtails, choker necklace, Spice Girls. Yes, yes, it worked. We’ve arrived. We’ve arrived in the 90’s. Now, when I was six years old my parents got
the internet for our house and for little old New Zealand, that was super early. A lot of my friends wouldn’t get the internet
in their house for another five years. And for those of you out there that are watching
that were also around for the birth of mainstream internet, you remember that it took quite
a long time for eCommerce to become commonplace. Back then it was considered kind of shady
to give your credit card details out online, even if it was for a big store, and a big
brand. What if my credit card details get stolen? How I can trust it with this person that I
can’t see? They’re were a lot of fears about buying things
on the internet. But obviously over time attitudes changed,
and it became more and more acceptable to purchase things online and as more and more
people did this, the drop shipping .com boom began to explode, and the bubble began to
grow. The .com bubble was a period of a few years
where some online stores with fancy names popped up out of nowhere and made huge promises
to investors, riding on the hype of this new thing called eCommerce. Basically, these stores came to investors,
and they said to them, “Hey, we’re gonna become super successful and really profitable off
of this new thing called eCommerce as long as you give us some money right now so that
we can grow.” And investors did give them money. They gave them a lot of money. Probably the most notorious player in the
.com bubble was pets.com. It was an online store dedicated to selling
pet supplies. Pets.com were very clever, they were able
to raise millions and millions of dollars over their short two year lifespan by creating
a huge marketing hype campaign. They even spent millions of dollars to run
ads for the 1999 and 2000 Super Bowl games, which made their little sock puppet mascot
famous across the USA. But here was the problem. For pets.com and other .com bubble casualties,
they had a great domain name, they had a website, and they had a fantastic marketing team. But they didn’t have a warehouse and they
didn’t have inventory. So what did they do? Just like the mail order companies, they turned
to drop shipping. Unfortunately, unlike for the mail order companies,
drop shipping did not work out this time. Why? Well, because it had become very expensive. Up until the age of the internet, customers
didn’t really mind if it took four to six weeks for the items to arrive. Simply having items shipped to their door
was a huge novelty, but by the 90’s, things had changed and big companies and brands wanted
to make the shipping times faster. So USA fulfillment centers stepped up their
game so that they could match these expectations and the results were that the costs for drop
shipping also went way up. And for pets.com it was a huge disaster. They were selling items for a third of what
it cost them to buy it and ship it to the customer. By the end of 2001 it wasn’t just the Spice
Girls who had disappeared, these eCommerce companies that had been relying on these expensive
drop shippers had disappeared as well, along with the trillions of dollars invested in
them. Yes, it’s looking quite bleak right now, but
great things are born out of disasters. So let’s continue on our journey and see how
drop shipping managed to bounce back. Yes, yes. We have arrived. We’ve arrived in the 2000’s, during the rise
of Amazon and Ebay. Now if you ask me today, I would tell you
that drop shipping on Amazon and Ebay is a bad idea. But for a while there, it was great. So far on our journey into the past, we’ve
seen that multi-million dollar companies have taken advantage of drop shipping. But what about individuals like you and I? Well, at this point working with Chinese drop
shippers wasn’t easy and so us and the West were still shackled with working with expensive
USA based drop shippers. So the average Joe like you or I couldn’t
afford to not only create and build our store, and then run it, and market it, while paying
the expensive prices that the drop shippers were charging. Drop shipping for average people was just
not viable. But, Amazon and Ebay, two companies that survived
the .com crash and then thrived in it’s wake, changed everything, and it was through them
that drop shipping became viable for anyone. If you sell on Amazon or Ebay, you don’t need
to set up a website because they take care of that for you. And perhaps more importantly, if you sell
on Amazon or Ebay, you don’t need to worry about advertising because they do that for
you and they get customers to their site. That was especially relevant back then because
Facebook advertising didn’t get released until the year of 2007 and it took several years
for it to become the amazing advertising platform that is today. Back then, your best bet were Google Ads,
and while the traffic quality was and still is to this day, very high quality, it was
and still is to this day, very expensive. A lot more expensive than Facebook Ads. And so, even though it was still expensive
to work with USA based drop shippers, because of the fact that you now no longer had to
create your own site, and you didn’t have to market it yourself, drop shipping became
viable for everyone. And it was during this period, in my teenage
years, that I entered the drop shipping and eCommerce space. And actually, working with USA based drop
shippers on Amazon, not Chinese drop shippers, still remains a viable strategy to this day. However, there were some policy changes in
late 2017 that have made that method less beginner friendly. On the surface, it looked like drop shipping
had reached it’s golden age, anyone could build a profitable drop shipping business. But actually, what we didn’t realize then
was that it was only just beginning. Yes, yes. We made it back. We made it home. We’re back in the year 2018. You see, the 2010’s have been huge for drop
shipping and it all actually started back in 2010 when Alibaba released Aliexpress. Previously there had been no easy way to connect
directly with Chinese manufacturers and drop ship from them. But suddenly there was a website that made
it super easy to purchase individual items directly from Chinese manufacturers, super
cheaply, and then have them shipped directly to your customers. These items, they were so cheap. When combined with Facebook Ads that had already
been out for several years, you could now create a website, advertise it, and still
make a profit, even after purchasing an item from a drop shipper. That was huge. But while it was now financially viable, creating
your website and running it still took quite a bit of work, especially if you weren’t very
tech savvy. That was until the year of 2015 when Oberlo
was released. And that was when Shopify took off way up
to the moon. Now most people watching this will know what
Oberlo or Oberlo is. It’s a Shopify app that massively streamlines
the process of adding Aliexpress items to your store and then semi-automates the fulfillment
process. In 2017 Shopify acquired Oberlo for 15 million
dollars, cementing it further as the leading store platform for individual drop shippers. Now, not only did you have access to cheap
items from drop shippers, thanks to Aliexpress, you also had access to cheap ads thanks to
Facebook, and, you could create a semi-automated drop shipping store in less than an hour with
Shopify. And thus we now enter the current age of drop
shipping today, where you no longer need to sell on Amazon or Ebay and give them your
customers. Instead, we get to build our own stores and
build our own list of customers and we get to control our own destiny. Instead, we get to build our brands. We get to build our own stores, and we get
to keep the list of our customers for ourselves. We get to be in control of our drop shipping
destiny. And that brings us to modern day drop shipping. It’s been quite a journey through time and
the different periods of drop shipping have taught us a lot of lessons. The 70’s taught us to embrace new ideas and
methods. The 90’s taught us about the folly of over
extending. The 2000’s taught us that by leveraging the
tools around us, we don’t need to be a big company to build a successful business. But perhaps the best lesson that we can learn
from our journey into the past is the knowledge that this journey is still continuing to this
day. Anyone that tries to scaremonger you and tell
you that drop shipping is some “scheme” that is going to die out is wrong. It’s a real business model that has been around
for many, many years. And while it will continue to evolve and change,
it is going to be around for many, many more. As always, thanks for watching. If you love this video, we know that you will
love our others, so be sure to subscribe to our channel and click that little notification
down next to it so you don’t miss out whenever we release a new video. And did you know that we here at Wholesale
Ted have a premium drop shipping training course called The Dropship Club. It teaches Aliexpress drop shipping, step
by step, and it is perfect for beginners, and you can find a link to how you can join
it in the video description below. And before you run away, I’ve got one last
freebie that I’d love to give you. Here at Wholesale Ted, we have a free eBook. How to make $10,000 a Month Online with Drop
shipping. You’ll find a link on how you can download
it in the video description below.

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