Explaining Dropshipping Like You're A 5 Year Old

[00:00:00]Welcome back to another video. In this one, I'm going to explain drop shipping in the stupidest simplest way possible or at least the way that I do drop shipping. And by the end of this, you're going to know exactly how this model works, why it works, and everything will make crystal clear sense. And I can almost guarantee you by the end of this video, too, you're probably going to want to start and you're probably going to watch my other videos and start implementing things so you can start making sales because you'll realize just how simple this model actually is. Now, something else that I'm going to do in this video is explain this in a stupidly simple fifth-grade caveman level. That way, everybody, regardless of your current level of experience or exposure to this model, will fully understand everything. But now, before we jump into this video, if you don't know who I am, my name is Nick Dalberg and I've been in the drop shipping space since June of 2015. So, at the current time of recording, that's about 11 years. I've personally generated over $30 in sales since then. And as of the last 2 years, I've also been the founder and main coach inside of Jung Labs, which is my education company where I specialize in helping beginners, probably like yourself, start and scale drop shipping businesses. If you want more information on that, there will be a link down in the description. If you want to see the results of that, I've documented just about every single student win over those last 2 and 1/2 years. Well, with that being said, let's jump into this so you can start taking away some knowledge and start making some money. So, what I do is drop shipping, but the way that I like to describe it is data-driven drop shipping. Now, the keywords in this is data-driven, okay? Because there is not a single guess that goes into anything that I do in this business. So, just staple that idea in your head right now.

[00:01:27]Never guess, okay? So, now, let's break down drop shipping. What exactly is it?

[00:01:31]So, there's five parts to this equation.

[00:01:34]There is you, you have your customer, you have your website, you have a private agent, and then you have a factory. So, let me explain how this works. Your job is to identify products in markets where there's demand.

[00:01:46]Remember this statement, we do not create demand, demand already exists. It is our job to identify where that demand is and find products that serve that market. I'll get into product research a little bit later in this video. You find a product, you send a picture of that product over to a private agent. Your private agent will then get you what's known as a quote. Quote just simply means cost of goods plus shipping. And for context, this is shipping to your customer, okay? So, the agent will get you a quote on what they can source that product from the factory. The reason you need this quote is because this is how you determine what you price your product. Because you can price the product that you want to sell at any price you want. I typically recommend a three to four x markup. For example, if the quote is $10, you would price the product anywhere from 30 to $40 on your website. But now, once the supplier gets your quote, you put the picture of the product on your website, and you are fully ready to sell. Now, in order to get customers to your website, you need traffic. Traffic will come from paid ads, typically meta. That's Facebook and Instagram. So, here's how the whole thing actually works, the logistics of it all. You run paid ads to the people that make up the market of the product that you're selling. Those ads land on your customer's social media feeds, again, Facebook and Instagram. They stop, they click on your ad, they land on your website, they buy your product, and your agent gets automatically notified. Within a few business days, Shopify pays you out the money that the customer paid you, then you place the order for that product with your agent.

[00:03:14]So, you collect money first. From there, the agent places the order with a factory that mass produces these products, and then the factory ships it back to the agent. Within two to three days, the agent will then ship the product directly to your customer. So, within this entire process right here, you are never physically touching, seeing, or even pre-buying any inventory whatsoever. And that's what makes the drop ship model so attractive to so many beginners, because there's very low overhead. Now, let's flip the script for a minute. Imagine you were to start an e-commerce business, which is just an online store, any other way. You would have to bulk buy a purchase order from a factory, meet their minimum order quantity, which means typically you have to buy anywhere from 500 to 1,000 units, which could cost anywhere from 1,000 to 5,000, even 10,000 dollars. That factory is then going to ship those products directly to you, which could typically take anywhere from two to four weeks.

[00:04:05]You have mountains of inventory sitting in your home, or you have massive overhead because you had to lease a warehouse or partner with a 3PL, which is a third-party logistics company, where there's additional fees like pick and pack fees, storage fees, minimums, and so forth. Typically on contract as well. And the worst part about the traditional model is you have no idea if this product is proven or not. You basically just married the product that you just spent anywhere from 1,000 to 10,000 dollars on. Therefore, you need to move this inventory because you're underwater. So, you can clearly see why the drop shipping model makes so much sense. So, now let's talk about the data-driven aspect of drop shipping or how I do it. So, again, let's refer back to what I said in the beginning of this video. Demand already exists. We are not creating demand. Demand already exists.

[00:04:50]Remember that. It is our job, your job, to identify where this demand lives. The simplest way to gauge demand is by utilizing different sources on the internet. Two great sources are Reddit and social media, that being Instagram, TikTok, Facebook. And again, remember we're looking for demand. And to further explain what demand is, think about it like this. People only buy products for an outcome. And in order to have an outcome, there needs to be some type of problem or desire. Or we could even look at this as pain. So, now start thinking about different types of problems, desires, or pains that the everyday person has. The everyday person being me, you, everybody else watching this video. At the end of the day, remember this, we're all human, we're all the same. The only thing that makes any person different is the color of our skin and what we've been exposed to throughout our lives. At the end of the day, we're all the same creature. So, what are some common problems, desires, or pains that people experience? A great place to go and start identifying these is by using AI. You can use Claude, you can use chat GPT, you can use Gemini, and simply ask these LLM, what are some common problems, pains, or desires that people experience? Or what are the biggest problems, pains, and desires that people are currently experiencing in the United States or in wherever in 2026? And it will start listing off a bunch of different things, broad categories. I wrote out a couple of examples here, weight, mental health, physical health. But every single one of these is very vague cuz it's broad. Like maybe people want to lose weight. Maybe people suffer from anxiety. Maybe people suffer from work-related stress or financial stress. Maybe people have some type of back pain. But now to go even further on these points, we need to go deeper and be more specific. So, the deeper points, weight loss for post grads, people that just graduated college that gained a bunch of weight in college, social anxiety, work-related stress from not being able to spend enough time with their family or their children, lower back pain from sitting at a desk all day for people that work from home. So now we're getting somewhere. We never, ever want to just attack core problems themselves. We always want to go deeper because these are actual pockets of audiences. These are actual markets. This is what actually resonates with somebody.

[00:06:59]Because again, weight in general is just a very broad, vague statement. Do you want to lose weight? Do you want to gain weight? And remember, every single person that deals with any one of these problems, they have their own inner monologue and they experience these pains, these desires, these fears, these problems in different ways. And it's our job to be able to communicate their inner monologue to them. But I'm getting ahead of myself. So let's backtrack now.

[00:07:23]So we understand that we have to identify problem, pain, desire to be able to sell the outcome. So now we take this context that we have over here outlined in blue and we pull all of this back to Reddit. If you go on Reddit and you search any one of these terms right here, weight loss post grad on Google, you're going to see a bunch of different subreddits. r/weightloss, r/postgrad. And when you search in there, weight loss or something along those lines, you're going to see a bunch of different forum posts of people, your market or your potential market talking about their experiences, their insecurities, their fears, their pains, what they want, what they've tried, what they wish there was. And the same goes for social media. If you search that on social, you're going to find a ton of different social media posts of people talking about different products, talking about their pain, talking about their experiences, and so forth. The comments on social media posts, especially viral posts, are littered with ideas and concepts that we can borrow. But anyways, you're going to notice that people are talking about specific types of products. I'll give you a great example for weight loss. You see a lot of people talking about GLP-1.

[00:08:23]GLP-1 is the new shiny object right now for weight loss. However, there's a lot of negative side effects of associated with GLP-1. Again, you can find all that context here on Reddit. You can find all that context here on social media.

[00:08:35]Matter of fact, there's a way to compress all of this context inside of a second brain using I have a whole video breaking down how all of this works.

[00:08:43]That's linked down in the description.

[00:08:44]It will help you out so much. I'd recommend watching it after it. And you're going to see people talking about some type of natural supplement that is a great alternative for GLP-1. There you go. You found your product. Now, from here, what we need to do is go and validate that there's actual commercial opportunity behind that product, which we can already do oh so lightly over here because we can see that people are talking about on Reddit. We can see that people are talking about it on social media. But now, let's look the product up on Amazon. This might be some natural supplement containing some natural ingredient. Let's just search that up.

[00:09:13]And I can almost guarantee you, you're going to find tons of different listings of people selling this supplement on there, but geared towards broad general use cases, not specifically towards our main pain points that we found over here or our angles. However, whatever products you find on Amazon, you can literally send a screenshot of those directly to your agent, and they will be able to source and fulfill those for you. Because let me interject over here real quick. A lot of people had this massive misconception that the majority of products that they see online are proprietary and unique and owned by this brand or that brand and they can't sell that. And the reality is you absolutely can. The majority of brands that you see out there are in fact manufactured and assembled and created in China. However, all they're doing is just white labeling the product. White labeling is simply means putting their logo on a product that already exists and then selling it as if it's theirs. That's how that whole process works. It's very straightforward. And for anybody wondering it's also very legitimate. But anyways, now you've discovered a product. So now you again your agent's going to get you a quote, which is going to allow you to put that product onto your website. But before you do that, you might want to manipulate those photos around a little bit that you grabbed on Amazon using AI. You can use Nano Banana for this. You can use Sea Dream for this. Higgsfield has all of these. So does SaleAI. But now keep in mind with these photos, you want to speak directly to the inner monologue of the customer so you really resonate with them because when someone lands on your Shopify store, they're going to see these photos first and they're most likely going to scroll through the carousel of photos that you have sitting on your product page. That holds so much weight because people would rather look.

[00:10:45]People are more attracted to visuals than they are reading. Remember that. So you want to make sure that these visuals of your photos of your product get the point across. So an example of some photos that you could do is one just showing the product by itself. You could also list off the benefits. You also need to show the outcome or the timeline that it takes for your product to work.

[00:11:05]Then you need to build trust. So before and afters or result-driven photos, again all created with AI. Those are your product photos. And by the way guys, I'm not going to go super in-depth on any of this stuff because I have every single video showing exactly how to do this stuff on my channel. Now we have a product on our website. Now keep in mind how we just conceptualized this product. We pulled this product because we know that demand already exists.

[00:11:28]We've seen tons and tons of contexts of people talking about this product for their specific problems, desires, and pains. And we were able to validate that there is commercial opportunity for this product from the number of sales that this product has on Amazon. By the way, you can also look at the ad library on Meta for additional validation when it comes to commercial opportunity. But we've essentially proved and validated that our product has potential to work.

[00:11:52]And we've tied it directly to an identity that somebody is already living. So we just use publicly available data to identify a product and gather a quote, put it on our website.

[00:12:02]That right there is exactly the secret behind all these winning products that you see. People are doing this right here. But now we need to create ads. The simplest way to roll out ads is creating image ads. And don't get me wrong, video ads work as well, too. And contrary to popular belief, one is not better than the other. They both, in fact, work. But the idea here is, what is the principle behind the ad? What message are we trying to convey to the person that's going to see this ad? Again, we pull this context directly from our sources that we've pulled from Reddit and social media. Again, that should live inside of your second brain. Again, I have a video breaking all that down. You want to be able to articulate your potential customers' deepest desires, their insecurities, their pain, something that is so relatable to them that it stops their scroll when they see your ad and they click on your. People obsess over visual formats, image or video, carousel. It's not about that, and it never has been. It is always about the messaging behind that ad and what is. So imagine this, weight loss post-grad. We're selling a natural supplement that's an alternative to GLP-1. Freshman year of college, your potential prospect let themselves go.

[00:13:10]They started drinking a lot. They started eating out a lot because they're in college, that's what they do. They started slacking on their routine, and slowly they started gaining more and more weight. They didn't notice it until around their junior year. Their face was a bit more puffy. They felt a little bit more fatigued. The waist was feeling a bit more snug in their favorite pair of jeans. Again, you'll hear people talking about this directly on Reddit or on social. It's your job to pick up on that and then be able to communicate or articulate that thought visually through an image ad. So, how would we do that?

[00:13:40]Maybe we'd show somebody in the mirror with their belly hanging over their waistline to show that their jeans are too tight or maybe it'd be before and after photo. Freshman year, senior year, slender versus larger. That's your image ad. Very simple and very straightforward. Those ads will stop the scroll and get the click because they resonate deeply with the person that you're selling to because we know so much about them now. So, you can already see how this is very data-driven to begin with, but now how do we even get more data-driven with it? Well, you're running paid ads on Meta and you're spending about $50 a day. This customer lands on your website and there's one simple thing that we're looking for when this happens. When they land on your site, what do they do? Well, what do we want them to do? We want them to buy and in most cases with a $50 a day budget, you will convert. You will get a sale and I know you may be thinking, well, that might be easy for you to say, of beginners starting from zero. Getting sales is not the difficult part. What we're about to explain is and I'm going to break it down in a super simple way.

[00:14:32]So now, remember, we're talking about paid ads. Data points will always be divided between this line right here, post-click and pre-click. And in simple terms, the way to look at it is like this. Is the problem pre-click before they clicked on my ad or is the problem post-click after they clicked on my ad? If it's pre-click, they did not click on your ad. Clearly pointing out that there is a problem with your ad or it's not resonating with the audience or the market that you want to be selling to.

[00:15:00]And I'll tell you why that is. It's because your messaging is not refined.

[00:15:05]And then, there's post-click, which most people don't have pre-click problems in the beginning. Most people have post-click problems. You're getting customers to your website. Again, what are they doing? We want them to buy, but hey, if you don't see a sale, which you probably will, what happens before they buy? It goes like this. They land on your product page, which is this right here. Then the next step, so it would be step one, then step two would be they add to cart by clicking the add to cart button, which pops out your slide cart.

[00:15:32]Then step three would be checkout. When they click the little button down here, they move into the checkout page. And then if they complete this, then they go to a confirmation page, which means they bought. Which would be the fourth and final step. It's the outcome. It's what we want. So, post-click problems will typically always happen right here for most beginners. And your job is simply just to identify where the drop-off is happening. Is there drop-off between view product, add to cart, checkout, or the purchase? A simple, simple, simple way to look at this is just look at the numbers. Again, what really goes into data-driven drop-shipping is proving things mathematically and making the numbers work. That's how all business works, and that's my entire thesis on business and ultimately why I've been in business for 11 years. So, caveman way to look at this is like this. You have 500 people that viewed your product page. 50 of those people added to cart.

[00:16:15]25 of those people initiated checkout.

[00:16:17]And then 10 of those people bought.

[00:16:19]Where is the biggest gap here? The biggest gap is right here in between view product page and add to cart. This is the bottleneck. You have 500 people that are going to your product page.

[00:16:28]However, 50 of those people are adding to cart. This is the biggest gap, so this is where we need to focus our attention. So, this is what we need to rectify. But now, you got to ask yourself, too, with these 10 people that bought, are we profitable? The answer is either yes or no. This is very hard to know if you do not know your numbers, your cost of goods. If you're profitable, awesome. If you're not profitable, the simplest lever that you can pull is average order value. By stacking post-purchase upsells into your funnel, which is this stuff right here.

[00:16:57]All four of these steps makes up your funnel, but including post-purchase upsells after checkout, right here. This gives you three separate opportunities to capture more revenue after they've already bought, but before they land on the confirmation page. Another reason that this is so crucial is because they don't need to re-enter their card information. All they need to do is just a button, and then the additional complimentary items get added to their order. So, if you're converting people at, let's say for simplicity, $50, and they add another $50 worth of stuff through your post-purchase upsells, that $50 customer now turned into a $100 customer. A lot of people neglect average order value, and they neglect their post-purchase upsell funnels.

[00:17:35]You'd be surprised how many people just simply don't leverage them. You're missing out on massive money there, and it could be the difference between you being profitable or not profitable. But now, let's head back to our bottom. We know that we need to fix this because mathematically, if we could get more people to add to cart, like 150 people, the math starts mathing way harder, and you become more profitable. So, how exactly do we go about fixing this bottleneck? Think about it. People are landing on your product page, but they're not adding to cart. Why could that be? And don't overthink it. You might think by default, maybe it's price. So, what could you do there?

[00:18:07]Sure, you could lower your price, but you know what that's going to do? That's going to shoot you in the foot. So, ask yourself, why does somebody not want to pay this price for a product that they took time out of their day to stop, look at an ad, click on it, and go to the website? Because they don't see the perceived value in that product, because that price point feels like a burden, and it should feel like the complete opposite. It should feel like a relief to their problem. So, we need to agitate their pain further. This can be done through different ads, tighter messaging. This can also be done by adjusting our copy on our product page to become more hyper-specific about our customer and their problems. Or alternatively, throwing what's known as a pre-sell prior, but we're not going to get into that. But in most cases, when you launch, all you're going to have to ask yourself is one simple question. Am I profitable or not? Because you're most likely going to get a sale or two. And if you're not profitable, average order value is something that you could absolutely do. If you are profitable, great. By how much? The best thing to do is not to scale right away. It's to coast for a few days. Let your profit compound because that is what you're going to be scaling on, your profit.

[00:19:11]Now, I could keep going on all day about this and I could get really scientific with all of these numbers. But, this is exactly what I do with my students inside of my program. I teach them how to mathematically prove every single stat inside of their business and manipulate the numbers to further prove the math. Therefore, they can scale profitably. But, this is all you need to understand about drop shipping in the very beginning cuz this is all it really is. There is a time and place for all the things that you want to do. White label your product, get influencers and YouTube creators, get product in the United States. That can all happen once you are successfully able to turn a consistent profit via the drop ship model. The majority of my students that are doing 80 to 100,000 plus a month, they have all white labeled their products. Some of them choose to drop ship a fill. Some of them have inventory sitting here in the United States in 3PLs, again, which is a third-party logistics center. And they've built real established brands from this drop shipping model in a very short timeline because of the low overhead and the low amount of risk that's associated with it following the data-driven framework that I teach. So, hopefully this video connected and made a lot of sense and simplified this entire thing for you cuz I promise you this game is not difficult. It is very black and white, especially when you strip it all down.

[00:20:23]But, with that being said, I hope you got a ton of value out of this video. I do hope that you start and implement some of these things that I just showed you and if you need more context on this, I have a ton of videos here on my channel that break down all these different things. And if you want closer help or you want to work with me directly one-on-one so I can help you do this or I can help you scale your existing store, there's an application down in the description of this video.

[00:20:43]But, with that being said, I appreciate you sticking around and I'll catch you in the next video.