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Doesn't it seem like Amazon just sucks now? You search for something like a USB dongle, and the listings are flooded with overpriced junk from China that look premium in photos… but barely work out of the box. It's why I've stopped shopping there almost entirely. Amazon didn't start this way, but over time, it has quietly transformed into an overpriced Temu. What happened?
Things started out very differently. Amazon broke into ecommerce by offering the widest selection of books, all from one place. Retail book shops can't do this. Shelf space is a zero-sum game. If a book doesn't sell, it's taking up space from another that might. That's why it's hard to find a book you actually like in these stores, even popular ones. It's all recent cookbooks, biographies, and only the most popular series. Amazon didn't have this issue. Shelf space didn't matter, because you were technically ordering from a supplier.
What I just described is the basic model for ecommerce. But in the late '90s, it was revolutionary. Amazon began exploding, and called itself the "largest bookstore in the world." A claim that brought Barnes & Noble swinging, since they believed Amazon "isn't a bookstore at all. It's a book broker." Barnes & Noble were clearly salty, but their claim wasn't entirely wrong. You could argue Amazon was technically dropshipping in the beginning. They didn't carry much inventory, and while they facilitated some orders, many of them were directly from the supplier to the customer. They offered convenience and a good experience: fast shipping, Prime, customer support, and the one-click checkout, which they actually patented.
Almost 40% of US ecommerce is dominated by Amazon alone, and their lead is massive. Walmart, who holds second place, is only at 6.4%. But, even with their tight grip, Amazon today… sucks. Much of it is cheap, crap products from China, with massive markups. I'm not talking about branded products here, like LG TVs or a PlayStation 5. I'm talking about those unbranded products, or those with a brand that might as well not exist. Low-cost items of anything and everything: LED light strips, Bluetooth trackers, mini blenders, electric wine openers, leggings, phone holders, mini projectors, portable fans—the list goes on and on.
The most aggravating of all: tech products. You'll find a USB dongle for $10–20, which on Alibaba is less than $1. Many of these might look premium in the photos, but most will likely be faulty or stop working after a few months. It's why I've almost stopped shopping on Amazon altogether.
So where do they all come from? Amazon is absolutely packed with dropshipping. Well, technically, it’s not dropshipping because as a seller on Amazon, you technically hold inventory. But everything else is pretty much the same. Source cheap garbage in mass from Alibaba, mark it up a few hundred percent, and sell it on Amazon. According to their own statistics, "close to 2 million small and medium-sized third-party businesses engage in selling on Amazon. Approximately 70% of these sellers operate as independent third-party (3P) sellers." Not all of these sellers are dropshippers, and I have to clarify there are some incredible small businesses selling high-quality products. But these are more the exception to the rule. Many stores on Amazon are just dropshippers. They don't really exist in branded categories but are overrepresented in those basic everyday items.
Let's break it down, because the deeper you look, the stranger things become. Here's how dropshipping works: You're essentially an invisible middle-man. You search digital trends for what products people are buying, find a cheap product on Alibaba or AliExpress, and list it on Amazon for a giant markup. When someone buys it, you don't pack and ship it… the supplier does. Profit. You don't even store or facilitate the orders yourself, and look at those margins: an 80-cent product sold at 10–20 times the price!
It sounds like dropshipping is free money, and that’s why there are so many gurus online teaching you how to make millions doing this! But, surprisingly, the reality is actually the opposite. There's the product cost, sure, but then the shipping cost, which is usually baked into the price, then the Amazon referral fee, the Amazon Individual Seller fee—most of which will be half the price. So, where does the rest go? Ads.
It's all well and good to set up your dropshipping business… but you still need people to find your page and click buy. Often half the cost goes into ad spend alone. Some of this is through social media, which is why you might see strange products like "mini projectors" appear on Facebook. The most recent additions are on TikTok Shop through sponsorships. But most of it is sponsored brand ads, on Amazon itself. If you search for a product, say "USB Dongle," there'll be a list of results, but at the top, a sponsored listing. The seller is charged by "pay per click," so every time someone clicks on the listing, they're charged, even if they don't buy. The pay-per-click ranges from 50 cents all the way up to $2, $5, or even $10 per click for the more high-value items. More and more people compete, the ad price goes higher, the price of products goes higher. All the while that USB dongle is actually worth… 80 cents.
What's really interesting is that this is where Amazon actually wins with dropshipping. They make close to nothing on the order itself, but with ads, they make massive amounts. In Q1 2025, Amazon's retail revenue was $126.4 billion, but their income on that was under $7 billion. Their advertising generated $13.9 billion in revenue, yet profit margins on advertising are typically 75-80%, which would make it more profitable than retail, at around $11 billion, close to AWS which makes the most profit. Amazon makes money not on facilitating, but by advertising.
But somehow, this isn't even the worst part of dropshipping. Videos like these are everywhere. On TikTok, YouTube, Facebook, everywhere. I don't want to hate on anyone who's done or does dropshipping, because I’ve done it myself. If you can make it work, it’s a great business for sellers. But I'm sure you've seen this content and also felt a bit weird about it. "Make $10K/month with $0! No inventory, no experience!" These videos sell a "get rich quick" scheme and a copycat game. Telling you all the benefits but hiding the fact that hundreds of people are already trying it that same day, and most are failing. They promote a system without a moat, instead of creating something original or a business that can last. The moment a product goes viral and dropshippers see it on Google trends, there are already hundreds of people copying the strategy. These videos follow the goldrush mentality: They might make some money dropshipping, but most of them make the real money on teaching people how to dropship. Don't dig for gold, sell shovels. The exact same thing happened in the AI boom: "Make passive income on AI!"
Worst of all, these videos typically prey on people who are desperate or need money, and paint the illusion you can use it to get rich. Dropshipping itself might not be bad, but on the macro level it's had major consequences, and that brings us back to Amazon. In the rise of dropshipping, something extremely interesting and unexpected has happened. With these generic, unbranded items which are so expensive, you might think "Why not buy these at Walmart for cheaper?" And you're exactly right. That's the flaw in ecommerce, and partly why dropshipping is beginning to die. Instead of having all the pointless annoying costs passed onto the consumer, on a product that should cost $5, in retail stores, it's much simpler. Instead of maybe the product cost being 10% of the price, in retail it's more like 80%, then a bit for logistics, and a bit for the retailer, like Walmart. Very little of the product cost goes to marketing. No pointless social media ads, just good value.
I remember in the 2010s, it felt like everyone said ecommerce was the future. Retail shops were an "outdated business model," and the convenience of shipping straight to you was unbeatable. This is why a lot of retail chains like Toys "R" Us closed down thanks to "showrooming," where customers looked at products in person, then ordered them online for cheaper. The pandemic cemented this too, with ecommerce growing 43% from 2019 to 2020 in the US—a jump of almost $250 billion. But we don't seem to be in this "post-retail, ecommerce utopia" like some MBAs predicted. How much of retail sales do you think comes from ecommerce? 40%? 30%? It's actually just 24%. And that number seems to have plateaued. I think we've collectively realized the limits of digital retail, and this is why dropshipping is dying. It's never going away, but for a lot of everyday products, it just makes more sense to buy something from Costco where 80% of what you pay for actually goes to the product you're buying. If you do want to buy those products online, you can just buy them from Temu and cut out much of the cost you find on Amazon.
But even then, physical stores do a lot that online shopping can't. The whole experience of going out with friends/family and comparing products in person is often more fun than just scrolling and adding items to your cart. Not only that, you can better evaluate a product's quality, and returns are much easier.
Back in 1997, Bezos said something interesting. "There's nothing about our model that can't be copied over time. But you know, McDonald's got copied. And it still built a huge, multibillion-dollar company. A lot of it comes down to the brand name. Brand names are more important online than they are in the physical world." (Source). People could copy his business model, but he wasn't worried, because he had branding. Ironic because it's the exact opposite of dropshipping which plagues Amazon. But I think it's the real way to succeed online and on Amazon. Don't just copy whatever everyone else is doing and sell something you don't care about. Build a brand you're proud of and products you stand by. If Amazon had mostly those types of sellers, the world would be a better place.
But hey, maybe that’s where we’re heading. Over the years, we’ve racked up 160 million views. Yet somehow, we still haven't reached 1 million subscribers! That conversion rate is even worse than Amazon’s quality control issue. If you've been watching without subscribing, please hit the subscribe button so that we can finally make 1 million a reality.