Is Ecommerce A Passive Income?

In short no. 

Passive income or businesses require very little input after being setup. Ecommerce businesses that last more then a few months require careful management, no matter what team and processes you put in place.

An example of a passive income is stocks and shares, for example you could buy an Exchange Traded Fund (Company buys all the top stocks in Australia, charges a tiny fee and you get the returns). With an ETF all you have todo is buy it, keep an eye on how it’s doing then report it in your taxes each year.

That is a passive for or income.

Ecommerce businesses aren’t passive. In a usual month you’ll typically need todo the following…

  1. Upload new products
  2. Write new products descriptions
  3. Setup or manage advertising campaigns
  4. Respond to customer enquires your team can’t handle
  5. Make sure your site is uptodate (WooCommerce needs constant security updates)
  6. Order new stock
  7. Process returns (Some fashion stores get 40% returns)
  8. Quality check manufacturing
  9. Manage cash flow to pay for everything

Even if you have someone or an agency helping you do each of these, you’ll have to manage all of them.

 

Is Ecommerce A Good Business Model?

If done correctly yes. They can generate a lot of cash (cash is better than profit on paper) and they can scale better than service based businesses, but not as well as online service businesses.

Don't Expect To Turn Up On Monday To Lots Of Orders

This is common misconception. Setup eCommerce site orders will follow and I just send them off.

That is the easy bit, it’s everything else llisted above that is hard.

Is Dropshipping Easy?

The dropshipping gurus selling course on Facebook Instagram would have you believe it is (for gods sake, don’t click them or it’s all you will see for the next month).

“Don’t deal with stock, just sell”

It is never that simple. Dropshipping means delayed deliveries (30-60 days), which means lots of customer complaints. You can’t control product quality and who sells it, which leads to price wars and decreased gross margins (percentage you’re left with after you’ve paid for the product to pay all your other bills).

Then if you do get a product that sells well, it might only last a few months, leaving you to search for the next “hit product”.

That’s a very hard business model to sustain.

This Wired UK article on dropshipping is well worth a read.