What’s the worst that could happen with a Shopify account?
June 22, 2024 12:59 PM Subscribe
My son wants to start a drop-shipping business by opening a Shopify account and selling screen protectors ordered from…some other vendor?. He is 14 and learned about this business model from an eighth-grade business class. I have no understanding of what’s he talking about, but a Shopify account costs $5 a month, so is there any downside to letting him try this?
He says this is an experiment, to learn something about running a business. He has entrepreneurial dreams. I have zero understanding of either tech or business and can’t guide him in this. But I’m fine with hooking his debit card (which has a balance of a few hundred dollars) up to a Shopify account and letting him experiment with this if there’s no risk. Do you have any experience with this, and can you tell me if there is in fact risk involved?
Thank you.
He says this is an experiment, to learn something about running a business. He has entrepreneurial dreams. I have zero understanding of either tech or business and can’t guide him in this. But I’m fine with hooking his debit card (which has a balance of a few hundred dollars) up to a Shopify account and letting him experiment with this if there’s no risk. Do you have any experience with this, and can you tell me if there is in fact risk involved?
Thank you.
It's simply NOT ALLOWED.
posted by kschang at 1:03 PM on June 22 [9 favorites]
With that said, dropshipping is actually pretty simple in concept. You only operate an online storefront. You don't keep any inventory. Any orders you get are passed through to someone who actually has the product, who will ship it to the purchaser. You take the payment, pay a lesser amount to that someone who has the product, and pocket the difference. Obviously what you charge have to be enough cover your markup AND whatever that someone charges for the product AND shipping.
In operation, it'll cost you more than $5 a month. $5 is just for Shopify. You probably have to "rent" (subscribe) to a plug-in that automates the order, payment, and shipment tracking which will probably cost MORE than $5 a month. AND you need to have an eye for products that are very cheap in China, available on Aliexpress, AND sells for a good price in the US, and shipping's cheap enough that you still enjoy a healthy profit margin. It's NOT as easy as it sounds, but it's not that difficult, at least on concept.
posted by kschang at 1:11 PM on June 22 [3 favorites]
In operation, it'll cost you more than $5 a month. $5 is just for Shopify. You probably have to "rent" (subscribe) to a plug-in that automates the order, payment, and shipment tracking which will probably cost MORE than $5 a month. AND you need to have an eye for products that are very cheap in China, available on Aliexpress, AND sells for a good price in the US, and shipping's cheap enough that you still enjoy a healthy profit margin. It's NOT as easy as it sounds, but it's not that difficult, at least on concept.
posted by kschang at 1:11 PM on June 22 [3 favorites]
Once you've found a product that you can profitably act as middle-man for, the next bit's tricky. You need to persuade people to visit your shopify store and buy it.
My understanding is that most dropshipping uses short-term, intensively targetted advertising. Which costs money and isn't guaranteed.
This is why suppliers don't care if dropshippers are selling on at a profit - because the seller is also taking on all the financial risk of running the store with no guarantee of sales.
posted by Lorc at 1:40 PM on June 22 [4 favorites]
My understanding is that most dropshipping uses short-term, intensively targetted advertising. Which costs money and isn't guaranteed.
This is why suppliers don't care if dropshippers are selling on at a profit - because the seller is also taking on all the financial risk of running the store with no guarantee of sales.
posted by Lorc at 1:40 PM on June 22 [4 favorites]
Yes, you will have to set it up under your name since the platform doesn't allow minors to be account owners.
Dropshipping doesn't require an investment into the product since you only ship once an order is made. That being said if he really wants to make a successful business, it would be a good idea to vet the products by ordering samples since the quality can vary a lot (these products are most likely made and shipped from China fyi).
It will not be easy to make sales since it will heavily depend on marketing/branding. But I do think it's a good low risk way to learn about running a business. The platform is really designed to be foolproof and make entrepreneurship accessible to anyone. That being said, running a successful business requirss more than jusy understanding the platform..
posted by winterportage at 1:47 PM on June 22 [1 favorite]
Dropshipping doesn't require an investment into the product since you only ship once an order is made. That being said if he really wants to make a successful business, it would be a good idea to vet the products by ordering samples since the quality can vary a lot (these products are most likely made and shipped from China fyi).
It will not be easy to make sales since it will heavily depend on marketing/branding. But I do think it's a good low risk way to learn about running a business. The platform is really designed to be foolproof and make entrepreneurship accessible to anyone. That being said, running a successful business requirss more than jusy understanding the platform..
posted by winterportage at 1:47 PM on June 22 [1 favorite]
Don't forget fraud and scam, fake cards, disputes, etc.
I don't believe proceeds can go into a personal account. This probably requires a MERCHANT account at a bank (another 18+ thing)
posted by kschang at 2:05 PM on June 22 [1 favorite]
I don't believe proceeds can go into a personal account. This probably requires a MERCHANT account at a bank (another 18+ thing)
posted by kschang at 2:05 PM on June 22 [1 favorite]
Ideally, you could get hold of someone in your circle of extended family / friends of friends who has done exactly this and is willing to give your son a few hours of time to talk through all the steps involved in creating a break-even drop-shipping business and how much money and effort those steps cost (beyond the shopify account). A detailed plan to create a drop-shipping business may involve a number of other steps and expenses your son is not aware of. E.g. registering and paying for the domain name for the online store. Advertising / marketing to get potential customers to even look at the store -- big topic, what's the plan? How much cash needs to be kept in reserve to deal with chargebacks, fraud, returns due to quality issues / defects in the merchandise.
If your son is interested in running some experiment to learn about business, that's excellent, but it might also be worth having a discussion with your son about how much money he is willing to spend on these experiments, and what will happen if the business is still losing money once your son has run through that initial amount of money.
posted by are-coral-made at 4:49 PM on June 22
If your son is interested in running some experiment to learn about business, that's excellent, but it might also be worth having a discussion with your son about how much money he is willing to spend on these experiments, and what will happen if the business is still losing money once your son has run through that initial amount of money.
posted by are-coral-made at 4:49 PM on June 22
As a platform with a slightly different set of frictions, eBay or Esty may work for this as well. It has hoops, just a different type of hoops to Shopify.
posted by fiercekitten at 5:08 PM on June 22
posted by fiercekitten at 5:08 PM on June 22
I don't think he has to operate this at a profit. He needs to operate it at a breakeven or small "tuition" fee. Small losses.
I have been in business for myself for 36 of the last 40 years. I think if this was available to me at 14, I would have jumped at the chance. It will be a great learning experience. When you say "no risk" or no "downside", that is very vague. How do you define risk in this case? Is it losing money or is it something worse like having the family bank accounts shut down (that won't happen, just an example of extreme risk)? If it were my child, I would set up the account, give them a $100 down and out and let them have at it. (Follow along with him and his 8th grade class and you might learn along with him!)
One of my 3 children is entrepreneurial. I let him set up an eBay business selling my stuff (that I approved of). He got 50% of the profits and I got something for items I no longer wanted. He did it through HS, but ultimately it was too labor intensive for him vis a vis the money. Going to the post office, boxing up items, responding to customer inquiries, etc.
As a child growing up on Long Island, at about 14, my parents let me take the train into Penn Station/Madison Square Garden on my own to go to Knicks and Rangers games. When I could not find a buddy to go with me (we had 4 season tickets), I would go and scalp the extra tickets. Before stubhub and before all these reselling markets, there were phyusical tickets and a thriving resale market outside arenas. I got burned once in a while, but I learned so much from the experience (and made a relatively lot of money). It led directly to my first post college opportunity. I transferred those scalping skills to trading options on the floor of one of the national exchanges. I had no salary, just 50% of my profits.
Helping him with this will go much further than simply an 8th grade business class project. It will instill confidence in him, it will show you support him, it will give him a low key introduction into the adult world. Be that parent that says YES, sure, give it a go. Or, say this has too many complications, but come up with another idea and I will support it. He may find out that he loves this type of job or he may find out that this is not for him. Either way, it is well worth the small "tuition" paid.
(In my opinion, he put you, unintentionally for sure, in a position of having to say yes or no with "no" having more repercussions than simply denying him this opportunity. It goes to the parent-child relationship and what you want to teach him about risk, work, etc. )
The world is no longer get a job with a big company (IBM in my day), go to work every day for 40 years, have a nice pension and sopme savings and retire. It is sort of a three option world now. Work for the gubmint, gat paid less but have lots of benefits and lifestyle plusses, work for big corporation, toil under 60 hour weeks, get stock options that you hope hit it big, get paid a decent wage and hope to have the savings and assets to retire, or become more entrepreneurial scratching out a living answering only to yourself and your family. Obviously there are a lot of options between those three, but to me, having the skills and the tolerance for being entrepreneurial and eating what you kill so to speak is something most kids would love to be taught and would greatly benefit from them or benefit from knowing it is not for them.
I know this response goes way beyond the scope of your question, but I think you should think about this question from your child in the larger context other than how can he fuck this up.
Godspeed
posted by JohnnyGunn at 5:38 PM on June 22 [15 favorites]
I have been in business for myself for 36 of the last 40 years. I think if this was available to me at 14, I would have jumped at the chance. It will be a great learning experience. When you say "no risk" or no "downside", that is very vague. How do you define risk in this case? Is it losing money or is it something worse like having the family bank accounts shut down (that won't happen, just an example of extreme risk)? If it were my child, I would set up the account, give them a $100 down and out and let them have at it. (Follow along with him and his 8th grade class and you might learn along with him!)
One of my 3 children is entrepreneurial. I let him set up an eBay business selling my stuff (that I approved of). He got 50% of the profits and I got something for items I no longer wanted. He did it through HS, but ultimately it was too labor intensive for him vis a vis the money. Going to the post office, boxing up items, responding to customer inquiries, etc.
As a child growing up on Long Island, at about 14, my parents let me take the train into Penn Station/Madison Square Garden on my own to go to Knicks and Rangers games. When I could not find a buddy to go with me (we had 4 season tickets), I would go and scalp the extra tickets. Before stubhub and before all these reselling markets, there were phyusical tickets and a thriving resale market outside arenas. I got burned once in a while, but I learned so much from the experience (and made a relatively lot of money). It led directly to my first post college opportunity. I transferred those scalping skills to trading options on the floor of one of the national exchanges. I had no salary, just 50% of my profits.
Helping him with this will go much further than simply an 8th grade business class project. It will instill confidence in him, it will show you support him, it will give him a low key introduction into the adult world. Be that parent that says YES, sure, give it a go. Or, say this has too many complications, but come up with another idea and I will support it. He may find out that he loves this type of job or he may find out that this is not for him. Either way, it is well worth the small "tuition" paid.
(In my opinion, he put you, unintentionally for sure, in a position of having to say yes or no with "no" having more repercussions than simply denying him this opportunity. It goes to the parent-child relationship and what you want to teach him about risk, work, etc. )
The world is no longer get a job with a big company (IBM in my day), go to work every day for 40 years, have a nice pension and sopme savings and retire. It is sort of a three option world now. Work for the gubmint, gat paid less but have lots of benefits and lifestyle plusses, work for big corporation, toil under 60 hour weeks, get stock options that you hope hit it big, get paid a decent wage and hope to have the savings and assets to retire, or become more entrepreneurial scratching out a living answering only to yourself and your family. Obviously there are a lot of options between those three, but to me, having the skills and the tolerance for being entrepreneurial and eating what you kill so to speak is something most kids would love to be taught and would greatly benefit from them or benefit from knowing it is not for them.
I know this response goes way beyond the scope of your question, but I think you should think about this question from your child in the larger context other than how can he fuck this up.
Godspeed
posted by JohnnyGunn at 5:38 PM on June 22 [15 favorites]
This might be paranoid but I’d check the public liability insurance implications. Everything has a safety standard, anything can cause an accident.
posted by tardigrade at 12:19 AM on June 23
posted by tardigrade at 12:19 AM on June 23
Response by poster: When I say risk, I mean the possibility of some kind of liability (to me, the adult, as it looks like I would be the one opening the account and possibly a merchant account) or the possibility of losing more than a couple of hundred dollars. I will willing to let him try and lose a hundred or two just for the learning experience, but I am not willing to lose, say thousands of dollars because I didn't understand liability or whatnot.
posted by Ollie at 2:55 AM on June 23
posted by Ollie at 2:55 AM on June 23
Response by poster: Like maybe an LLC would be a good idea? But that probably costs money to set up.
posted by Ollie at 4:22 AM on June 23
posted by Ollie at 4:22 AM on June 23
About LLCs, I saved this comment that an old user posted years ago: “The limited liability aspects of an LLC are vastly overrated and commonly misunderstood. For someone providing services like a consultant, the LLC provides no liability protection for mistakes that you make personally. For that you need Errors and Omissions or personal liability insurance. The only protection that the LLC provides is liability for company debts and most LLCs do not have company debts because no bank will loan to you without a personal signature. In other words you are on the hook personally for debts regardless of the LLC.
If you are worried about being sued, you need insurance, not an LLC. An LLC provides you no protection. For most small sole proprietors working as contractors, for example a coder or web designer or a copy writer or tech writer, you really don't need either. Nobody is going to take away you home.
Don't make the mistake of setting up an LLC for lawsuit protection. It doesn't work that way for most small service businesses.”
posted by daisyace at 4:36 AM on June 23 [3 favorites]
If you are worried about being sued, you need insurance, not an LLC. An LLC provides you no protection. For most small sole proprietors working as contractors, for example a coder or web designer or a copy writer or tech writer, you really don't need either. Nobody is going to take away you home.
Don't make the mistake of setting up an LLC for lawsuit protection. It doesn't work that way for most small service businesses.”
posted by daisyace at 4:36 AM on June 23 [3 favorites]
Two more considerations:
1. Taxes. The seller has to keep careful records of the price he has paid for merchandise, and all expenses, and the revenue he receives. If he cannot document the wholesale price, the IRS will tax him on the retail price, not just on the profit made.
2. If there is any delay on the part of the shipper, the retailer gets the complaints from impatient customers.
posted by yclipse at 4:07 AM on June 24
1. Taxes. The seller has to keep careful records of the price he has paid for merchandise, and all expenses, and the revenue he receives. If he cannot document the wholesale price, the IRS will tax him on the retail price, not just on the profit made.
2. If there is any delay on the part of the shipper, the retailer gets the complaints from impatient customers.
posted by yclipse at 4:07 AM on June 24
I would ask the business class teacher all of the questions you (and others) are asking here. Plus ask the teacher to share the answers with the class.
posted by gakiko at 1:59 PM on June 24
posted by gakiko at 1:59 PM on June 24
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