In this episode we talk with Oberlo co-founder Tomas Slimas. Before launching Oberlo, Tomas was a dropshipper and ecommerce entrepreneur himself, trying – and often failing – to make money online.
He eventually got it figured out and generated $3 million in revenue on a single store in a single year. Tomas sold that business and then doubled down on dropshipping, founding Oberlo in the hopes that anyone could do what he had just done – build a successful online business without ever holding inventory.
David: One thing I’ve heard you talk about is that, even if Oberlo is less than five years old and even if the concept of dropshipping has only become a big deal in the past few years, dropshipping as a business model is not new. You like to point out that companies have been dropshipping for a long, long time. I’m curious what you mean by that. And what are some of the examples of dropshipping outside of stores that are running on Oberlo?
Tomas: I think that’s a great question. Overall, I think dropshipping is still very common among ecommerce stores that are selling big, bulky products like furniture. It could be tires, it could be some custom products too. It doesn’t make sense for a company selling tires to stock a thousand tires of every sort. So they usually just order those products straight from the manufacturer. The same goes for furniture and other bulky products. I think it was really common… Dropshipping was really common as a business model in these industries back then and it is still really common today.
David: So we have talked to a lot of dropshippers using Oberlo dropshipping and lots of them had side hustles before they got into Oberlo dropshipping. So I know one real successful merchant that we talked to from California, he was doing a wholesale real estate. Then there’s a pair of friends from Utah who were selling stuff out of their garage. Then there’s an English entrepreneur, we talked to who is doing all sorts of scrappy stuff, like fixing up bikes and foreign exchange trading and whatever. Do you fall into this camp of people who had a big list of side hustles before you got into dropshipping?
Tomas: Yeah I did. I wasn’t… It wasn’t necessarily a side hustle, it was… I just had a lot of things I was doing and many of those things failed. Some of them succeeded. And I think what many dropshippers have in common is that they are trying to make it work. So they’re really hungry for success and they’re looking for ways of how they can succeed, and how they can grow bigger and make more money or have an ability to travel the world or have an ability to work from home or whatever their dream is. So I think we all have that in common. And I had it too and yeah, I was really trying to make it and then I was just stumbled upon dropshipping and dropshipping worked out for me.
David: So you mentioned the dream to succeed. I think that’s shared by a lot of people. But with a lot of dropshippers, it seems, in particular, that there’s not just a dream to succeed, but that they wanna succeed in a certain type of way, like it’s unconventional. The things that they pursue, there’s kind of like a hustle element to it. Was there something about success outside of the norm that appealed to you in particular?
Tomas: I think… I think what you’re referring to is the fact that dropshipping really strips away all the details and it really just focuses on how could you take a product that’s cheaper and sell it for a higher price and make money out of that. So there is not so much romance in like packing the products yourself and shipping it to your customer with a “thank you” note or doing all that kind of stuff. So I think dropshipping really helps you focus on what is essentially arbitrage or of selling products at a higher price than you get. And that is really common. That’s what Walmart does. So it’s not something like special, but it just really helps you focus on that.
David: So you launched your first dropshipping store in 2014, and I wanna get a better idea of what dropshipping was like back then before you started Oberlo dropshipping. So these days, dropshipping means that you have some combination of apps installed on your ecommerce store, and these apps kinda take care of a lot of the dirty work, like finding suppliers and fulfilling and managing orders. Your store, of course, preceded a lot of these apps including Oberlo. So how would your 2014 pre-Oberlo dropshipping operation have compared with what dropshipping looks like today?
Tomas: I don’t really think that it differs much. I think dropshipping was really different 10 years ago when Facebook wasn’t around or Facebook advertising wasn’t really popular. Because back then you had to sell your products via Google ads or organic search, and the marketing channel in many cases defines how you did ecommerce. Back in 2014 when I was doing that, dropshipping didn’t really differ much besides the fact that you had to do a lot of things manually on the supply side. So you had to manually pick the suppliers. I remember we were literally every day waking up and exporting all our orders from Shopify and then sending those orders in a CSV file to our suppliers so they could then download them, manually add tracking codes, and then kind of ship them back to us and then we import them back to Shopify.
So that kind of process was very tedious. And that’s what Oberlo dropshipping and many other apps have solved. But obviously, we haven’t solved picking the right product and setting up the marketing campaigns. And I don’t think anyone has since then. So I really think the only thing that has changed is that we save a lot of time on these tedious tasks on the supply side, so we can actually focus on the marketing, but the marketing hasn’t really changed like…
David: And was it the tedious-ness of these tasks, like exporting files and sending it to the supplier, did that inspire Oberlo dropshipping? Is that where Oberlo dropshipping comes from, that the fact that you know you hated doing this, and you assumed other people probably weren’t enjoying it either?
Tomas: So, it actually was… The story is very complicated and a little bit different. So we were working directly with the suppliers in China and at some point, we thought, it really doesn’t make sense to go all the way to China and negotiate deals with suppliers like we’re asking discounts, we’re asking that they put our brand label on the clothing items and what we’ve decided to do is that… Anyways, everyone is selling on AliExpress, so let’s just sell their products off AliExpress, and then when we make some sales, we’ll go to those suppliers and we’ll tell them, “Look all these sales that are coming from us. Why don’t you give us a discount, why don’t you put our product label and brand label on the products?”
And so we started doing that. We literally took products off AliExpress and added them manually to our store. And then we just faced a bunch of problems like products running out of stock, and then we kept selling a product that didn’t exist on AliExpress any more or whose prices changed and we were selling a product that had a different price. So that’s how we built, kind of, an initial version of Oberlo dropshipping, and it did exactly that and the name was actually… Oberlo used to be called “Ali Importer” and the only free features it had… It didn’t even have fulfillment. The only free features that it had was importing the product, then we will update the stock and the price automatically. And we didn’t really care about how we fulfilled those products. So that was kind of the problem we were solving for ourselves and that’s kind of the problem we decided to… The product we decided to ship to the Shopify app store.
David: Was that first version of it difficult to build?
Tomas: It was. I know like from… since then, dozens and dozens of companies have done something similar. I think the purpose of Oberlo dropshipping, in general, is not so much about building a product that no one else has. Many products are kind of a commodity. Some are easier, some solve some edge cases that we didn’t solve and… But many products are pretty similar. I think the purpose of Oberlo dropshipping and what we’ve done really great at is actually bringing people in and showing them that there is a way to achieve your dreams by doing this, which is ecommerce and dropshipping and I think we’ve been really successful at kind of making Oberlo dropshipping a go-to solution to building an ecommerce store or kind of a way to start into ecommerce that no one has really succeeded in the market. So I think… Yeah, I think our power was in, probably even in education and in inspiration more so than in product.
David: You mentioned that Facebook and evolutions with Facebook are perhaps a bigger deal than things that have changed within dropshipping itself. And it’s interesting to see the rise of Facebook advertising and how that kind of coincides with the rise of dropshipping as we know it today. It’s like Facebook launched mobile ads in 2012 and then they launched lookalike audiences in 2013 and there was just a ton of development on this front kind of happening simultaneously when you were launching your store. And then when a lot of… When dropshipping was kind of democratized and everybody had access to it. In some parallel universe where dropshipping tech was way, way ahead of marketing tech, so like if there was an Oberlo dropshipping solution but not a Facebook, what would dropshipping look like? Would there be dropshipping as we know it if it weren’t for these marketing platforms?
Tomas: I think dropshipping would still exist. It’s just that the people who are doing dropshipping would have a different profile. So the fact that over the last 15 years or 20 years that that has changed so much that it enabled anyone to start a store. Creating a Shopify store is not harder than managing your Facebook account, like your personal Facebook account. And then running Facebook ads or actually picking a specific user in a specific country that speaks a specific language, you can pick all these attributes very easily from within Facebook advertising admin. So, it is really… That has enabled anyone to create ads and handpick people they want to show their ads to.
And Oberlo dropshipping and other solutions have made it easy to manage your store, add products, email subscription bars, and many other things. So that has really enabled anyone to start a store and if any of this part didn’t exist, it would just be harder which means that fewer people would be doing it. And probably people with different backgrounds. So if today anyone can start an ecommerce store, if Facebook wasn’t around, it’s probably gonna be only people who have background in some specific area of marketing who could do that or people who already have audiences of people, so they’re just looking for products to sell to their audience that already exists.
David: Apps like Oberlo are awesome in that they allow anyone to launch a dropshipping business. And so thousands and thousands of people have installed Oberlo and use it to grow their business, but because it’s gotten so easy, like you said, there have also been thousands and thousands of people who have installed Oberlo and gotten nowhere. And this is just part of the equation. If you lower the barrier to entry, there are gonna be a lot more people entering. What are some of the things that you’ve seen that differentiate some of the successful ecommerce businesses from the ones that didn’t work out? When you talk about the profile of a dropshipper, what are some common themes that you’ve seen in the successful profiles?
Tomas: I think dropshipping is not different than any other business. Dropshipping is a business, and you rightly pointed out that many people fail whatever the business they start. It’s just part of the equation. And I’m not to tell why people fail or why people succeed, but I think the general kind of theory is that there is tactical stuff and then there is kind of the why… The kind of higher why behind why people fail. And the tactical stuff is… Beginner dropshippers might not focus on advertising, but focus on how their store looks like, and that’s probably a bad use of your time. If you spend a month designing a logo with some free software, but you don’t do your ads or you don’t try to understand how to target the people, the audience that would buy your products, I think that’s just a tactical mistake.
But I think that that could be easily learned because there is so much education out there. There are probably 500 articles on the Oberlo dropshipping blog, we have our YouTube channel. There are so many other creators who are creating a lot of content that is very useful. So I think the tactical stuff could be easily solved because people can learn it and everyone can learn.
David: What about the non-tactical stuff?
Tomas: The non-tactical stuff is just people sticking around and going through it and persevering and having the motivation and the hunger to get there. And obviously you will, you will kind of face roadblocks, but those roadblocks have to motivate you to keep moving forward. So if you don’t know something, that has to be a motivation, like that pain should lead you to… to learn that. And I think that the problem is when that pain stops you from doing that.
So if you start an ecommerce store and you don’t get any sales and that pain kinda stops you from learning the sales because… Learning how to make sales because you just think like, “I’m not made for this,” I think that’s where people stop. And I think the goal for you from the non-tactical perspective is like how to set up your mindset in a way that you would keep moving forward, whatever the obstacle is, and those obstacles would motivate you to learn those things.
David: Do you remember any moments for you personally, where there was this pain point and this headache?
Tomas: Yeah, for me, it’s all the time. I was running both an ecommerce store… Well, I was running the ecommerce store with my brother, and we started Oberlo dropshipping, it was five of us. It was myself, my brother and then three other folks. So among my brother and myself, I’m the pessimistic guy and my brother’s really optimistic and he’s very enthusiastic and I’m thinking everything through too many times. Yeah, when I’m thinking about the obstacles that I’ve faced and whether they have stopped me, from learning from these obstacles and saying, “That’s over, it’s not for me,” or the obstacles that I’ve learnt from, I think I’ve faced so many obstacles that I’ve said, “This is over, this is not for me… ” Maybe I’m a musician, maybe I’m someone who should be reading books or something. And my brother was always like, “We should keep going because there’s no other way, we’re gonna have to make it.”
And among the obstacles, there were classic ones. I’ve been running ecommerce stores for three years, and I haven’t made much sales because that was the conventional ecommerce stores. So it was all painful. Setting up stores, borrowing money from your parents and I was buying inventory and then not selling an item is like, it’s hard and it took three years, kind of, that period was like three years long, and it didn’t really go well. So that was hard. Dropshipping was hard because when doing dropshipping, especially back then when there wasn’t so much knowledge around dropshipping, you couldn’t read on how someone solved this problem or that problem. Yeah, we faced a lot of problems starting with payment gateways, starting with products that were not shipped on time or we found bad suppliers or something like that. And all of these problems caused so much frustration that you always wanted to stop.
David: You mentioned your conventional stores that you ran in parallel to the dropshipping or maybe before the dropshipping stores where you’d get a bunch of products and you stocked them in a warehouse or a garage or whatever, and then you move that inventory which is… I think this is kind of how a lot of people conceive of a “normal ecommerce store.” You didn’t have much success with that. What… As somebody who’s been on both sides of the dropshipping versus the “normal store,” what are the differences between the standard ecommerce set up and the dropshipping ecommerce set up?
Tomas: I’ll put it this way, so I think there is no right or wrong answer to this. It really depends on who you are. So, if you are running a conventional store, there are a lot of tasks that you have to do where you have to have a lot of knowledge. So, if you are running a conventional store, you have to buy products in advance and stock them in your warehouse. And buying products in advance is risky because you invest capital. And if you don’t know what would sell well, or what the market needs, you will just burn a lot of cash. In non-conventional stores, like in Oberlo dropshipping let’s say, you don’t buy products in advance, so you don’t really have to know what products will sell well. Which means… With this, I want to illustrate that it requires a different background.
And I think, in my case, the mistake was that when I didn’t know anything about ecommerce or marketing, or about the internet in general, I started with conventional stores where I was just learning stuff. And I think it’s the most painful learning when you are building a store, on Magento which is this hosted platform, self-hosted platform. So there is a lot of set-up there. You sell products that you stock in your warehouse, so you pick the products like… I was logging books for half a year into the platform. Just, writing down descriptions of the product into Magento. So it was really, really painful. And, whereas right now, I would say that for a beginner who doesn’t know anything about setting up a store, picking the right product to sell or starting marketing campaigns you shouldn’t start with a self-hosted ecommerce platform, you shouldn’t start with buying products in advance and you shouldn’t start with offline marketing, buying billboards. That’s… Your skillset should match the solutions that you pick.
David: And so what was your… You mentioned that the background can inform the type of store that you wanna run. What was your background before the ecommerce stores? Like what were you really good at?
Tomas: I wasn’t really good at business at all.
Tomas: So I was… I was doing a lot of folklore. I was kind of a folklore musician.
Tomas: At high school. And then I studied economics and politics for one year, which has macro-economics, so it’s not so much about business, it’s more about just countries’ economies.
David: It’s crazy to think about all the roadblocks that people would have faced when starting an ecommerce business like 15 years ago. Building a website would have been a headache and accepting credit card payments would have been headache and finding products, marketing products, and all this stuff was a lot more difficult than it is now. Now it’s not a problem to accept credit cards. Now it’s not difficult to find ways to market. When you think about how to innovate in the ecommerce space, what’s the next big roadblock you see that’s gonna be removed for all the wannabe entrepreneurs?
Tomas: We like to think of ecommerce as containing… As kind of standing on three pillars. So one is; the store, where you’re selling your products; the second is what you’re selling, so the actual products and the third one is like how you’re selling, how you’re bringing customers to your store. And when you look at it, every pillar has been more or less solved. You can really easily build a store, you can find products to sell online relatively easily and there are a bunch of marketing platforms that lets you reach your customer sufficiently. Now I think there is a lot of room for innovation in every single piece. Especially for beginners, for people who don’t necessarily know much about the ecommerce specifics.
So I think… Well, definitely the most untouched area is advertising. There are tools that help you reach customers efficiently and they just tend to become more and more complicated because they keep adding more features to make those platforms more efficient. So if you were using Facebook ads in 2014 or 2013, the interface was really, really easy. Right now, I don’t even understand it. It’s super complicated. If you go on to Google AdWords like… It’s a mess. You will get lost.
So, I think creating tools that would help you, for a beginner, to understand those platforms efficiently and kind of guide you through the steps you have to not only create a campaign but also identify your customer. Identify why that customer would buy from you and what kind of content resonates with that customer. I think it’s important and I don’t think anyone is doing that. So the short answer to your question would be that every single area has a lot of room for innovation, but I think the marketing piece would definitely benefit a lot from some influence.
David: And you say that because you think that there is a bit of a mismatch between the functionality of them? It’s maybe too powerful for what some people are looking for? I mean these are like enterprise solutions that we’re using to run non-enterprise stores.
Tomas: Yeah, so I’m not the person to judge but I think Facebook and Google Ads… Google Ads platforms… Both of these platforms have historically focused too much on making everything possible, but not making most of the things simple. So I think they really focused on that. And that really helped people who are… Who knows what they are doing in Facebook Ads, for example, to achieve extraordinary results.
But for people who are just starting out, I mean, they are not complicated… Not as complicated. Everything is out there for you to learn. So it’s not that it’s like a black hole. How would you start doing offline marketing or TV advertising? It’s not so accessible as Facebook Ads obviously, but Facebook Ads is still pretty complicated. It helps you find products to sell and manage your store. I think that’s the product solution that we’re bringing in, and again, as I mentioned at the beginning of the conversation, I think what Oberlo dropshipping does even greater is help people… Make people aware of this opportunity and help them get started for education, for inspiration, and for a solution. So we’ve never been selling Oberlo, we’ve always been selling ecommerce and dropshipping.
David: What are one or two dropshipping myths and misconceptions that you wish weren’t out there?
Tomas: That dropshipping is easy. I think dropshipping is simple, but it’s not easy. It’s straightforward, the steps are clear. The solutions are out there for you, the education is out there for you. But it’s not easy because it’s just hard to make people buy from you. And that’s just the general truth. So I think that’s one of the misconceptions that I would… I would hope that it wasn’t out there. And I think the second misconception is that people will never buy from you if you have the slow shipping plans.
I’ve fallen on this myself, but I think the reality is that… Well, the data that we have, proves that there is an audience of people who are buying particular products and they’re fine waiting for longer shipping plans. I think there was a misconception that if Amazon is doing one-day delivery everyone has to do a one-day delivery because there is no chance they can win against Amazon. But I think there is… Yeah, I think that’s a misconception about dropshipping vs Amazon.
David: You mentioned that there are some products that people are more willing to wait for. What are a couple of examples of things that… Where the overnight delivery or the next day delivery is not quite as important?
Tomas: I could definitely tell when one-day delivery is very important.
Tomas: I mean, food, clothes and things like that. But I think products that you don’t necessarily need or you have an intent to buy, are products that you would be good at waiting for. Because if you have an intent to buy a product, you’ll likely want it faster than later. So, let’s say you want to buy running shoes, you don’t want to wait for a month. You want to buy them and you want to get them now. For products that you didn’t know you want, so you don’t necessarily have the intent to buy them, I think people are generally okay to wait for.
David: There was an Ask Me Anything that you did on Reddit a few years ago and there was a funny exchange that you had after somebody asked, “When’s the best time to launch a store?” So, you quoted Reid Hoffman, the founder of LinkedIn, who said, “If you’re not embarrassed by the first version of your product, you’ve launched too late.” And that sparked some conversation in this AMA with people going back and forth about the best time to launch a store. And eventually, you kind of put your hands up and said, “Actually, I’m not the best person to discuss this since I’ve never worked in a company owned by other people.” And I thought that was interesting because it really highlighted that you had never had a normal job. So, I’m curious if this lack of a traditional work background, when you got into ecommerce, if that was by design, like you couldn’t imagine working in a standard company, or if this ecommerce route that you ended up on, if that’s just kind of the way things worked out and you went with it?
Tomas: Yeah, that’s a good question and I have a funny story. It wasn’t by design. So when I started out, I didn’t have many options. So my options were to go work at a restaurant or a cafeteria and there was nothing wrong working there, but it just didn’t really excite me as an opportunity. So if I had options at the time of working at great companies around the world or even the big corporations or small corporations, or whatever, I didn’t have any objections to taking that job. So, it wasn’t a philosophical kind of decision not to work for anyone. It was just like if I had better options. I thought at the time that the best option I have is to start something of my own.
David: So I wanted to ask you about growing up in Lithuania and how this might have shaped your approach to business and jobs, and you just kind of maybe set me up for this question. And this might be a stretch, but just hear me out.
You can tell me if it’s stupid at the end. So you were born not long after the Soviet Union collapsed in Lithuania. So you have grown up with the residue of this failed Soviet State. Is there anything about this timing, you know, growing up as capitalism made its first appearance in Lithuania in decades, do you think that had anything to do with the way that you approached your options or the way that you wanted your working life to unfold?
Tomas: In general, in countries that are a little bit worse off, people tend to want to make it more. So I think if you are very comfortable in whatever well-developed country, you have fewer incentives to put in the hard work to make it happen. Unless it’s something you are passionate about. Now, when you are in a country which is not that well off, and maybe you’re living by, not really kind of luxury or whatever, you have more incentives to really put in the hard work to make it work, to make it happen. So, I think growing up in a country like Lithuania or any other country similar to Lithuania, it just helps you become more hungry for success.
David: You scaled up your dropshipping business to $3 million in annual revenue and eventually you sold it. When you look back at that sequence of launching, scaling and then generating millions in revenue and then selling, how did that compare with what your expectations were, getting into it?
Tomas: Obviously, I have never expected it to grow that big. We all have aspirations, but not $3 million. Because $3 million in Lithuania is very different than $3 million in the US. And so I felt really rich. I wasn’t, but it was a great feeling. And I also… When I got a feeling of how big it could become or I just kind of saw that we are actually making sales, I didn’t realize how many problems we would face. We faced a lot of problems with payment gateways. We faced a lot of problems with suppliers in China, setting up new stores, and making sales decisions.
David: Was the plan to have a handful of $3 million dollar stores?
Tomas: Yeah, that was the plan. I think every dropshipper is paranoid about finding the next product or making it kind of sustainable. So most of the dropshipping stories are like, there is someone who really wants to succeed, and they find a way to create a store and test it out and usually, that’s a dropshipping store, and then they quickly make it happen. And the next big question they have is how to make this repetitive, how to keep succeeding at it. And we had this same question. We tried solving it by launching numerous stores and launching our own brand. So that was our brand and I know many dropshippers who succeeded at that. We weren’t them. So we just sold our store because we kind of ran out of ideas about what we could do with it.
David: Do you think people in dropshipping are too quick to worry about the next product? You used the word paranoid. Do you think this is something where people, instead of looking for the next thing, maybe could take a deep breath and build what they already have or is this the nature of dropshipping? How can you not fall victim to that paranoia?
Tomas: I think it’s good to be a little paranoid and I think it’s healthy for people to look for ways of how to make it sustainable. Because dropshipping is a very… It’s a business model based on… A lot of trends. And if there is a trending product that is selling really well, like a hot product, the winning product as they call it… So you’ll make it but that winning product will… There will be diminishing marginal returns, like everyone will start selling it and then you will just get less value over time.
David: Is there… So, the trending product… Is fidget spinners, the best example of that?
Tomas: I think fidget spinners, it’s a good example but it’s not entirely accurate because fidget spinner was like a global phenomenon. It happened, everyone knew about it, it was massive, it was everywhere. You go to China, there were fidget spinners on the street. You go to, whatever, Kenya, there were fidget spinners on the streets. You go to Tokyo, Europe… You had… Everyone was selling fidget spinners. Like in New York, grocery stores were selling fidget spinners.
So fidget spinners were a global phenomenon, and when you call fidget spinners a winning product as an example or use fidget spinners an example for a winning product, people think that there isn’t… There’s no way they can find a winning product because fidget spinners don’t happen often enough. So I think a winning product is just any kind of product that people click on and there are many of them, and dozens and dozens of them and we see that among the world merchants.
David: What are a couple of examples of products that don’t fall victim to the trend thing? Like they’re winning products now, and they were winning products a year ago and they’ll probably be winning products in a year. What falls into that kind of evergreen mold?
Tomas: I think, evergreen products are not really good for dropshipping. Because Evergreen products are products that people usually need so they have an intention to buy them. And then if you have an intention to buy something, you usually have very different ways of finding those products. So if you know what you want to buy, you go to a store that you like to buy that product from or you go to Amazon and search for that product or you go to Google and search for stores selling that product so you could compare the prices. And all of these ways of finding products are not really helpful for dropshippers to sell more.
I think what dropshipping is really good at is leveraging Facebook ads to show products to people while they were on their commute, scrolling through their Facebook news feed and then entice them with an engaging product, a creative… So, you show a product… Whatever, an inflatable air sofa that you can just hold against air and inflate it and then chill on the beach, I think.
David: These are real by the way?
Tomas: These are real. Yeah, and they were really trending a year ago or so. People didn’t know that they wanted those but when they saw them, they really wanted them, and they were fine waiting for them. They wanted to buy, they didn’t know like… “I should go to Amazon,” or whatever. Yeah, so I think evergreen products are probably not good for dropshipping unless you set up your dropshipping store differently.
So as I mentioned, 10 years ago when Facebook wasn’t really big as an advertising platform, most dropshippers were doing organic or Google AdWords and on organic, you’re actually selling products that people search for because that’s kind of the model of it, right? And then you should probably be selling something evergreen like some fishing gear; people are constantly looking for fishing items or for fishing content. So you want to kind of appear in those results and then sell your dropshipping products.
David: Alright Tomas. We can leave it there. Thank you so much for taking the time to chat.
Tomas: Thank you. It was my pleasure.