490: BEWARE! The 4 Absolute Worst Businesses To Start In 2023 – Family First Friday

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In this episode, I’m going to reveal the worst businesses to start this year and beyond. And I’m not normally a negative guy, but this podcast episode is important because my goal is to make sure you’re investing your time and money wisely. Not every side hustle opportunity is a good one and not every business is suited for every person. Plus the business landscape is constantly changing and some business models are just no longer viable. What’s up everyone. You are listening to the My Wife, Quitter, Job podcast where I teach you how to make money online.

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by exploring different tools, strategies, and understand how to leverage human psychology to grow your sales. Welcome to a special segment of the show called Family First Fridays, where I go solo to give you my thoughts on how to make money without sacrificing your lifestyle. And if you haven’t picked up my book, The Family First Entrepreneur Yet, head on over to mywifecooderjob.com slash book, fill out the form, and get over $690 in free bonuses. Now just a quick heads up before we start, this episode wasn’t recorded to discourage you.

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but to empower you because it’s all about avoiding potential pitfalls and financial headaches. Now the first business that I would avoid this year is retail arbitrage. Retail arbitrage is a business model where you buy products at low prices from retail stores, whether it’s physical or online, and then resell those items at higher prices on marketplaces like Amazon, eBay, or Etsy. And the difference between the purchase price and the sale price is your profit.

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Now most of you guys probably don’t know this, but before I launched bumblebeelinens.com, I actually started out with retail arbitrage. For example, many years ago, and I’m probably gonna date myself here, Tickle Me Elmo dolls were the hottest toys on the market and they were sold out everywhere. Now happened to be at a toy store one weekend and I saw five of these dolls in stock, so I bought them all and flipped them immediately on eBay for a pretty good profit. This is essentially how retail arbitrage works and on the surface,

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It sounds fun and profitable. All you got to do is shop the clearance racks at Target, list those products on Amazon, and keep all the money. But here’s the main problem with retail arbitrage. Over the years, this business model has become increasingly popular, which means there are a ton of bargain shoppers doing this. It is extremely difficult to find items to flip for a profit that aren’t already being sold by many other sellers. Now I got super lucky with these Tickle Me Elmo dolls, and to this day, I have never been able to replicate it.

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Finding products to resell is often hit or miss, and there’s no guarantee that the items you find one day will still be available the next. So basically, once you hop on this hamster wheel, you have to constantly be on the lookout for new deals, and if you can’t find a good deal, then you’re not gonna make any money. Also, you better love shopping because that’s what you’re gonna be doing all day long. You can’t really scale a retail arbitrage business because you are limited by how many items you can find and buy and then store, pack, and ship. For example, I have a buddy who makes

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35 to 50K a year doing retail arbitrage, which is pretty good money, but he shops eight hours a day and has a truck that he drives around to pick up the merchandise. But here’s the biggest disadvantage. If you sell on a platform like Amazon, there are strict rules to follow. And if the brand that you’re selling decides not to let you sell their product any longer, you could get stuck with a pile of unsellable inventory. For example, a while back, my buddy bought a ton of Lego products on clearance from a toy store to sell on Amazon. And then one day,

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All of his selling privileges were revoked because Lego didn’t want arbitrage sellers on Amazon any longer. In addition, prices change all the time and it’s actually quite a big financial risk to buy a bunch of products upfront. If you miscalculate demand or buy a product that ends up not selling as well as you thought, you could be stuck with a bunch of unsold inventory. So overall, retail arbitrage is okay for making a couple bucks here and there, but it’s definitely not a good long-term business model. And not only is it getting harder every year,

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but you constantly have to seek out new deals in order to stay profitable. By the way, if you’re enjoying this episode so far, make sure you sign up for my free six day e-commerce mini course over at mywifequitterjob.com slash free, where I’ll teach you the ins and outs of selling online. It’s free and really a no brainer to sign up. Now the next business I would definitely not start this year is wholesale on Amazon. Amazon wholesale is an e-commerce business model where you find an established brand name product

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purchase it in bulk at wholesale prices, and then sell it on Amazon FBA. Now, unlike other Amazon business models, such as retail arbitrage or online arbitrage that we just talked about, selling wholesale on Amazon allows you to make bulk purchases from a single supplier to provide you with a consistent supply of products. So right off the bat, Amazon wholesale is a better business model than retail arbitrage, but not by much. And in general, the gross margins for Amazon wholesale are decent,

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at around 50 % or so, and after Amazon fees and FBA, you could end up making between 20 to 25 % net. Again, not horrible. But selling wholesale successfully on Amazon requires you to find well-known branded products with high demand and a low number of sellers selling the same product. Now, the biggest flaw with Amazon wholesale is that since you are selling other people’s products, you will be competing with many other sellers selling the exact same item on Amazon.

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And when there are many sellers selling the exact same item on a large marketplace like Amazon, the price always spirals to the bottom. And every product you sell will have multiple sellers, and there can only be one active seller per listing on Amazon who owns what is called the buy box. To win the buy box, you constantly have to lower your prices. For example, let’s say you decide to sell Pantene shampoo wholesale. In a listing that I’m looking at on Amazon right now, it’s got eight active sellers competing for the buy box. And to win the buy box,

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you usually have to be the lowest price offering. And because prices change all the time, you have to watch all of your listings like a hawk to make sure you consistently have the buy box in order to make any money at all. In fact, the only way to make the Amazon wholesale business model a viable option is if you can somehow land an exclusive wholesale account where you are the only authorized seller of a product. For example, my student, Abby Walker has an exclusive agreement with Insolia to sell their insoles under her brand, VivianLoo.com.

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And as a result, she makes millions every year as the only seller. But these exclusive wholesale deals are extremely rare and hard to land. And in many cases, brands will opt to sell their own products on Amazon and keep the bulk of the profits. After all, why would a company give up a 50 % margin to an Amazon seller when it’s so easy to create a listing on Amazon? Not only that, but most brands now require a brick and mortar store or a strong online presence in order to get an exclusive contract.

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You also need a decent amount of upfront capital to pay for inventory. And then finally, when you sell other people’s products, you don’t own or control any aspect of your business. Most of my friends who are successful doing Amazon wholesale often lose a number of their wholesale contracts every year and are constantly on the hunt for new deals to fight the attrition. It’s just not worth the time in my opinion. Overall, if you’re going to do wholesale, then sell on your own website because at least on your own website, you’re going to be the only seller.

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Then the next business model that I would never start in a million years is a business that drop ships from China. Right now, the most popular drop shipping business model is called AliExpress Drop Shipping. And here’s how it works. You find a product in AliExpress at low prices. You list the product on your own online store. And when a purchase is made, you buy the same product on AliExpress and have it shipped directly to the end customer. And you keep the difference in cost as profit. Now, right now, they’re a

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bunch of services that allow you to connect your Shopify or WooCommerce store directly to AliExpress to make the entire process seamless. You don’t have to store inventory, you don’t have to ship out products, and getting started requires no money at all. But what they don’t tell you is that you have to manage your own customer service. What they don’t tell you is that 90 % of the products shipped from China via AliExpress are pieces of junk with little or no quality control. To gauge the quality of an AliExpress product,

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All you got to do is search for AliExpress reviews on Google and you’ll find thousands of horrific reviews. And remember, these products are shipped from China, so they take forever to make it to the customer. The cheapest viable AliExpress shipping option that doesn’t cost an arm and a leg literally takes up to 60 days for delivery. Now, can you imagine a customer buying something from you and having to wait 60 days for delivery only to receive a piece of junk? Well, this is what lies in wait if you decide to pursue this business model.

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Just don’t do it. The other con that no dropshipping guru will tell you is that the vendors on AliExpress are just regular people selling stuff. They aren’t real suppliers or real factories, so their prices may change at any time and listings disappear all the time. As a result, keeping your store in sync with AliExpress is always a problem. I actually interviewed the founder of Spocket, a popular US dropshipping app on my podcast about AliExpress dropshipping, and I just flat out asked him what he thought.

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and he basically shared my same sentiments. AliExpress dropshipping might make you a couple bucks here and there, but it’s not a good long-term business model. By the way, just for the record, Spockit doesn’t dropship from AliExpress, and I’ll include in the show notes below the link to that episode. So if you’re going to spend the time trying to buy traffic and sales to your shop, you must sell high-quality products and be able to provide excellent customer support. And this is impossible with AliExpress dropshipping, even though it costs practically nothing to start.

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Now the final business model that I would never start today is a brick and mortar retail store. Most of you guys don’t know this, but when my wife and I first started BumblebeeLinens.com, we actually considered creating a brick and mortar store. And when we ran the numbers, it would have cost us about half a million bucks upfront to launch our store. Meanwhile, when we decided to go the online route, we invested only $630 and made over hundred K in profit in our first year of business selling handkerchiefs online.

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And in fact, we were profitable literally from day one. If you are a tech averse person, starting a brick and mortar store or something physical might seem easier at first because everything is tangible. But everything in this world is already moving towards 100 % digital. And starting your own online store the right way is actually easier than ever thanks to e-commerce platforms like Shopify, BigCommerce, Shift4Shop and WooCommerce. Back in 2007 when I started, it took me several months to launch bumblebeelinens.com.

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But today, you can literally have your store up and running in a matter of days. But remember, when it comes to launching your own business, don’t just go for what’s easy. You got to play the long game, sell products that you own and can be proud of. Good luck.