Reply All - #117 The World's Most Expensive Free Watch

Episode Date: March 1, 2018

This week, the story of a man who made the extremely dubious decision to order a watch that he found in an Instagram ad. We explore the strange world that watch came from. Further Reading Jenny ODell's "There's No Such Thing As A Free Watch" Alexis Madrigal's dropshipping article Apply here for the Reply All summer internship! Learn more about your ad choices. Visit podcastchoices.com/adchoices

From Gimlet, this is Reply Off. I'm Alex Goldman. And I'm PJ Vote. So PJ, I have a story to tell you. Okay. And this story begins with a person making a dubious online choice. So you know those ads on Instagram that are for like really fancy designer goods that are incredibly cheap? Yes.

This is about a guy who gave into temptation and clicked on one of those ads. His name's David. And it was about a year ago. He was living in San Francisco. and he was on public transit. And it was probably in the evening, headed back home, and I was on my phone, and I was on Instagram, and I was scrolling, and I think I saw an ad.

A limited offer of a free watch. Here, I have it on my computer. Let me show it to you. Ooh, nice. Free watch. And it's like a pretty nice looking modernist black watch and says, shop Folsom, like the company, follow us at Folsom and get your free watch.

today. And then there's 7,000 hashtags, which is part for the course on Instagram. promo, promotion, giveaway, free, fashion stylist, fashion world, fashion photography, California, West Coast, Cali, SF, San Francisco. It goes on. Yes. So David sees ads like this on Instagram all the time. He is not a person who generally clicks on ads. Because I'm usually much more savvy. I'm the kind of person who does research before deciding to add something, anything to my life. But he goes to the company website. The company's called Folsom and Co. And let me just bring up the website. Hold on. Fulsome and Co. It looks pretty nice. It does. It looks like the nice website that like any sort of new

fashion startup would have. Like a pretty picture of a watch on a rock and like all the fonts are the elegant fonts. And depending on your ad blocking, it may or may not have little pop-ups, notifications telling you others around the world have purchased various things on this website. Lauren in New Orleans, United States, just purchased a something or other. Malena and Buenos Aires just purchased the Carmen watch. So, okay. Feel bad for her. That is the one thing that actually makes it look slightly scummy. Like, Nike's not like, we just sold a pair of sneakers. Right. So the watch is called the Jones, and it says, free, limited time offer. It costs zero dollars. And it says, mark down from 80 bucks. Mark down from 80. And it says, hurry. Offer ends in four hours,

21 minutes and 56 seconds. And all of this just preyed on David's desire not to miss out on something. Like it did exactly what it's supposed to do. Like I'm watching the countdown and being stressed and asking myself if I want to watch despite the fact that I'm wearing a watch. I said, well, it's free.

And then of course, when I put it in the cart and proceeded, it was something like 10 bucks for the shipping. And I said, well, and I probably hesitated. I can't remember exactly. But I hit by. And then a couple weeks later, the watch actually does show up at David.

its house. But then he gets it out of the package. And I could tell right away, just the fit and finish was poor. You know, you'd maybe tap with your fingernail on the glass and

it would just rattle. It was made of metal, of course, but it was probably the thinnest it could possibly be stamped out of. And, you know, it felt like if you were worn it, you might get a rash in a couple hours. Yeah, so the watch is the most abominable object like I've ever held in my hands.

That's a friend of Davids, her name's Jenny O'Dell, and David actually gave her the watch, which doesn't sound like a particularly nice thing to do, but it was because Jenny is an artist and she is obsessed with junk. Like, she did a residency at a garbage dump. So getting this watch was like Christmas morning for her. I was definitely pretty excited about it just because I could tell that it was a really crappy object that probably had some sort of weird story behind it. At the time, she was working on an exhibit at a place called the Museum of Capitalism, where people could just bring in their junk and she would try and learn as much as she possibly could about it. Okay.

And there was something about this watch that she got really fixated on. The number one question I was hoping to answer is where was it made, like an address. It's like you wanted to see where the watch was born. Yeah, exactly. I wanted to know sort of its life story, but the most important part of that is like the beginning. So she goes on the Folsom and co website and just starts trying to figure out everything she can about this business. She's like reverse image searching, the picture she finds on there. And there's one picture in particular that's fishy right away.

The building that was in the photo that sort of was implied to be their headquarters in. San Francisco. So I'm looking at an image of it now. It looks, it has a very sort of modern facade that's like softly backlit. If it were a storefront, it would be the storefront of a very boutiquey, fancy watch company. Totally. Yeah. But it is not. It is not. It's a ping pong social club owned by Susan Sarandon. I've never been, but it looks cool. And not only have they stolen a picture of Susan Sarandon's ping pong club to use as their fake office. A lot of the text on the website also appears to have been stolen. I realize that the description was directly copied from San Francisco.com,

which has like brief descriptions of their neighborhoods. So that seemed a little bit odd to me. Right. And as Jenny digs a little more, she realizes that the people who built Folsom and Co. seem to have built another business that looks just as fake. Sofi Coastal. So I go to SoFi Coastal, and it's almost the exact same website. It just appears to be in Miami instead.

So the SoFi Coastal website has a surfboard as the cover photo instead of just a picture of a watch. But other than that, it's pretty much the exact same website as Folsomanko. And then Jenny just starts finding this watch on tons of other. very similar looking websites. So it's like basically they're offering these lousy watches for sale, but it's just the company that they're pretending to be changes. They're like we're a hip techie downtown San Francisco company. We're like a cool like coastal surfing watch company,

but it's always the same thing. Right. So the Jones, which is the watch she got, is called the Elite on SoFi Coastal. And there's another company called Regent & Co, which again sounds exactly like Folsom & Co. Which weirdly calls the watch the Ron. Huh. I think Folsom and Coe sounds like it's for the guy who wants to buy like an expensive axe for some reason. And then Regent and Co. feels like a guy who buys like those lapel things for your dress shirt for some. Like they're pitching to slightly different versions of upscale fancieness. Fulsome and Co shoppers chop wood. Regent and Co shoppers wear blazers not at work. Yes. They're good at something. The people behind this are good at something.

So Jenny does a reverse image search on the watch itself, and she learns that all these websites, they're all getting this watch from the same place, which is a website called Ali Express. Okay. Are you familiar with Ali Express? I think so, but explain it anyway. It's basically like the Chinese version of Amazon. Like it looks like Amazon, but it's all Chinese products. And what is mind-blowing about it is just how cheap everything is. It's very dollar-storish.

And AliExpress has a listing for the watch, the one that is getting sold on all these different websites, under all these different names. It is for sale on AliExpress for under six bucks. Wow. And Jenny made one last big discovery, which is that all of these dodgy websites, Regent & Co, Folsom & Co, all of them, are being built using the same platform. This platform called Shopify. I don't know what Shopify is. Shopify is basically like WordPress for online stores. It just has a bunch of tools that make it really easy to set up a store online.

If this thing is very easy to do and people are, like, how big is this? Like how widespread is this scheme? That's exactly what I wanted to know. And I actually found someone who's been looking into this. So shortly after Jenny published her findings, Alexis Madrigal, who's a reporter for the Atlantic, fell for basically the same scheme. He was on Instagram, saw a camel hair coat that he liked. It was very cheap. He ordered it.

And then about four or five weeks later, he got this black plastic bag in the mail. And then when I pulled the actual, like, code out, it was, like, so synthetic. Like, the material was, like, literally nothing that you could purchase in the United States of America that I have seen. It could be, like, refined into, like, gasoline or diesel or something. I mean, it was just a petroleum product and very clearly. So Alexa starts digging and he finds all of Jenny's research and then he makes a discovery. He finds a how-to video

which teaches you how to rip off people like him. What is up, everybody? In this video, I'm going to be showing you guys step by step how to build and start your very own Shopify story. This kid named Rory Dannen on YouTube basically lays out as a kind of like primer on YouTube how this is actually done. So for this particular store,

we're gonna be making a men's watch store. So we're gonna call our store Men's Watch Shop. So create your store. So... And in this video, Rory is using watches just as an example. Like, he says that you can sell any products you want, and he explains how easy it is to set up using Shopify's templates and themes.

So the best team that we have found is Brooklyn. So you would click on the Brooklyn team. And it has tools. built into it or that you can sort of add on to it that let you suck in items from Ali Express. Men's watches and I find products on Ali Express that we can start adding to our store. So I like to look at this one. We're gonna add it to the import list. So all Rory has to do is press import and it pulls in images of the item, a description of the item. He sets his own price however much he wants to mark it up and he's all done. So as we can see our store is looking

pretty well. Like, literally it took 10 minutes. And so now, when you place an order at Rory's watch store, he just turns around and places an order at AliExpress and has the watch shipped directly to you. So you only paid $2 for this watch, but someone's just bought it for $40. It's obviously middlemen have always been around, but these people don't handle the merchandise. They don't do anything. They just built a front end for somebody else's, retail site. These guys are doing something that happens on the internet all the time, it's called drop shipping. And a lot of stuff that you buy, even on sites like Amazon, is drop shipped.

But when people talk about drop shippers, they're talking about these less than reputable folks that work with Ali Express. And there are a lot of them. The thing that I think really kind of blew my mind is there's this tool called Oberlo. And that's the thing that allows them to suck products directly in from the site Al Express. And they claim that 85 million items have been processed through that system. Oh, my God. So we're talking about hundreds of thousands of websites where all people are doing is reselling cheap goods from China as fancy goods.

Kind of like it. It's a kind of amazing business muckle, right? Because there's no upfront investment. You carry no inventory. All you have to do is get people to see that stuff. This is really the essence of how digital commerce works, just minus caring about the product, knowing what the product is, taking on any risk yourself or any of the other things we associate with business.

So I think that I do not know what to make up is like, this definitely sounds scammy to me. But like on the other hand, what you're describing is also just like retail fashion. Like find out what seems to be trendy, find a product that caters to people's interest in that trend, use the power of advertising to locate those people and pitch to them and then sell them a product. None of that sounds like, unless you think like capitalism is inherently a scam, it doesn't sound like a scam. And yet there's like, there does seem to be something, an air of scamming is hanging over this. Do you know what I'm saying? Yeah, I know what you're saying. And I thought the best people to ask would be the dropshippers themselves.

after the break, we meet a bunch of dropshippers who reveal to us all their secrets. Welcome back to the show. So, PJ, I talked to a bunch of dropshippers, and I basically asked them, like, are you cool with, like, what you do for money? And most of them said to me, like, look, this is just how everything works in retail. People buy something cheap, they mark it up, they sell it. Okay. But while I was talking to them, I stumbled onto something that I think is much more interesting. As I dove into the world of drop shipping, it started to feel like all the customers getting suckered into spending $10 on a $6 watch or whatever.

That money was not the point. They were just the visible part of a much bigger swindle. So what's the bigger swindle? Well, to explain what I'm talking about, I'm going to introduce to you three different dropshippers. Okay. The first one has a person we'll call Kevin. That's not his real name. And he's like a dropshipping rock star.

He says that he's super successful. And I asked him to explain how he does it. Okay. So, for example, he started a store online that caters to like goths and steampunk fans. And the first thing that he does for like any store is just he tries to figure out what his target audience is into. If I've done my research thoroughly, then I should have a pretty good idea what type of slang people are saying, what type of languageing they use. use, like, I try to name my products, so like the product kind of speaks to them. For example, if I had like a black watch, I wouldn't just call it a black watch or I'd call it like

the mechanic or something like that. And then someone in the steampunk match might be like, oh, this looks pretty cool. Rather than just black watch, it's not the mechanic, right? Right. I mean, this does not sound like rocket science, but according to Kevin, being good at Dropshipping is just being really good at doing this. Finding a cheap, good product and finding a market for it before anybody else does. And for someone like Kevin, the goal is to become so good that you make it into this group of elite drop shippers who are all over YouTube bragging about how rich they've gotten. We finally broke the million dollar mark. So for a while, a lot of you guys have been wanting to see my car collection.

This is a guy who's bragging about his BMWs. So today I'm just going to show you guys the cars, talk a little bit about what it took the get-thum. What is going on, everyone coming to you here from the Hollywood Hills. This is like an entrepreneur party in L.A. And a lot of these drop-shipping high rollers also teach classes on how to drop-ship. Some are online, but like the top of the range is this in-person seminar in Bali where you go to a drop-shipping retreat that costs $5,000. $5,000? Oh, man. Okay.

And according to Kevin, $5,000 is like really just the beginning if you want to learn how to make a lot of money. I've been to higher level masterminds. I've been to events. I've taken courses. I've gotten one-on-one coaching. I paid over $50,000 in the last year. Wow, you paid $50,000 for seminars on how to learn this? Yeah, it's been over that. It's been over that amount. So that's, that is a staggering amount of money to spend on drop shipping, Yeah, but he says that it was a great investment because according to him, he's made something like a million dollars on drop shipping. And he says that since he's made all that money, people have started coming to him asking for advice on how to do it themselves.

So almost as an act of generosity, he created his own drop shipping curriculum. What's happening, guys? Today I want to talk to you about a simple upsell strategy. Let's hop right into it here. This is... The videos are free, but if you want the real good stuff, you can join his private online community. So there's going to be a private Slack community. We're going to have two monthly live trainings and, you know, a few other bonuses and stuff like that for $50 a month.

Okay. Can I just point out that, like, generally speaking in the entire history of the world, when people figure out ways to easily make money, they did not turn around and tell everybody else how to do it. Like the top trader at Goldman Sachs isn't like, doesn't have like a YouTube channel where they're like, hey, here's what stock to pick this morning. It just seems possible that Kevin would benefit from at minimum exaggerating how much money he's making online. Yeah, it does seem totally possible. And I didn't want to just take Kevin's word that these courses were really helping people. So the next person I talked to is this guy named Yusuf, who gave me a completely different picture of what's going on.

Yusuf is this kid. He's in his 20s. He lives in Virginia. And when he was in college, he got totally sold on the idea of draft show. I was someone that took the advice. That advice that actually led me to dropping out of school before I had any success, and I ended up sleeping on a couch. Hmm.

Sounds like things were pretty rough for a while. Oh, yeah. I was making maybe, like, sprinkles, so maybe like $200 a month here, and then maybe nothing the next month. There may be 300 there. Yusuf was running into all of these problems that the videos totally didn't prepare him for. And he said it's like that for a lot of young people like it. Think about it. Think of many 19-year-olds watch drop-shipping videos on YouTube,

and they're like, oh, sweet, let me set that up. He copy and paste some flannels from Ali Express. And then, boom, they now technically have a store in business. But when things take 30, 40 days, 50 days to arrive, and he's getting tons of chargebacks from PayPal from credit card companies from the banks, to a huge pain of the apps. Yusuf said that he had to deal with angry customers all the time, people who wanted to return items,

and these Chinese warehouses weren't great. about taking return, so a lot of times he'd have to eat the cost of the refund. And even then, just maintaining his site took a ton of work. He constantly had to switch out his inventory. He was paying for ads on Instagram and Facebook. After a while, it started to feel like these videos that showed people making easy money from drop shipping were just taunting him. Think about how many people would love to make full-time income with an online business.

Literally, I think every human you ask would want that. So if you think it's not going to be competitive, then you are unfortunately mistaken. And I think all the other channels are like, oh, you just need to work hard. And it's going to work itself out. Eventually, Yusuf got to a point where he wasn't sleeping on a couch anymore. He was actually making sales. But it wasn't like dropshipping was easy money. It was actually a lot more just like a hard job.

And the more that I talked to people in the drop shipping world, the more I felt like Yusuf was actually one of the lucky ones. Like, I went through that dropship subreddit, and there's sort of like a 70-30 split between people saying, like, I'm ready to quit this, or my store's failing, or is drop-shipping dead? And then drop-shipping gurus telling them, like, you just have to work harder. Oh, that's so depressing. It is depressing. And I talked to one of those people who are really struggling. Her name's Leah. She's in her 40. She lives in Berlin. She's less tech-savvy than Yusuf, and she's had a terrible time with drop-shipping. She's barely had. any sales at all. I've done two sales so far since I started the Shopify shop. And how long was that?

That was last year, actually last year around March, April. Oh my God, that's so little. Yeah. That's nothing. That's nothing too little. I've been doing everything. I even got a Shopify consultant. We do the shop saying that maybe I should change this and that and they did all the changes. So at this point, have you paid more? more than you actually earned? Yes. I think I've spent more than $3,000 already, so yeah. Oh, my God.

That's so much. That's a lot. Talking to Leah, I felt really bad. She had spent so much money on this Shopify store. And she told me that she could quit anytime she wanted, but she'd invested so much into it already. Maybe she could turn it around if she'd just spent a little more. And that's what all the videos were telling her to do.

I'm curious, like, do you believe everybody else who says that they're successful? That's still my question, because I really love to know and to understand what they do, how they do it, what is it that I'm not doing. Do you think they might just be exaggerating? I have no idea. I have no idea. I look at them and I just ask myself, how do they do it? After talking to a bunch of dropshippers, I still can't tell if anyone is truly making a full-time salary off drop shipping alone. The only thing that's clear to me is that the big money in drop shipping seems to be in teaching people that there's big money in drop shipping.

Right. I guess the one person who we know is actually making money doing drop-shipping is Yusuf. Well, there's one thing I left out about Yusuf. These days, he's not just making money through drop-shipping. He's been selling something else online, too. What's popping, people? In this video, we're going to go over the top five niches for 2018. For $200, you can get access to Yusuf's Diamond e-commerce course.

He says that, unlike all the other garbage out there, his classes teach you what it really takes to become a successful drop-shipper. My first month of selling my course, it did $28,000. And unlike drop-shipping, there's no orders to fulfill. There's no customer complaint. There's no people yelling at me in German. Nothing. And I'm going to show you every step of the way.

I'm going to show you how I build the Instagram. I'm going to show you how I market on Instagram. I'm going to show you how I build my Facebook. I'm going to show you how to do Twitter marketing. I'm going to show you how I work with influencers. I'm going to show you how I like sponsor people and how I pay your sponsorships. I'm going to show you the design process.

Special thanks this week to Alexis Madrigal. We found this story through his reporting in the Atlantic, and we put a link to his story in our show notes. Reply All was hosted by PJ Vote and me, Alex Goldman. Our show is produced by Shruthy Pinnaminani, Fia Benin, Damiano Marquetti, and Caitlin Roberts. More production help this week from Krista Ripple and Elizabeth Kulis. Our editors are Tim Howard and Sarah Saracen.

Fact-checking by Michelle Harris. Our intern is Devin Gwyn. We were mixed by Rick Kwan, our theme song is by The Mysterious Breakmaster Cylinder, and additional music this week from Bobby Lord. Special thanks to Ashley Wilson. Matt Lieber is listening to the radio and hearing that song you've heard

sampled a million times, but you never knew the name of. Reply All is looking for a summer intern. If you are interested, you can apply at gimletmedia.com slash careers, and we'll also put a link to the listing in our show notes. You can visit our website at Replyall.combs, and you can find more episodes of the show on Spotify,

Apple Podcasts, or wherever you listen. Thanks for listening. We'll see in a couple weeks. Is that a protein bar? I'm glad you're eating, but I'm still unclear where you're keeping these things. Yeah, see, again, that's not really an answer. Just makes me think maybe I don't want to know. We have to find some internet.

We need like a Starbucks parking lot planet. When we press the left pedal and spelled decaf, the piano portal made us coffee. Maybe the right pedal will take us to a coffee shop. They have Wi-Fi? You wanna try? Alright, I'll be back. You just... Enjoy your snack.

God, what year is it? How long was I gone? Three seconds! Planet Decaf is boring and horrible. The air is like jello and everything moves like this. It's all Turnal Necks and Cat Stevens albums. They made me their leader. I have a family back there waiting for me. God, I'm so hungry.

Dude, I'll go find some berries or something. I don't eat. I just remembered. The box is giving me weird feelings.