The Jordan Harbinger Show - 835: E-Commerce Scams | Skeptical Sunday

Episode Date: May 14, 2023

While working for yourself can be fulfilling and financially rewarding, it's important to understand that it takes a lot of effort and sacrifice — especially when you're just starting out. Unfortunately, there are scammers aplenty who want to sell you on get-rich-quick schemes that only make them rich at your expense. So how can you tell the difference between legitimate business opportunities and shams perpetrated by shady shysters eager to drain your bank account? This week on Skeptical Sunday, we're joined by Steve Chou — e-commerce entrepreneur, host of The My Wife Quit Her Job Podcast, and author of The Family-First Entrepreneur: How to Achieve Financial Freedom Without Sacrificing What Matters Most — to separate the wheat from the chaff. On This Week's Skeptical Sunday: According to the FTC, Americans were scammed out of $249 million through fake business and job opportunities in just the first three quarters of 2022 — but get-rich-quick schemes really started gaining traction in 2020 as criminals took advantage of people who lost their jobs during the pandemic. The real math it takes to build a fortune from creating YouTube videos — and why relying on AI to create content from the ether is an unsustainable "strategy." Why buying an impressive-looking "done for you" e-commerce site pre-populated with dropshipping products will likely lose you money in the long run. How the astronomical income promised by countless dropshipping automation companies pans out when real-world middlemen and unreliable sources are factored in. Why it's essential to research and verify any business opportunity before investing time and money into it — if it sounds too good to be true, it probably is. Real businesses require effort, time, and some sacrifice to gain the momentum needed to make them rewarding. And much more! Connect with Jordan on Twitter, Instagram, and YouTube. If you want us to tackle something here on Skeptical Sunday, drop Jordan a line at [e-mail] and let him know! Connect with Steve at his website, Twitter, Instagram, and YouTube, and check out The My Wife Quit Her Job Podcast and The Family-First Entrepreneur: How to Achieve Financial Freedom Without Sacrificing What Matters Most!  Full show notes and resources can be found here: jordanharbinger.com/835 This...See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

This episode is sponsored in part by Conspiruality Podcast. You know how I'm always talking about critical thinking and spotting manipulation? Well, there's a podcast that's all about dismantling new age cults, wellness grifters, and conspiracy mad yogis, basically the wild overlap of spirituality and misinformation. It's called the Conspiruality Podcast. The hosts, a journalist, cult researcher, and a philosophical skeptic, dive deep into how this stuff spreads, from Project 2025 and the Heritage Foundation's dystopian vision of the future to how former leftists get pulled into far-right conspiracies.

An interesting episode to checkout is called Speaking Truth to Goop, where Jen Gunter breaks down the pseudoscience behind the wellness industry in a way that is super entertaining and eye-opening. It's sharp, funny, and makes you a lot harder to fool, which, if you listen to this show, you know I'm all about that. From exploring cults to analyzing our cultural and political landscape, the Conspiratuality Podcast will help you stay informed against misinformation and resist fear tactics.

Find Conspirality on Apple Podcasts, Spotify, and wherever you get your podcasts. Welcome to the show. I'm Jordan Harbinger, and this is Skeptical Sunday, a special edition of the Jordan Harbinger Show where a rotating guest co-host and I, well, we break down a topic you may have never thought about, open things up and debunk common misconceptions,

topics such as why the Olympics are kind of a sham, why expiration dates on food are nonsense, why tipping makes no sense, recycling, banned foods, toothpaste, chem trails, online scams, and a whole lot more. Normally, on the Jordan Harbinger show, we decode the stories, secrets and skills are the world's most fascinating people, and turn their wisdom into practical advice that you can use to impact your own life and those

around you. We have long-form interviews and conversations with a variety of incredible people, from spies to CEOs, athletes, authors, thinkers, and performers. If you're new to the show or you want to tell your friends about the show, our episode starter packs are a great place to do that. These are collections of our favorite episodes, organized by topic that'll help new listeners get a taste of everything we do here on this show. like persuasion, influence, disinformation, cyber warfare, China, North Korea, abnormal psychology, crime and cults, and more. Just visit jordanharbinger.com slash start or take a look in your Spotify app to get started. Today on Skeptical Sunday, according to the FTC, that's the Federal Trade

Commission, Americans were scammed out of $249 million just due to fake businesses and job opportunities, that even just in the first three quarters of 2022. People reported more than 69,557, oddly specific number, incidents of scams, which resulted in millions of dollars of financial loss. And remember, this is just sort of a sliver of the scam pie here in the United States. Now, the amount of fraud wasn't always this high, but employment and business-related scams, they rose big time in 2020 as criminals took advantage of people who lost their jobs and livelihoods during the pandemic because they are bastards and that will never change. So today on the show, we're going to dive into the murky world of online scams, specifically involving YouTube and

e-commerce, because scams in general is way too big a topic we'd be here all year. But as always, we're here to help you stay informed so you can make wise decisions when it comes to your money. Here to discuss the, well, some of the latest in YouTube Get Rich Quick Schemes is e-commerce entrepreneur and friend of mine. Steve Chu, Steve, welcome. Thanks, Jordan. I am looking forward to exposing these scams for what they are, and I hate how they often take

advantage of people who are unfortunate and desperate. Yeah, I mean, that's kind of the perfect victim in many ways. But tell me, out of all shitholes on the internet, why are we specifically talking about YouTube today? It's because I would say that YouTube is the primary breeding ground for these get-rich quick schemes. And it really is the best medium to scam people, because if you are a good talker and you sound convincing, then you can get a lot of people to pay you money. And video is by far the best medium for scams because you can see and listen to the con artist's firsthand, which builds trust. Image ads and sales pages aren't nearly as convincing as watching someone eloquent talk to you for five minutes straight. Yeah, that's true. That does make a lot of sense. I've seen some really

scammie YouTube videos in my day. What comes to mind is like here in my garage, you remember that ad, and all of the associated yutzes that go along with it. That guy was Ty Lopez. I'm not afraid to name and shame. I know. Everyone gets nervous when I mention names. I don't care. I mean, all that sort of scammy stuff. It's all in one bucket, in my opinion. I've seen a lot of those YouTube scam videos in my day, like online business plans. And I often wonder who's dumb enough to fall for these get rich quick schemes. But apparently a lot of people do.

Look, they got a robust market or they wouldn't exist. I mean, I hear you. These get rich quick scheme videos on YouTube, they make the most advertising revenue out of any other type of video. And in itself, that's actually how a lot of these YouTubers make money. So like a typical vlog on YouTube might make $4 CPM, which means that they're getting paid $4 per 1,000 views. Now, a get rich quick video, make money YouTube video, might make 100 CPM or 25X more than the average video. So if we do some math here, I don't like to do public math, but let's do it.

To make $1,000 a month from YouTube talking about making money, you would only need to amass 10,000 views a month at 100 CPM or just 333 views a day. And you don't even need to know anything about the subject matter. These get-rich-quick videos promise viewers that they can make millions of dollars within months by following their advice. But in reality, these videos are just nothing but spam. And the people who make them often have limited knowledge of how these business models actually work. And the worst scammers actually sell their own course that teaches this BS. And here's the thing.

The government doesn't regulate these types of videos, and people lose money all the time by following fake advice. I once had someone email me for help because they wasted $50,000 on a get rich quick e-commerce scheme that we're going to talk about today, in fact. 50K, man, that's nuts. Anyone looking for business opportunities on YouTube can't afford to lose $50,000, generally. Let's talk about some of the more popular get-rich quick scams or get rich at any speed scams on YouTube today.

Give me an example. Yeah, I think the first one we should talk about is called Amazon Automation. and this is a business model that actually became super popular during the pandemic. And at the time, if you remember, no one was shopping in brick and water stores and e-commerce sales were going gangbusters. And during this period, many e-commerce store owners were killing it online. And according to the Census Bureau, e-commerce grew by 43% in 2020 compared to just 14.9% the year before.

So scammers decided to capitalize on this trend, and they came up with this get-rich-quick scheme to start a done-for-you Amazon business for other people. So basically, you pay an Amazon automation for money. They do all the work, and you collect a check for doing absolutely nothing. Okay, so money for nothing, where can I sign up? Why do people fall for this? Because when you boil it down like that, it's so obviously a scam. I assume that when they pitch this, though, it sounds complicated and everything.

And so you're like, oh, it's so crazy, it just might work. But how does it actually work? I mean, I was actually very curious because I sell on Amazon. So I clicked on one of these YouTube ads, and I followed their entire sales pitch. So here's how it works. Basically, you pay a company a whopping $30,000 to find a product for you to sell on Amazon, and they do all the work. They find the product, they find the suppliers, they create the listing, they run ads

for you, and you're essentially an investor. But the difference between investing in a real company and in Amazon automation is that everything is done in your name. They create an Amazon account in your name, and they manage it for you, and then every month, you pay the Amazon automation firm 15% of your top line revenue as a management fee, and that's revenue, not profit, just to be clear. Oh, I see. Okay, so 30K is a lot of money just to even start. Why would anyone do this? Obviously, they must be thinking, well, the profit's going to be so high that I'm going to be able to make money doing this. Like, it's an investment. I'm not gambling with that 30K. That's got to be the rationale.

Yeah, so their pitch starts out by them bragging about how much money they make on Amazon themselves. And they specialize in selling on Amazon, and they're essentially portraying themselves as an expert. Sometimes they'll show you fake income statements, testimonials, and even show you some live products on Amazon that they claim are theirs. And then they'll lead you to believe that you can make 100K in profit after your first year with them. And one particular YouTube scammer claims that a conservative ROI is 200% of what you put in. And for every 100 products launched, on average only three don't perform well. And this 30K fee covers three products on Amazon. And they imply that their failure rate is 3%.

And even if one of your products is a dud, the remaining two will more than make up for the shortfall. So basically, if you don't know anything about selling on Amazon, you know, the pitch can come across as pretty convincing. Yeah, of course. I mean, I have questions just because money doesn't come out of thin air. and usually if I've got some awesome secret, I'm not like, hey, let me share it with everyone. I'm like, how do I raise tons of money and just scale this and keep all the money for myself?

But I'm a greedy bastard. All right. So what does the $30,000 cover exactly? So the $30K only covers their management of the product and the research. So, for example, you still have to pay for the inventory up front. You also need to pay for the cost of advertising and any associated Amazon fees. And there's no guarantee of success. And that's all in the fine print.

Yeah, of course. In the event that your product doesn't sell well, you are left holding the bag. And the Amazon automation firm literally has zero responsibility if anything goes wrong because everything is in your name. And here's the kicker. You still have to pay them 15% of your top line revenue no matter what. Ooh, so 15% in perpetuity on top of the 30K without inventory. It sounds ridiculous.

And so you're paying them the 15%, even if you're losing. money on your business. It's like you could be making negative $100,000 a month after advertising an inventory cost. And they're like, yeah, but your revenue is 200,000. So we don't care what your profit margin is. We need that 30 grand or whatever the math works out to be. Yeah, I've sold on Amazon for many years now. In a good case scenario, you are making a 30% gross margin after all Amazon fees. And it's not uncommon to spend an additional 15% of that revenue on ads. Now, after the Amazon Automation's firms cut, you literally make nothing. Although they claim that their products all carry at least a 40% gross margin. And what's hilarious here is that the sales pitch

spends like 15 minutes telling you why charging you 15% of your revenue is actually in your favor. They claim that they purposely want you to keep more of your profits so that you can reinvest your money back into inventory. And if they didn't charge you that 15% of your top line revenue, the alternative would be to charge you 30% of your net profit, and 15% is less than 30%, and that's how they spin it, which implies that you get to keep more of your money. Okay, so 15% of revenue or 30% of profit. I mean, 15% does sound better than 30% at first glance if you don't know what profit and gross revenue and all that stuff actually means. Let's use the exact example that they used, right? So let's say you sell a product for 100

bucks with a 60% margin. When they take only 15% of your top line, that's only 15 bucks. But if they were to take 30% of your profit, that's 60 times 30%, which is 20 bucks, and 15 bucks is less than 20 bucks, so they're saving you money. But you can't fool an Asian with math, right? The problem is that there's probably not going to be a product that makes you 60% margins on Amazon after fees. No way. 30% is much more realistic, and that's not even taking into account advertising costs and other fees. And 15% off your top line revenue means that the Amazon automation firm always makes money no matter what, even if you're selling at a loss. Ah, right. Okay. Right. Yeah, that's what I was saying before, right? Yeah, like, wait a minute,

top line revenue, that means that you can just not make any money and you still owe them money. Exactly. And the only way you can really possibly make money is if your margins are higher than 30%, which is possible, but difficult. And like I said before, in a normal Amazon situation, the product costs a third. You pay Amazon a third in fees, and you get to keep a third of your revenue. So something doesn't add up here. And again, I'm nowhere near your math skills and refuse to do public math, but it still doesn't add up. If these Amazon automation firms know Amazon so well, and they're sourcing these products,

and there's theoretically like an infinite number of them because they can just sell this to whoever they want for 30K and find a magic. set of three products that are going to do well, hopefully. If they can find those, reinvest the money into Amazon and keep 100% of the profit. Like I said before, what I'm doing is just going straight to family friends slash the bank and being like, look, here's my business model. If you give me $300,000, I can find nine more or 90 more products that are going to do well, rinse and repeat until I'm a billionaire. Why the hell would I share this with random people in public? I asked that exact same question. And they were pretty eloquent in explaining why.

So they claim that they need more capital to expand their e-commerce portfolio. And out of the goodness of their hearts, they want to share the profits with you. Yeah, red alert. I will say this. During the heyday of Amazon during the pandemic, it was conceivable that you could make some money this way. But the bubble burst basically when the pandemic ended. And all the Amazon aggregators are actually hurting big time right now. That all sounds horrible and is incredibly scummy.

But this also makes perfect sense. for these aggregators or whatever to pivot to then selling other people the idea that this was profitable and still is. Yeah, and here's the thing, though, they're not really violating any laws here. I mean, it's not like it's a Ponzi scheme or an MLM. They literally tell you up front that you are bearing all the risk and that there's no guarantee of success. And they also tell you up front that the fees are non-refundable.

And nothing is in their name whatsoever. So basically, you are bearing all the risk and they make money no matter what. Okay, so people are blinded by the numbers, blinded by the potential opportunity, and they just become willing to take the risk at some point. And to be honest, these scammers, they're very convincing. And they use plenty of psychological tactics to make you want to give them your money. Now, in the case of this webinar that I watched, these people seem to be genuine Amazon sellers with a portfolio of products.

And I actually double-checked their products on Amazon, and they do in fact exist. Interesting. Okay, so that's one e-commerce scam. and what other types of e-commerce scams are there on YouTube? Let's talk about one that I get questions asked about all the time, which is drop shipping. Oh, I've heard of this, yeah. So drop-shipping is where you make an arrangement with a supplier,

where you take orders online, but your supplier is responsible for storing and shipping products to the end customer. This sounds reasonable, and I know that drop-shipping is very common. I talked to a guy on the show who used to be an arms dealer, actually, and is the guy from the movie War Dogs. and before he was an arms dealer and before federal prison, he essentially drop-shipped bed sheets, much like yourself, actually. But he did it for nursing homes and care facilities. So he would essentially sell drop-shipped sheets to places that needed to buy lots of sheets and bedding,

and he never saw the product, right? He would get a sample and go, okay, this isn't crap, it's decents from Pakistan. And then he'd take the order and broker it, and then the Pakistani factory would import it to an importer that would then ship it to nursing homes. So it's not like drop shipping is a fake business. It's a real business model that I think a lot of places use, right? I was about to say, if he was drop shipping weapons, I think that would be illegal. That might be illegal. Yeah, that's a different kind of business. So dropshipping in itself is not a scam because you can in fact make money this way. 27% of online retailers actually use dropshipping to expand upon their product portfolio. Now, Wayfair, one of the biggest dropshippers in the world,

Drop chips about 95% of their products, and they made $12.35 billion in 2022. All right, so that's legit. I've also wondered how I'll be searching for some obscure CNC machined part that is only available from maybe one or two factories in Brazil slash China for radio-controlled cars. And I noticed that one of the places you can find it besides eBay is like walmart.com. And I'm like, they don't carry this at Walmart. So they must be dropshipping pretty much everything, right? They just...

They drive ship a lot of stuff, yeah, for sure. Everything, yeah, and they say they carry it, but they don't. It's only available online. I see that. Okay. So how are people getting scammed by dropshipping? So the scam is actually how dropshipping is portrayed on YouTube. They make it sound so easy and risk-free, and then they sell you a $2,000 course.

This is how they get you in the door. First, they find a widget that's popular on TikTok right now, or something that's just gone viral on Instagram or YouTube. So, for example, I don't know, you have a child, you have two kids. Have you seen those flying spinner balls on TikTok before? Yeah, I have, where it goes up in the air and it flights up and it lights up and then it like comes back to you. It is cool. Yeah, so they have a built-in gyroscope in them.

And if you throw it right, you know, it comes right back to you. Here's a sales pitch, though. If you look up that product on Ali Express, which is the Chinese version of eBay, you'll find that you can get it for three bucks. Then, if you look on Amazon, you'll see that it sells for $30. And you could be pocketing $27 per sale by drop shipping from AliExpress. Buy my course to learn how to do this. Okay, right. It sounds plausible if you can find enough people to buy it for $30 on Amazon, which

honestly, I've also been dumb enough to at least buy overpriced stuff on Amazon where I'll go, oh, I really need this, again, part for an R.Z car. I'm like, man, $8 for each one, these should be really cheap. So I'll buy it. And then the next time I go to buy, or in some cases, $40. And then the next time I want to buy it, I find it on AliExpress or on literally any other website. And it's like four bucks.

I'm getting hosed by a drop shipper for sure in that case. The stuff that you see on TikTok, Wish and all these other platforms, it's really just cheap pieces of junk. And here's the reality of dropshipping from a marketplace like Alibexpress. So first off, everything is coming from China with no quality control. So imagine this. someone orders this ball from your website. You then place the order on Ali Express,

and let's say the cheapest shipping from AliExpress is five bucks. Great, no problem, right? Still making a pretty good profit. But the shipping time is 30 to 50 days, right? And if you want faster shipping, you have to pay 10x more than what the product is actually worth. Not only that, but these products that are coming from China have poor quality control, and they often don't work.

You don't say. Imagine that, right? Really? Imagine a world in which a product that you saw on TikTok that is now sold from a factory in rural China is not fully QAid. Okay. And these sellers and Al Express, they're just random Chinese people and they're not real suppliers or factories. Listings come and go every single day. But the biggest factor is that by the time these products become trends on TikTok or wherever, it's already too late.

That product is already saturated. How about a word from a real brand or two, something from the fine products and services that support this show. We'll be right back. Thank you for listening and supporting the show. Your support of our advertisers does keep us going. All the ways to support the show. All the deals and discount codes are at Jordan Harbinger.com slash deals. You can also search for any sponsor using the search box on the website as well.

Please consider supporting those that support the show. Now, back to Skeptical Sunday. That's funny. I didn't think about this, but you're right. They're not real suppliers because, again, you can find on Allie, the same thing listed by hundreds of people. One of those people is maybe the supplier or the factory that's made, and everybody else is probably essentially a Chinese drop shipper that is hoping their listing pops up

higher in the Ali Express search engine or something like that. And I always wondered why products like this become viral on TikTok. Sometimes they're really unique and cool, but I would imagine other times it's because a TikTok influencer is actually the one doing the drop shipping of the product first, and they get it to go viral or they're testing that, and then that's how they make money. So by the time you do it, you're like drop shipper number 3,000 selling the same thing. Exactly. It looked like fidget spinners. Remember fidget spinners? They were ball bearings with plastic around it, and they were kind of fun and cool, but they were huge a couple years back. And going back to my reference at the top

of the show, Ty Lopez was telling people to drop ship these to make money. But he was telling thousands of people to do that for the exact same product. Exactly. I mean, it gets saturated. real quick. And not to mention that, can you imagine ordering something online and having to wait two months for it to arrive with zero quality control? I'm thinking about if you ran a store like that. The customer service headaches alone would not make it worth it. And you might make a couple bucks here and there, but this business is not something that's going to last. But why not sell a course that teaches this to others? That business model in itself is compelling. You don't have to store or worry about the inventory, the upfront risk is low, your profit margins on paper are ridiculously high,

and it's easy to sell a course, but it's a difficult business model to make money from. So you're selling pickaxes during the gold rush, except for your pickaxes are cheap injection molded plastic. Exactly. They break as soon as you try to hit the ground with it. Yeah. Okay. Gotcha. And, you know, if you think about it, you know, drop shipping isn't in itself a scam, because these YouTubers aren't really promising you anything. Basically, if you sign up for their class, it's out of your own stupidity. What about drop shipping in itself? We talked about why it's a viable business model for Wayfair, for example, but if you're

not a massive multinational company, is there a world in which this is not a scam? Yeah, so let's say you want to start a real legit drop shipping business, and you've got a real legit supplier in the U.S., for example, that is willing to drop ship on your behalf. Can you make money this way, and is there any catch? Well, first off, if someone else is doing the shipping for you, that means that your margins are going to be less. So the margins for drop shipping are usually on the order of 10 to 30%. In addition, most suppliers are going to charge you a drop ship fee of a couple of bucks and you have to pay for shipping. So the biggest problem with drop shipping is that you are selling someone else's product and you aren't getting the best pricing.

And merchants who are carrying inventory for the exact same product are getting better market. margins than you are, which gives them a pricing advantage. Okay, so I'm not getting the best pricing because someone else is holding the inventory and I'm paying them the drop ship fee and the shipping. Is that why I'm not getting the best pricing? I mean, think about it, right? Like, if someone company is storing your product for you and shipping it, they're going to charge you some amount of margin for that.

And contrast that if you hold the inventory yourself, then you can actually save money. So typically when you hold inventory, the margins are 50% as opposed to 10 to 3%. 30%. Got it. Okay. So essentially by outsourcing the shipping and the storage, I'm also giving them that part of profit, which I would normally have if I were Amazon or Walmart, having my own warehousing infrastructure. Correct. Got it. Okay. And here's the other thing about drop shipping. Amazon has actually killed drop shipping for a lot of products, because back in the day when drop shipping was more popular, brands needed these dropshippers in order to increase their sales. But these days, with Amazon owning over 50% of e-commerce,

a brand can just simply list their products on Amazon and keep most of that profit for themselves. And the reality is that drop-shipping is pretty difficult to make money from today. It's not a scam, per se, but your odds are pretty low. I will say this, however, drop-shipping is actually a great way to test the market for a product before you invest a lot of money. Because you can list a lot of different products in your shop with zero risk

and then carry inventory or private label the winners to increase your margins. The big scam is with these YouTubers that are putting out videos and selling courses promising great riches with no upfront cost or risk. That's the real scam. I see. So the win here with drop shipping would be, all right, I got 10 products that I'm thinking about selling. Let me see how these do with different funnels, with different targeting, with different

advertising with different colors, whatever, and then once you see that the red circle globe thing that you got off Ali Express is the one that's selling the best, you're like, okay, and then you buy 10,000 of those, you warehouse them yourself, and you just sell red, globe ball, fidget spinner, whatever's. And then you're taking the margin from that, but you use drop shipping to test the whole thing so you didn't have to buy a crate of each of those and deal with that. Yeah, basically you're using it for research. instead of making it the whole business. That makes a lot of sense. So the fact that real companies like Wayfair makes so much drop shipping makes it sound compelling. And I see why people fall for this.

Because again, if you don't go through all of the math in your head and you trust the math that's given to you by the YouTuber, it sounds really compelling until you try it and you realize that you're competing with everybody else they sold the course to and gave the exact same ideas to, and that you have no capital and no business experience and you don't know how to run ads and all the other things that trip up people when they try to run a business, a real business. Yeah, I mean, you mentioned Wayfair again. Wayfair is successful because they have the traffic.

And if you can build traffic, any business model is going to work. But starting from scratch with drop-chipping with no traffic at all, good luck. And you got to just exercise some common sense here. If something sounds too good to be true, it almost always is. And that's why this episode that we're recording right now is important. If we kind of openly talk about these scams, then people will be less likely to fall for them. And in reality, these schemes always prey on the desperate. People who need this money right away.

There's something out there called done for you e-commerce. It sounds kind of like what we talked about before, but I get notes about this in Feedback Friday. Like, I don't know. They're going to do the whole thing. This is very promising. I'm a single mom or I have a day job. I want to dismantle that because I know that this has to also be, if not an outright scam, loaded with a lot of catches.

Let's talk about what that is first. So it's called Done for You, E-Commerce. This is basically where a company sells you a complete website that is pre-populated with a bunch of drop-shipping products, and the website looks great. Everything is included, and all of the relationships with the suppliers have been established, and all you've got to do is hook up credit card processing, and you are ready to take payments.

And like I said, these websites, if you look at them, they are visually beautiful, and the photography looks great, and you end up paying, you know, a few thousand dollars for a store in a box. Right. Not too bad. I'm guessing the catch is there's a lot of stores and a lot of boxes that are online that have no traffic like we mentioned before.

That is true. But the other catch is that these companies are selling the exact same design to many, many people. Even worse. Right? Even worse. Yeah. You're building a coffee shop next to a Starbucks that has a Starbucks across the street and another

coffee shop. Exactly. I mean, the sites look the same. The products are the same. Basically everything. And not only that, these done-for-use stores usually sell products that are super saturated, like home decor, clothing. And the margins actually are not that good either because it's drop shipping. And it's next to impossible to build traffic to these sites because you don't make enough margin to pay for ads. And it's pretty impossible to rank in Google for these search terms because they're really saturated. So are all these scams related to e-commerce because we're talking about e-commerce or are all these scams related to e-commerce for another reason? Is this just like an easy niche to hold, to craft a scam and sell it? I think it's a sign of the times because you've got to remember during the pandemic, no one was going to brick and mortar stores and the pandemic created all this. And whenever there are desperate people out there, it's going to be more scams.

And e-commerce just happened to be hot when everyone was sheltered in place. Yeah, that makes sense because you think like the whole world is now going to be. going to shop online and it's never going to go back. And that was a fair assumption in many ways because I remember a lot of pundits being like, you know what, this is the final nail in the coffin for brick and mortar. People realize they can get everything at home. Shopping is either going to become some sort of experience where it's like you got to essentially, you're going to Disneyland or having an experience with the brick and mortar outlet. No one's going to ever need to go to Target again was kind of the idea. And it's just, yeah, that's not what happened.

at all. Okay. What about this Amazon eBay drop shipping hybrid, hydra scam kind of get rich quick thing? You know what I'm talking about? Yeah, this one was really big a year ago. Amazon eBay dropshipping is what it's called. And this is where you find a popular product on Amazon. And then you listen on eBay at a higher price. And whenever someone buys your item on eBay, all you got to do is you place the order on Amazon and have it shipped to the eBay customer and you just pocket the difference. Okay, this is what I never understood about this. And again, I've seen this when shopping on eBay and or Amazon. I understand there's an arbitrage opportunity here, but who the hell goes on eBay and is like, I want to pay a stranger in Minnesota for this item and not Amazon

and I want to pay more for the privilege and not get free shipping? Why? Why would anyone do this? Here's why it works. Everyone online likes to shop at different places. So some people only shop on Amazon. Some people just love eBay. Some people like to shop at boutiques, and other people just like to go to the mall. Okay. And there are price differences everywhere, and arbitrage is just fundamentally how people in e-commerce make money.

So what is the actual scam? Because in my opinion, it's fair if you find a cheaper item on Amazon and you're selling it on eBay and you're mailing them that item. Like, who cares, right? Where's the actual scam? So once again, the scam comes from people who sell, courses, and they promise great riches from teaching this business model. Ah, okay.

And here's why this particular business model doesn't work at all. So number one, it's actually against terms of service. If you are caught doing this, both Amazon and eBay are just going to ban your account. Huh. And it's pretty easy to catch because the eBay order actually arrives in an Amazon box. Right, okay, because you're not just buying it, shipping it to yourself and selling it to them, right? You're just putting their address in the checkout when you buy it. on Amazon. So you're going to get caught in like a week doing this. Exactly. I didn't realize

it was against their terms of service. And as you can probably tell, this is not a good long-term business model. So many things can go wrong. The Amazon seller can raise prices. The margins are often razor thin after all the fees. And basically you make one mistake and you lose a lot of money that you could potentially have made. All right. I think we've beaten drop shipping to death. Are there any other scams worth mentioning? Because I know e-commerce, again, is rife with these things. Unfortunately, there are a bunch of new ones that have popped up recently, and they all have to do with chat GPT and artificial intelligence. I was waiting for AI to jump in the scam game. I'm surprised it took longer than the whatever two weeks that chat GPT has been in the mainstream, zeitgeist.

I mean, if you've been following the news, you probably know that chat GPT is great at creating written content. And in fact, it actually writes content better than some of the writers I have on staff. You get what you pay for, Steve. There are actually tons of YouTubers who are selling chat GPT courses on how to create niche websites that will instantly rank in Google search. Okay, how does that work? I mean, should we be giving this stuff away? I mean, you've got to pay for this stuff on YouTube, right?

No, we should definitely be giving it away. How much for your course, Steve? I mean, if you act now, I can probably do, you know, 1499. Uh-huh, recurring? Yeah, reoccurring, right, 15% of your revenue. Write my top line chat GPT revenue, no problem. All right, so without getting too technical, there's actually this Chrome plugin out there called AIPRM, which is a plugin that sits on top of chat GPT that gives you a game plan

on how to rank a site and search. You type in a keyword. The plugin will literally tell you which articles you need to write in order to fill out that topic on your blog, and then you have chat GPT automatically write those articles for you on your site. Yeah. And the way Google works today is that they tend to rank sites that have comprehensive information about a very specific topic.

And normally, it actually takes a long time to write this content, but with ChatGPT, you can write this content in minutes. Does this work, though? I try to have ChatGPT do things like write ad reads for this show that I can rewrite into proper ad reads. And a lot of what comes out is pretty bad. And these are 30 seconds, 60 second ad reads. I can't imagine being like,

all right, I need 8,000 words on two-stroke engine. You're going to have a bad time with that. That was the case for chat GPT3, but chat GPT4 is a lot better. Okay. If I were to just talk about like the quality of writing, I would say chat GPT3 is someone that you got from overseas to write your English article. But chat GPT4 is like on par with a decent US writer. Really?

Yeah. Wow. Incredible. Okay, so this scam is going to get worse. Yeah, I'm just going to say that 2023 is going to be the year of spam. Like, everyone in their mother is going to be using ChatGPT to create duplicate AI-generated content,

and it's really going to be a mess for Google to sort out. And arguably, Google search might not even matter in a couple of years because the chat GPT interface is just so much better to get the info that you want. Imagine a world where all the content on the web is just AI-generated. Every ebook you see on Amazon is just regurgitated junk, and this is where the world is going. Yikes. Okay, so I would want to buy a book on a specific topic, and then putting that topic in an AI plugin's going to go,

ah, Jordan wants a book on USB audio interfaces for podcasting, and it's going to write the book for me in the one second between after I check out and it gives me the download link and throw it into a PDF, and I'm going to be reading an AI summary of the front page of Google resources on that specific topic with affiliate links plugged into it. What people are doing right now is they're just using these to pump out e-books that they're selling on Amazon for like three bucks. Okay, but that's, ugh, that quality is going to be terrible. How do we stop this kind of thing?

I would imagine Google has to be working on this, because this is not good for them if their results are now complete crap universally. You know, what's funny is last year they stated that they're going to penalize AI content. And then in February of this year, they did a 180, and they said that AI content is okay as long as it isn't abused. And in reality, it's actually pretty hard to detect. I started using this tool called originality. com, just to see if my writers were using Chad GPT to produce content.

Thankfully, they weren't. But Google, because they flip their stance, I mean, deep down, I think it's not going to be good if you're using AI content to rank. And if you publish AI content without changes, it's pretty easily detectable. But if you edit the output, even a little bit from a human, it's actually pretty hard to detect. All these courses, by the way, that teach all this stuff is BS,

because they're just contributing to this glut of regurgitated junk on the web. And once everyone starts doing this, there's not going to be any money to be made. Plus, you'll risk getting penalized by Google and Amazon as well. And in fact, actually, Amazon just did a way, Ava bannings of people who are putting out bad content in the form of e-books. Speaking of razor-thin margins, how about a word from one of the fine products and services that support this show?

We'll be right back. Once again, thank you for listening to Skeptical Sunday. All the deals and discount codes here on the show, all the sponsors are at Jordan Harbinger.com slash deals. You can also search for any sponsor using the search box on the website as well. Thank you once again for supporting those who support the show. Now for the rest of Skeptical Sunday. probably remember, too, back in the day. And when I say back in the day, I mean probably like

five years ago or six years ago. Remember long-form video sales letters? And before that, long-form sales letters where the whole web page would be like 18 pages of copy that you would scroll, scroll, scroll, and there would just be photos in there and like blinking whatever's. And you would sell a product that way. And I knew people that were making millions of dollars a month. I mean, they had a large cost of advertising and they were mostly affiliates and stuff like that. But they'd be making like 20 million bucks a year selling whatever dating products or real estate investing products on this. And then Google went, I think the update was Panda or something and it just nuked all of them. And they were like, oh, if you have a site where when we index it, it's just a giant wall of text.

And at the bottom is a sales link. You're getting, I don't know if it's delisted from Google, but you're certainly not on the front page. We want somebody who has real info. So I knew people that went from making $24,5 million a year to making pretty much nothing, except for using their email newsletter, which was now not growing because all of their feeder websites were also delisted. I mean, this was like nuclear winter for them because they couldn't recover because the entire business model was turned off with the flip of the switch. I would imagine that Amazon, Google, Bing, whatever, they're going to try to do something

very similar, where if you've got a site and 80% of the content is AI generated, they're just going to say, this is a crappy site, pull it to the end of the road, page 10, or not at all, and your business is done. And all your previously generated content is now useless. Yeah. I mean, they're going to figure it out. It just takes time. Just a matter of time. Yeah. It's never good to bet against Google and Amazon not screwing you, right? Because they've got billions of dollars, some of the brightest minds in the world working on trying to get a good customer experience. And I put that in air quotes, but let's say good Google results for people like you and I. So they're going to figure out what little trick you're using to arbitrage and rank,

and they're going to turn it off if it means that it makes their results better. And they're not going to care. So I just always found it silly to try and fight Google using tricks instead of making really good content. I'm still waiting for them to say, oh, look at all this audio and podcasts. This is a really great website that has a lot of content. Every year we get a little closer to that because the content is good. And every year we get a little further away. I just feel like it's an uphill battle to fight these massive companies to try and trick them into showing low quality stuff that you generate, especially from AI. I mean, we've been talking about written content so far. there's actually people teaching other people how to create YouTube videos from AI to get revenue from AdSense.

So basically, you use ChatGPT to generate a script, and then you just go to a voiceover site to generate audio, and then you use Dali or Mid Journey, which is an AI image generation tool, to generate a slideshow, and then you include the narration in the video, and then you publish this garbage on YouTube, and voila, instant money. Now, we all know that's not going to work in the long run. Sure. And I wouldn't be surprised if Google and Amazon just start banning accounts left and right for people who are just posting all this regurgitated AI junk. It infuriates me when I look for something on YouTube and I find a video with a robo

voiceover that's showing me a slideshow. It's instant dislike. I don't even know how to do this, but I try to report those videos a lot of the time if I have time because it's absolutely infuriating. You're looking for a definition and it's like a guy with a ridiculously heavy accent or a robot mispronouncing the word. Like, how do I pronounce this? And it's a mispronounce robo word.

It's just complete junk. And I would imagine the platforms want this gone. So as soon as they figure out how to sweepingly destroy all of it, it's only a matter of time. Yeah, for sure. I'm also curious as to what's going to happen this year, thanks to the chat GPT updates. I'm sure that we are just not imaginative to come up with the seven zillion more

get rich quick schemes that are in the pipes right now. And the million dollar question is, is there a way to do e-com? specifically since that's what we're talking about here. Is there a way to do that the right way? And is there a way to do it without doing much work? And I know that's a silly question, but if it's not drop shipping, what is it? I mean, Jordan, you and I are business owners. And I hate to burst everyone's bubble from everyone who's listening. But starting any real business requires a lot of upfront work. And for e-commerce specifically, I think that the best way to create a long-term

business today is to own your own brand. And we talked about, drop-chipping, when you sell other people's products, there's going to be hundreds of other retailers selling the exact same thing, and that always leads to a price spiral to the bottom. And selling on Amazon these days is also very cutthroat because someone will eventually knock you off. And so you absolutely need to be selling your own branded products. And just to give you an example, just the other day, I was shopping for laundry detergent. And I saw this unknown brand that was on sale for half the price of Tide, but I love Tide. I bought Tide anyway because that's what I use.

And I listen to the Jordan Harbinger show because your snark and your personality can't be replaced, even though there are other shows with similar guests. So what does it mean to create a brand? It means getting people on a customer list so you can expose people to your brand over and over again until it sticks. They might not be in the market for what you have to sell immediately, but when they are ready to buy, they will think about you. and then after they buy, you keep them coming back with repeated interaction. And as my wife would say, the reason she married me was because I wore her down over time.

And creating a brand is no different. I believe that she married you for that exact reason. How much work is it to create a brand? And I mean, I guess I could probably answer this myself since I did it with the Jordan Arbinger Show. And you're right, actually, without going too far down this rabbit hole, the only reason that I'm able to do podcasting for a living is because I have this brand. I had another brand before that wasn't named after myself. And when I left, I thought, I'm so screwed. I don't have my own brand, but it turned out I did.

I just didn't name it after myself. I had a personal brand. So when the old show collapsed, essentially, I was able to start the Jordan Harbinger show and bring over the vast majority of the audience. That is, it's kind of the best insurance policy that you could never hope to buy. You recovered in record time.

I was impressed. And it's because of the strength of, your brand and your personality. Thank you. And I think that there's a lesson here for the e-commerce folks or the people looking to create a product business online. It's way more work to create that brand, but you're more bulletproofed.

You have a different level of trust with a consumer at that point. Absolutely. That's definitely the way to go today. Yeah, initially it's a ton of work to create a brand as you did because you need to create content. You need to get people on an email list. You need to communicate with your customers, but you can actually automate a lot of this stuff today and make your life easier,

but it will take time. I know that you wrote a book and I'm in it, no big deal, but I want to hear a little bit about that. I know it's not about getting rich quick with drop shipping and or e-commerce. Yeah, I've got a book coming out, and it's called The Family First Entrepreneur. And I wrote this book, really, because 99% of the entrepreneurship advice you hear online is wrong. That's a strong statement, but it is a strong statement, but it's probably, you're probably wrong about that. It's probably more like 99. Something percent of the advice that you hear online

is wrong. I've tried most of it. A lot of it didn't work. I could be the common denominator, the common factor, and a lot of it not working. I'm open to that particular scenario as well. As you guys can tell from this episode, I am not a fan of anything, Get Rich Quick. But I'm also not a fan of hustle culture either. And I run a show myself called My Wife Quitter Job, where I've interviewed over 450 successful entrepreneurs who are just killing it with their multi- million-dollar businesses. But what you never hear about publicly is that they don't see their family much or that they were totally burned out or stressed out. And you never hear about the huge sacrifices that they had to make in order to get there. It doesn't have to be that way.

I mean, why do we start businesses, Jordan? Most of us, we just want to make an honest living and spend time with our family and loved ones. And you don't need to work 80 hours a week or hustle nonstop to make that happen. I know you got a family now, Jordan, just curious, How have you adapted your businesses for your family? Well, now instead of constantly stressing about my business, I constantly stress about my kids and my business, which has been a nice change of pace. But I've got two kids now. I've definitely made things work.

But it is an uphill battle, man. I sort of struggle with FOMO and a lot of the things that I talked about with you for your book. But what I admire about you, Jordan, is that you've made things work. And I know that because, as you mentioned earlier, I used you in your business as an example. in this book. I don't want to harp on the book too much, but I will say that... Yeah, you do. You want to harp on it. I do want to harp on it. But I'm going to be, you know, nice to your listeners here. I will say... I appreciate that.

That you can start a real business that suit your lifestyle, but it's going to take work. And don't fall for these get-rich-quick schemes because you're just going to waste both your time and your money. One thing I want to make clear, though, is the book is not like, here's Steve's way of starting a business. It's actually just about balancing your family, balancing your work life and running a business. So if that's you, definitely check out. out. We'll link to that in the show notes. I wanted to have Steve on because you and I, when we talk on our free time, dad time, we actually do end up talking about scams and things that target unsuspecting individuals because you know so much about e-commerce and I have no idea about that area at all

other than smelling something fishy. So remember, if it sounds too good to be true, it probably is stay vigilant, stay safe. And of course, you know we've got a lot of episodes on scams on the Jordan Harbinger show. We have an entire playlist of these episodes over at Jordan Harbinger.com slash start. including an episode with YouTuber CoffeeZilla, which is quite popular, well before he became the YouTube scam ripper opener. We talked about a lot of online scams there as well, and those episodes are a great fit if you want to expand your knowledge of scams, online scams, offline scams, especially so-called business opportunities to protect yourself

and protect your loved ones from predatory schemes. Steve, thank you very much, man. Thanks for having me, man. Here's a sample of my interview with Scam Buster CoffeeZilla, whether you or a loved one is being tempted by sketchy investment opportunities, MLM traps, fake guru-led operations, understanding how to identify them and the mechanisms by which they work is the best chance you can have of putting a stop to their shenanigans.

Here's a quick look inside. You see an ad and it's of some guru you've seen before, you haven't seen before. Let's say, Jordan, you're the guru for today. And you tell me, oh, come to my free webinar. It's always free and it's always going to teach me how to get rich. There's no investment that I initially think I have to make. So I go to your webpage, I give you my email, and I sign up for this live webinar. It's never live.

They've pre-reported it. It's a three-hour sales pitch for their $2,000 course, and they basically tell you, look at all these people who have had success. They will show you the Forbes article that they bought, but they'll not tell you that they purchased it. They'll say, hey, look how successful I am. They put themselves in your shoes. They know that their average buyer is broke, you know, disaffected. He's everything he's been trying hasn't worked.

And they say, I was just like you. I was where you are. And I bounced around and I made all these mistakes until I found the one secret. And I will tell you that secret to get you from A to Z. It took me five years to get to a million dollars. I'll teach you, Jordan, how to do it, a proven blueprint in one year. I'll take you from loser where I used to be. I used to be a loser like you.

And I'll take you to winner where I am now. And I'll take you there. Blueprint, guaranteed. No problem. Look at all the testimonials. up maybe right, right, right, right now. And then they go, hey, my course, normally, I'd sell it for $40,000. Normally, it's $100,000 worth of value. But just this second, for the next 50 minutes, I will give this to you for $2,000. And they're coaching you through the little credit card

application. You're on the phone with a credit card company that coach needs to do this? You're like sitting there and they're like, hey, this is what you're going to say. Go ahead, call them right now and let's swipe that card, baby. Let's swipe that car before you leave this seminar. They're left with a $40,000 collection debt, you know, for a high interest rate. They can't pay it back. They're not making the money they were promised. And then there's a money back guarantee. There's not a money back guarantee.

To hear more about how to expose predatory shysters for what they are by delving into their shady manipulation tactics, check out episode 368 of the Jordan Harbinger Show with CoffeeZilla. This episode is sponsored in part by Something You Should Know podcast. Finding a new great podcast shouldn't be this hard, so let me save you some time. If you like the Jordan Harbinger show, you'll probably like something you should know with Mike Carruthers. It's one of those shows that makes you smarter in a practical, useful way. Same curiosity vibe we go for here, just in a fast-focused format. Mike brings on top experts and asks the exact questions that you'd want to ask, and the topics are all over the place in the best way.

Recently, they've covered things like why we care so much what other people think, the benefits of laughter, why sports fans get so invested, and what makes people like you or not. The through line is always the same. Smart ideas you can actually use in real life. Something you should know has been featured in Apple's shows we love, and it's got thousands of five-star reviews because it's consistently interesting. So if you want another show that scratches that I want to understand how people in the world really work, itch, search for something you should know wherever you get your podcasts. Look for the bright yellow light bulb and start listening.

You can thank me later.