To refocus, Chapman used a lesson from his solar panel operation: When selling door-to-door, the product has to be intriguing enough for people to invite you into their homes, Chapman says. "Same thing online — to pull someone away from their friend feed, you've got to be offering something interesting."
Out went Mormon art and in came inflatable lounge chairs, a popular staple among online stores selling viral products. Sourcing from Chinese manufacturers on Alibaba and Aliexpress, Chapman found other products for $4.99 that he could resell for $59.99. To avoid the cost and risk of taking on inventory, he would set up arrangements with suppliers (over the popular Chinese messaging service WeChat) to have his orders shipped directly from their warehouses in China to the customer in the U.S. — a practice known as drop shipping.
"That's the best way to test a product to see whether or not it's actually going to sell," he says.
And drop shipping had other benefits: Through a program called ePacket, an arrangement between the United States Postal Service and foreign postal operators designed to encourage e-commerce, it was actually cheaper for LDSman to ship from China, albeit with a slight lag time. Shipping an external iPhone zoom lens from Shanghai, for example, cost $2.29 — more than $5 cheaper than the cost to ship the same package domestically.
Making money while he slept
As orders streamed in while Chapman slept, he realized he was on to something. "I made money my second day and every day after that," he says. Just two weeks in, he had his first $10,000 day.
The revenue allowed Chapman to hire out time-consuming customer service work to a team of freelancers in the Philippines. Chapman says he pays each team member $700 a month (low by U.S. standards but notably higher than the $400 monthly average a family in the Philippines earns). He also boosted his budget for Facebook advertisements, focusing more money on the ads that attracted the most purchases.
Nearly two months in, the woes of drop shipping caught up with him. The vendor in China he paid $80,000 to supply and ship inflatable lounges swapped out the approved product for a cheaper alternative. When customers started complaining, LDSman replaced about 1,500 bags. Even so, Chapman says he's bounced back from the experience to reach a 48 percent total pretax profit margin.