Do you dream of owning a retail store? But don’t have the money? Did the risks make it difficult for you (Source: StartupNation). If so, we understand. What if someone told you it was possible to open your own online shop on a budget? It is possible. Dropshipping in South Africa is the answer. Why South Africa? Oberlo states that there is still a lot of South African dropshipping competition, which makes it an attractive place to start this business. Many aspiring entrepreneurs use this business model. We will simplify dropshipping and discuss the benefits and drawbacks of the process.
What’s Dropshipping and how does it work?
Dropshipping, in layman’s language, is the act of owning an online store but not having inventory. Dropshipping is a way to directly connect with manufacturers and establish a supply chain. Your initial investment is usually for setting up an online store and advertising. After choosing the items they want from your product catalog, customers can place orders and pay. Once an order comes through, you – the dropshipper – will place a duplicate order to your relevant manufacturer/supplier. That’s it. This is it! The supplier will take care of any additional packaging or delivery requirements.
Your profit margin for each product is included in the prices you display on your retail shop. For example, if your business sells a smartphone for R5000 and if you are buying them from your manufacturer/supplier for R3750, that means you are making a profit of R1250 per product you are selling through your online store. It’s really that simple.
This business model allows customers to be unaware if they are purchasing a product from dropshippers. If a customer purchases a smartphone brand-named through your online store and is satisfied with it, they will be able to tell that your store is the right place to purchase that smartphone brand. This business model requires that you choose your suppliers carefully to ensure a positive customer experience.
Dropshipping in South Africa: Is it profitable?
South Africa is quite different from other countries when it comes eCommerce. What works in the United States may not work here.
Dropshipping in South Africa can make you money!
Dropshipping in South Africa is profitable, so the short answer is “yes”. However, this statement comes with a caveat. Dropshipping in South Africa is just like any other business. There are many factors that can determine your success.
Dropshipping is a popular way for budding entrepreneurs to get into the online world.
However, many people believe that opening a dropshipping shop will guarantee their success.
Dropshipping is, in reality like any other business that needs work to be successful. To make your South African dropshipping company successful, you will need to have great products.
This post will explore what makes South Africa’s dropshipping business profitable. But before I get into that, let me take a look back…
Does Dropshipping work in South Africa?
Let’s get to know each other before we can start a dropshipping business in South Africa.
Dropshipping is a viable option in South Africa. Dropshipping is an online form of eCommerce. You don’t own the products. Dropshippers create an online store and then sell products from third-party suppliers. The dropshipper handles the transaction and forwards the order to the supplier. He then delivers and fulfills it.
Dropshipping is a very attractive business model, which I am sure you will understand.
Dropshippers don’t have any obligation to purchase stock, they don’t need warehousing, and don’t have the responsibility for logistics.
However, selling products online is not without its complexities. Even though you don’t need to purchase the stock, there are still costs associated with starting a dropshipping company in South Africa.
Let’s now take a look at how to dropship in South Africa.
Connect a payment gateway with your dropshipping shop
Next, you need to establish a payment gateway online to make your dropshipping business a profitable and successful one in South Africa.
Payfast is one of the most popular and easiest payment gateways. Payfast is integrated with Woocommerce and Shopify, making it easy to accept payments online for dropshipping businesses in South Africa.
A payment gateway that is able to handle international payments will be required if you sell outside South Africa’s borders. PayPal is the easiest to set-up, but you have other options such as Stripe and 2Checkout.
This article will help you find the best payment portals in South Africa. I’ve compared the different payment gateways available to drop shippers as well as other eCommerce and online businesses in South Africa.
Invite potential customers to dropship to your dropshipping shop
This is the most difficult part for dropshipping companies in South Africa. Your dropshipping business in South Africa will be profitable if you get targeted traffic.
It is for this reason, I research and choose the right niche for dropshipping.
Driving traffic to your website is easy if you have done your research and found the products that customers are looking for at the right price.
Two ways to find dropshippers for your business are available.
Paid advertising is the fastest and most efficient way to reach your potential customers. It’s easier than ever to reach potential customers with platforms such as Facebook and Google, if you are willing pay for it.
Advertising in your niche can bring you great results.
Organic traffic is the second method to drive traffic. It is possible to reach your target market and attract potential customers by using proven search engine optimization (SEO).
Optimizing your individual product pages to drive organic traffic to your product is one way to achieve this.
A traditional content marketing strategy is another great way to drive traffic to your dropshipping shop.
You can then get your products noticed by creating blog posts, youtube videos and podcasts that provide value to your customers.
Optimize your results by analysing and optimizing
This is an ongoing process. Your dropshipping business should be viewed as a living laboratory. You should do the same thing for your dropshipping store as scientists would to test new processes and report on their effectiveness.
You must be constantly testing, tweaking, and noting what works and doesn’t work in order to build a successful dropshipping business. It is important to focus on what works and minimize what doesn’t.
Remember that the online landscape changes all the time. It is possible for something that worked today to not work tomorrow. Dropshippers are constantly being introduced to new products and competitors. It is important that you remain agile as a dropshipper, keeping up with these changes.
Dropshipping is a great way to get into South Africa’s eCommerce market. Although it will take effort and money from the business owner, there is no better time to build a successful dropshipping business in South Africa.
This article is a brief overview of how to start a South African dropshipping business. I will continue to explore dropshipping in detail in future posts.
South Africa Dropshipping – What’s the competition?
South Africa is the 37th largest eCommerce market with a revenue exceeding US$4Billion in 2020. This puts it ahead of Malaysia, and behind the Czech Republic. (Source: ecommerceDB). Even Statista says that South Africa’s online shopping trends are improving and will continue to grow in the coming years. The quality of internet services has improved tremendously in the recent years. South Africa’s awareness of technology and media has led to an increase in the number of internet users and smartphone owners. In South Africa , the percentage of internet users was 56.3% in 2020 and is expected to rise to 62.3% in 2025.
Dropshipping competition in South Africa is still relatively low. According to e-commerce statistics, South Africa has a lot of potential and offers a fair business environment. It’s worth considering starting a dropshipping company in South Africa by 2021. You will have a competitive advantage and be able to make a lot of money if there is low competition.
Dropshipping: Is it good?
That will be up to you! It is not for everyone, we can only say that. Let’s take a look at the main advantages and disadvantages of this business model to see how it works for you.
Dropshipping is easy to understand and implement. This model is a great option for entrepreneurs looking to start a business quickly and make it easy to sell the products. If you’re interested in starting a dropshipping company in South Africa, let’s look at the benefits.
Very low startup costs
Low startup costs are one of the greatest advantages to opening a dropshipping shop. Setting up a retail shop in South Africa can be difficult. You have to pay rent, taxes and manage inventory. Dropshipping is easy. All you need to do to get your online store up and running is to pay for the domain name and hosting. You can also buy pre-designed stores from Shopify. You can also invest more money in advertising to increase your reach if you have a larger budget.
It is a profitable business model that requires low investment and has low risks. Oberlo has provided an overview of the total costs. This does not include advertising.
Flexible Experimentation on the Market
You don’t need to keep a physical inventory so you can try different business niches with different products for a low to no cost. You should think about the products that you would like to sell, and then research the demand and supply. You should avoid larger products like furniture unless you have large orders or if your profit margins are high. You can start by exploring the electronic market.
Low fulfilment costs
Dropshippers don’t pay suppliers until they receive an order. The customer pays the dropshipper once an order has been placed. The dropshipper then places another order with their supplier. The supplier handles shipping and packaging costs and the dropshipper doesn’t have to pay anything. The dropshipper only has to accept the order and forward it to the supplier.
No inventory management costs
Dropshipping does not require physical inventory. This eliminates inventory costs. Inventory expenses can be very high in a traditional retail store. Inventory costs are high. You need to think about how you will buy and manage the inventory. Also, what happens to the warehouse rent? Dropshipping eliminates these worries, making it easy to manage your finances and test new products on the market.
Dropshipping in South Africa requires that you make sure that the customer is aware that they are purchasing from a dropshipping company. Many dropshipping stores have poor design elements that make it obvious that they are dropshipping. In addition, poor customer service, long shipping times and low product quality can all contribute to the lack of trust. This could have a negative impact on your overall business.
Limited Control over Products
This business model has a major disadvantage: you have very little control over the products. Dropshipping is third-party packaging and shipping the product ordered through your website. The shipping time, packaging, and product quality are all up to you. Bad products sent under your name can quickly damage your business and have a lasting impact on your overall revenues and reputation.
Your partners are your only source of products. This gives you little to no control.
Limited branding and customisation
You don’t have control over the product manufacturing, packaging, or delivery. This makes it difficult to promote your brand. Even if the supplier/manufacturer can accommodate your customisation request to a certain extent, you may have to show that a particular product is selling well and is in high demand. Manufacturers must cover the cost of customisations, while also considering profit.
This model makes it difficult to build brand loyalty. Your business may sell products from different brands, and provide customer service for them. The product brand (i.e. Manufacturers and suppliers could take all the credit. This leaves you with little room for growth as your own brand.
Low-Profit Margins and Competition Issue
Profitability can be negatively affected by high competition. Many entrepreneurs are attracted to this business model because of its low cost. They hope they will make a quick profit. To make quick sales, they intentionally set the profit margin low. Because it is a low-risk business, there is little risk of losing. This allows them to keep their profit margins low. If you want to be competitive as a start-up, your profit margin won’t be as high as yours.
South Africa is relatively competitive. This creates a safe environment for you to market your brand and build a reputation. It will allow you to stay ahead of the competition.
How can I start a dropshipping business here in South Africa? Avoid these common mistakes.
Dropshipping is a business that requires thorough market research. Before you start dropshipping, it is important to understand the supply chain and the demand in the market. Knowing the demand will allow you to create products that are suitable for your target market in South Africa.
Second, you should consider choosing your niche in order to attract the right customers and focus your business. This will allow you to make a greater profit and build a name for yourself. To make money in less-popular areas, you should explore them. Do not rely solely on current trends. Before you even start your business, do market research. This will allow you to make a better name and profit over the long-term.
This Shopify article explains how to find your niche.
Young, passionate entrepreneurs skip this step and instead find suppliers randomly, set up a website quickly, and sell online in the hope of making some profit.
Connecting to suppliers
After understanding the market, contacting and connecting with the relevant suppliers/manufacturers should be your next priority. Dropshippers who are interested in becoming dropshippers will immediately inquire about how to connect with AliExpress South Africa. You should not use AliExpress. AliExpress is a popular platform for dropshippers around the world. However, AliExpress South Africa will not allow you to ship internationally. Shipping costs, taxes and shipping time are the main issues.
You should look beyond the obvious! You have many options for suppliers in South Africa, including Computer Wholesalers and ParcelNinja. BuyFast, Buy-a-Lot. You can also connect with other businesses, explore local markets, and help them grow. You might not be offering the same products that dropshippers in South Africa or around the world, but you could also be following popular platforms. For a long-term, profitable effect, be unique and explore other ideas.
Setting up an Online Store
This is a simple but crucial step. We recommend WordPress for setting up your online shop. There are more than 60000 themes and plugins to help you make your store unique. Digital Lime Green can assist you in setting up your online shop according to your requirements and instructions. WordPress offers affordable domain names and low prices for hosting of your website. You can set it up in a matter of minutes, and you might even be able to start selling within hours.
A professional website is essential. Your website is the first step in gaining customers’ trust since it is their main channel of purchase. Your website will drive customers away if it is not well designed, confusing to navigate, or has poor, copied content. Before you set up your online store, think like a customer who visits a website.
Advertising can help you grow your company (of course!). Advertising will help you grow your business, especially if it is new to the market. There are many platforms you can advertise on, including Google Ads and Facebook ads, and Instagram advertisements.
Research your market before you advertise. You may be in big competition if you sell something just because it’s in high demand. Focus on what you are selling most. This is because it will establish your brand in the market. If you concentrate on selling smartphones and other electronic devices, your customers will know that you are a specialist in those products. This will increase trust and build your reputation. Targeted advertising can be a great way to promote your business.
Although technically you don’t have any relationship with it, any product-related problems will be addressed by your business. Your business should have a well-functioning customer service system. Your business will be severely affected if you have poor or ineffective customer service.
Customer service is about treating customers with respect and politeness. It also includes helping them resolve any queries quickly and maintaining their satisfaction. Customers who are happy with their service will return to your business and be more satisfied.
Dropshipping hopefuls make the error of overlooking this aspect in their greed to make a quick buck from this business model. Even if their business closes, this will have a negative impact on them. They will most likely find it difficult to start a new business. This is your personal investment, not a deed that you can ignore when growing your business profitable.
Dropshipping, even though it is a low-risk, low-cost business model, should still be considered a business. Dropshipping is a responsibility. There’s no quick way to make a quick buck with any business model. It is important to plan your business well, do your research, advertise properly, find your niches and offer excellent customer service. Dropshipping in South Africa is possible with your dedication, focus, and determination.
Our article explains the basics of starting a business in South Africa.
Digital Lime Green can help you market your business. We are a digital marketing and web design agency in Cape Town, South Africa. We can help you market your business via multiple digital channels. For more information, take a look at the Digital Marketing Package.