Dropshipping is something you are familiar with. But what about reverse dropshipping? This is a new business model that allows products to be shipped to traditional exporting countries.
This model has a lot potential to make a profit. The barriers to entry can make it difficult for people to get started. We’re here to help you understand reverse dropshipping.
WHAT IS REVERSE DROPSHIPPING?
Dropshipping and reverse dropshipping are both ways of taking orders from customers, then sending them to dropshipping suppliers or manufacturers for fulfillment.
Regular dropshipping involves purchasing each product from a country such as China or India and having it shipped to customers in the United States. Customers in India and Thailand can order products from the United States, or Europe through reverse dropshipping.
This may not sound like a very profitable idea. There is a lot of money in countries that are traditionally exporting. These people look for products from Canada and the United States because they believe these products are superior to those they can purchase in their own countries.
WHAT ARE THE PROS OF A REVERSE DROPSHIPPING ONLINE STORE?
Dropshipping reverse can be high-risk but high-reward. There are many upsides to reverse dropshipping. Profit margins can be higher and there is potential for untapped demand. You will need to deal with different laws and languages in foreign countries.
The most prominent upsides of reverse dropshipping include:
HIGHER PROFIT MARGINS
While you may not believe it at first, middle- and upper-class people in countries other than Canada, the United States and Europe are more willing to pay a lot for the same product.
This is often due to them paying more for European and American products. They pay more for the same product due to higher taxes, tariffs and shipping costs.
This can be used to your advantage by identifying gaps in the market for high-demand products. Selling the same product in Europe or the United States will result in a higher profit margin.
There will be less competition in these countries than there is in the United States where hundreds to thousands of dropshippers compete to get customer orders.
Most businesses that ship products to countries with a high percentage of exports will be either big-box retailers or larger importers. Dropshippers have a greater advantage than them due to their lower overhead.
Larger companies will not be able import the most sought-after products. This creates a gap on the market for products that are less in demand.
OPPORTUNITIES FOR BRAND BUILDING
Dropshipping is all about branding. A strong brand can be created that is associated with quality and reliability in your destination.
White-labeling products manufactured in your country can help you build your brand. You will initially need to sell brands. However, as you become more familiar with the brands that work and those that don’t, your brand can be substituted for other brands.
You may discover that you can build a very profitable brand over time. This will allow you to stop dropshipping.
POTENTIALLY LARGER AUDIENCE
Many markets in developing countries or primarily exporting nations are not yet tapped. This means that there are many more potential customers for your product than in your country.
Southeast Asia is home to over 670 million people. Southeast Asia countries like Thailand, Vietnam and Indonesia, Malaysia and the Philippines are experiencing rapid modernization with a growing middle class and upper class.
These people are searching for products and will likely find gaps in the market for exactly what they need. These gaps can be exploited to reach a wider audience than your country.
CHEAPER MARKETING AND ADVERTISING COSTS
Advertising and marketing are usually cheaper in foreign countries due to less competition. Although this is not true for all channels, you will probably find that SEO (search engine optimization), and PPC (pay per click) are much less competitive.
A local company can conduct market research if you’re serious about building a long-lasting business. Although this will require some upfront investment, it will provide you with a comprehensive picture of the market and help you determine where you can get the best bang for your buck.
EASIER TO OFFER BETTER CUSTOMER SERVICE
I have lived in Southeast Asia for six years and can tell you that the customer service is poor. This is a good thing as it allows you to compete with larger regional import-export businesses.
Superior service means being responsive to customers’ inquiries quickly, providing a better user experience and being clear about the products you sell. You can overcome language barriers by hiring a virtual assistant in your area.
WHAT ARE THE CONS OF A REVERSE DROPSHIPPING STORE?
There are both significant upsides and downsides to reverse dropshipping, as we have already mentioned. It will likely be difficult to get your message across to people who speak a different language than you do in the country where you are dealing.
Dropshipping has its downsides.
POTENTIAL DIFFICULTIES FINDING MARKETING CHANNELS
Marketing to people from the same cultural background and language is a great way to communicate with them.
Try to get your message across to someone who speaks a different language or uses social media.
It can be difficult to find the right marketing channels in foreign countries. This can be avoided by working with local marketing professionals to help you create a strong brand and establish the right marketing channels.
MORE BARRIERS TO ENTRY
Apart from language differences, there will be other barriers, such as cultural differences or government regulations. These are not impossible to overcome, but it will take extra effort.
When looking for countries to dropship to make sure you thoroughly research the country and its culture. Your chances of success in the long-term are higher if you do your homework before starting.
Living in Southeast Asia taught me one thing: laws change in developing countries every day, sometimes even by the hour.
These places are not governed by any set rules. New regulations and bureaucratic red tape are common. Take craft beer in Thailand. It is illegal to craft brew beer in Thailand. Therefore, manufacturers would make their beers in neighboring countries and then import them into Thailand.
These stories are not uncommon. You may encounter similar nonsensical or cumbersome regulations depending on the product you are dropship. To ensure compliance with local laws, it is a good idea to consult a local attorney before you start.
HAVE TO DEAL WITH TARIFFS
You will have to deal with tariffs and taxes in many countries. This is particularly true for exporting countries that have strict protectionist policies in place to protect local manufacturers.
You will need an attorney and an accountant before you can do business in any country. These experts will help you get started and make sure you do not violate any local laws that could lead to your packages being seized by customs.
POTENTIALLY MORE DIFFICULT SOURCING PRODUCTS
It may be more difficult to find the right products to sell if you source products from countries that import traditionally. It will be necessary to contact manufacturers directly. You may also need to establish relationships with dropshipping companies.
This does not have to be a huge obstacle. Dropshipping is a popular business model in the United States and Europe. It will take more effort than just searching on Alibaba to find them.
Use directories like Thomas Net to find manufacturers and call them directly. Although it may take more time, this will give you the best results.
HOW CAN YOU GET STARTED REVERSE DROPSHIPPING?
Do not let the negative aspects of a reverse dropshipping company discourage you. This business model has been used by many successful people to make a lot of money. Because of the many obstacles involved in starting a business, fewer people will persevere.
These are the first steps to reverse dropshipping.
FIGURE OUT WHICH NICHE YOU WANT TO OPERATE IN
You must first identify a niche that is currently underserved before you can get started. You won’t likely be able to upload products on Amazon and make quick sales, unlike traditional dropshipping.
Market research is essential. This may require you to hire a local expert to guide you through unfamiliar territory. Gap analysis is the best way to get started. This will give you some ideas on where to start and tell you what the most demand is.
SOURCE YOUR PRODUCTS
Once you have chosen a niche, you will need high-quality products to source from Europe, the United States or Canada. Spocket and US Direct are two of the best places to start.
It is a good idea to get in touch with manufacturers directly to establish a dropshipping arrangement. Make sure to tell them you will be shipping products overseas. They might already have dropshipping arrangements in the United States, and are therefore available to ship internationally.
FIGURE OUT THE BEST PLATFORM FOR SELLING PRODUCTS
This is in addition to finding the right marketing channels. Many countries don’t use Amazon or eBay. It is possible that Shopify store websites and social media apps are not very common in certain countries.
China, for instance, doesn’t use websites as much and operates primarily via the mobile app WeChat. Another example is Thailand, where the majority of sales are made via Instagram or Line. If you want to succeed, you will have to go where your customers are.
WRITE AND TRANSLATE YOUR PRODUCT DESCRIPTIONS
No matter where your products are posted, be it on social media, an eCommerce platform or a website – you must translate the product descriptions.
Google Translate and similar tools are not recommended. Translation programs can often miss the mark and cause your copy to be misinterpreted. You will need to find a local translator.
A skilled translator will be able to translate all the information without losing its meaning. Clearly translated product descriptions reduces the chance of customer returns or exchanges being misunderstood.
CHOOSE THE BEST CHANNELS FOR MARKETING EACH PRODUCT
You must also invest in marketing and amplifying your message. It is not enough to rely on people finding your products organically, especially if it isn’t easy for them to find the right place.
It is a good idea to speak with local marketing experts or digital marketing agencies that know how to market to locals. They will be able to advise you on the best channels, and make sure you don’t waste your advertising dollars.
Local marketers are also available to help you present your products in the best way possible to increase sales and possibly raise your prices.
COMMON QUESTIONS ABOUT REVERSE DROPSHIPPING
These are the most commonly asked questions about reverse dropshipping.
WHERE CAN I SOURCE PRODUCTS FOR A REVERSE DROPSHIPPING BUSINESS?
Dropshipping products are best sourced from US Direct and directly from European and US product manufacturers. You will need to negotiate a deal directly with the manufacturer, since they might not be experienced with shipping products overseas.
WHAT CAN I DO TO MARKET PRODUCTS IN FOREIGN COUNTRIES
Dropshipping products can be promoted in foreign countries by finding out which local businesses use them. WeChat, for instance, is a popular advertising method in China. If you have the funds to get better results, consider working with a local marketing professional.
IS REVERSE DROPSHIPPING LEGAL?
In most cases, reverse dropshipping is legal. You will need to keep up-to-date with laws in each country as you ship products to different countries. International trade restrictions and blacklists should be taken into consideration.
THE FINAL VERDICT
Dropshipping reverse is not a good business model. You need persistence and patience as well as the ability to make quick decisions in the face constantly changing rules and regulations.
There are many benefits to reverse dropshipping. You’ll find you have more potential to reach untapped markets that are hungry for high-quality goods.If you feel that reverse dropshipping is not the right choice for your needs, please read our guide to starting a regular dropshipping company to find out if it might be a better fit.