The dropshipping model has been a part of retail since the 60s. In this article, I will focus on reverse dropshipping. The concept behind dropshipping involves business owners maximizing profit while minimizing cost.
With the advancement of technology, this business model has grown and developed its subsidiaries, one of which is reverse dropshipping. While the dropshipping model accounts for 23% of online global sales, its counterpart, reverse drop shipping, is not as widely known.
What is reverse dropshipping?
Products are purchased from countries prone to product importation and sold in countries that usually export products. To understand how reverse dropshipping works, you should have a foundational knowledge of what dropshipping is.
Reverse dropshipping is an eCommerce business where high-end products are sourced from developed to developing countries; for example, dropship medical apparatus from the US to China. Reverse drop shippers capitalize on the insufficient production of some high-quality products in countries like China or India to make a profit.
The dropshipping business model operates based on retailers selling a product they do not stock. When a customer places the order, the drop shipper purchases the item from a third party that ships it directly. The dropshipping business model involves three parties; the manufacturer, the seller, and the customer.
When orders are placed on the dropshipping model, the products are imported from manufacturing hubs like India and China to end consumers in countries like the United States, Australia, etc. In the reverse dropshipping model, the products are gotten from the United States and then shipped to Asian countries or similar countries.
Dropshippers in the United States adopt this business model with Asian products because of the low manufacturing and procurement cost. In contrast, for those using reverse dropshipping, high-quality products will cost more.
Reverse dropshipping, as its name implies, is the reverse of the traditional method of dropshipping. Compared to traditional dropshipping, where business owners focus on purchasing cheap products to sell to customers for a higher price, reverse dropshipping focuses on high-quality products.
One may wonder why people would look to carry out a business with a high running cost over one that will bring in more profit. To address this, we collated the differences between dropshipping and reverse dropshipping.
Is reverse dropshipping better than traditional dropshipping?
As with any business, reverse dropshipping has its advantages and disadvantages. Choosing the business model to use is dependent on your business goals. We can say that reverse dropshipping is not better than traditional dropshipping and vice versa.
Reverse dropshipping and drop shipping are two sides of the same coin. They both involve the seller promoting products to be purchased that they don’t stock. And the same three parties, the seller, manufacturer/supplier, and consumers, are present in both business models.
The difference between the two business models is that one involves shipping cheap products from low-income countries to high-income countries, and the other ships high-quality products from high-income countries to low-income countries.
Beginners are encouraged to stick to the traditional method as reverse dropshipping can be complicated to work through without prior knowledge. Most low-income countries, such as China, tend to export products more than imports, and entrepreneurs looking to dive into the reverse dropshipping need to be aware of the importation regulations.
Because reverse dropshipping is not practiced as commonly as traditional dropshipping, there is little information available on the secure manufacturer and shipping routes. Reverse dropshipping is for adventurous business owners who stand to risk it all to earn higher profits in sales.
Pros and Cons of Reverse dropshipping
Most business models have benefits and flaws and reverse dropshipping is no different. Below is a breakdown of what one should expect and look out for when venturing into reverse dropshipping.
Pros of reverse dropshipping
Lower competition: reverse dropshipping is a relatively undiluted market that takes advanced understanding to be successful. For this reason, the competition is considerably small.
It is easy to gain an advantage in the reverse dropshipping as fewer businesses are in this market space. After selecting the right niche for your business and narrowing down a specific target audience, you stand a chance to make more profits by consolidating the market.
Higher profit: reverse dropshipping targets high-quality products; the higher the product quality, the more expensive it tends to be. One dropshipping feature is that you can sell products at a much higher price, and reverse dropshipping does so irrespective of the initial price.
With reverse dropshipping, you stand a higher chance of making more profit than the traditional method. Quality always wins over quantity, and this business model is proof of that so long as you partner with the best suppliers.
Build a luxury brand: because of how low the competition is with reverse dropshipping and the quality of products sold, it is easy to establish a luxury brand. In this niche, customers would depend on and return to brands they have used before.
This model will enable you to build a trusted customer base, providing you with the tools to ultimately establish a luxury brand of your own. Financial freedom is only a handful of sales away with reverse dropshipping.
Cons of reverse dropshipping
Large market difficulty: To succeed, you must partner with a reliable supplier for dropshipping of any kind. Because reverse dropshipping is not as popular, it can be challenging to find a supplier willing and able to partner, especially when sending products to lower-income nations.
A reliable supplier is the bane of a successful reverse dropshipping model. To profit in this space, one would need to spend more time researching third-party suppliers to partner with you. This dropshipping model can be arduous and expensive, although not impossible to pull off.
Higher expenses: it is easier to import products into high-income countries than import to low-income nations due to bureaucratic bottlenecks. For businesses doing reverse dropshipping, there is increased red tape.
Some countries have challenging importation and regulatory laws, which make it difficult to deliver products to customers. A common challenge with reverse dropshipping is the higher cost of duties, taxes, and additional payments that can impact the prices of dropshipping products.
Limited countries and limited entry: every country has regulations governing its importation industry. It is wise to conduct detailed research on the country’s importation laws before selecting products.
Apart from custom regulations, product restrictions should be considered before choosing the products. One should research if the product you choose qualifies for importation.
3 platforms you can use for reverse dropshipping
Reverse dropshipping is quite a lucrative business model, and there are different platforms entrepreneurs can use as a launchpad.
The best platforms to start reverse dropshipping are those that offer 24/7 support, are almost free to use, work with various dropshipping plugins, and ultimately aid in the success of your business. Some examples of the best platforms for reverse dropshipping are;
Woocommerce: this platform is popular in the eCommerce industry and occupies 30% of the market share. It is a user-friendly platform with a large community of developers and designers offering support, plus it is also free.
Magento: is a developer-friendly eCommerce platform that requires its user to have a beginner level of coding knowledge. It is the second most used platform globally and the hosting site for thousands of eCommerce businesses.
Shopify: Shopify is easy to use and consists of pre-established pages that allow you to add products easily. For entrepreneurs looking for a profitable business that offers business an unsaturated space, although with significant risks, one should venture into the world of reverse dropshipping. Once the ball gets rolling, it is easier to generate a high-profit margin and be on the right path to financial freedom over the traditional dropshipping method.
How to start reverse dropshipping
Although it may seem like a simple business model, it will require a few months to start seeing results. Here are a few steps to get started with reverse dropshipping:
- research and niche selection
- choose products to sell
- contacting and vetting suppliers
- get web hosting and a domain name
- build your store and upload the products
- build a sales funnel
- drive traffic (free or paid traffic, for example, Udimi solo ads)
- ensure customer support
- retargeting and follow up
This may seem a bit overwhelming, but in the end, your success relies on essential elements:
- product quality
- reliable supplier offering excellent shipping time
- your store (simple but effective design and checkout page)
- your marketing strategies
Building a profitable income stream from reverse dropshipping takes time and commitment unless you get lucky. Investing in a dropshipping course is the best way to take a shortcut to success and avoid all the pitfalls beginners make.