|What is dropshipping?|
How does dropshipping work?
Benefits of dropshipping
Dropshipping in Vietnam
Dropshipping in the US
You’ve probably heard the terms dropshipping or dropship somewhere in MMO forums, or business discussion groups. The global dropshipping industry, which is projected to reach 557.9 billion USD in 2025 at a CAGR of 28.8% between 2019 and 2025, is undoubtedly the most promising eCommerce business model. But what exactly is dropshipping? How does it work? Why do people always state that if you’re looking for an online business opportunity, dropshipping is a viable choice? Let’s find out right here on this blog!
What is dropshipping?
Dropshipping is an order fulfillment method that doesn’t require the merchants to keep products in stock, order inventory in bulk, or physically fulfill the order in any way. Instead, the sellers sell their products, and pass on the orders to a third-party supplier whenever the orders have been placed, usually a wholesaler or manufacturer to fulfill orders. That means the sellers don’t have to directly handle the products. Sounds great!
Dropshipping is a great business model for entrepreneurs as it doesn’t require as much operational capital as the traditional retail model. Retailers don’t have to invest a lot of money to open a brick-and-mortar store, own inventory, or hire employees. All you have to do is set up an online storefront and focus on marketing, branding, and customer service to attract more potential customers. After adjusting the marketing costs, the profit you get is the difference between the price you pay suppliers and the price your customers pay you.
Dropshipping is a business model, not a specific type of store. But, there are some types of businesses that commonly rely on dropshipping for fulfillment in which print on demand is a popular form of dropshipping.
How does dropshipping work?
1. Find a third-party supplier who has the products you want to sell
2. Show the supplier’s products with marked-up prices on your website and advertise them
3. Receive direct payment from the customers who buy from your website
4. Pass on the orders to your suppliers and pay them their original price. Keep the profits to yourself!
5. Do nothing: the third-party supplier will ship the order directly to your customer
6. Repeat! Find more products and suppliers if you want to scale up your business, and enjoy greater revenue!
Benefits of dropshipping
- Less capital is needed: Since you don’t store any inventory, dropshipping has the potential to lower your overhead costs, such as maintaining a storage facility or sending products to customers.
- Multi-channel selling: You can use dropshipping for your business while selling on your own domain, through a store on Amazon, Shopify, eBay, or other social media channels.
- Flexible operating location: Dropshipping allows you to expand your businesses to the globe regardless of your operating location, opening up a possibility to work from anywhere.
- Scalability: Leveraging suppliers can make it feasible to accept more orders without increasing the investment for inventory, package, and delivery.
- Easier to test: Since you don’t need to store any inventory. There is no chance to get inventory backlogs of any products that cannot be sold.
Dropshipping in Vietnam
It is evident that the Vietnamese eCommerce market has grown significantly in recent years. With Vietnam’s development, it is expected to reach US$29 billion in total retail revenue by 2025, trailing after Indonesia and Thailand.
This is an incredible development but in comparison to the U.S and China, the $29 billion USD figure seems paltry. But, Vietnam is still regarded as having attractive conditions and chances for building cross-border eCommerce business models, which have flourished in other countries but have yet to bloom in Vietnam such as print on demand, fulfillment or in particular, dropshipping.
In developed countries like the U.S, dropshipping is a very common business concept. Is Vietnam an ideal place to start a dropshipping business? It would be tough to answer this question precisely a few years ago. But at the moment, with the outstanding growth of the eCommerce industry and the transformation in domestic customers’ shopping behaviors, as well as more integrated supply chains, Vietnam is absolutely a potential playground for sellers to experience this business model and gain booming profits margins.
What is dropshipping Shopee?
Put simply, dropshipping Shopee means you run an online store and sell products on Shopee without having to purchase inventory upfront and no money investment. The only thing you need to do when you do dropshipping is to do marketing and get sales from your customers. Dropshipping Shopee is exactly the same as the global dropshipping model that we have been talking about for the whole time. The only difference is the marketplace where it specializes.
Dropshipping Shopee has been dominant in Southeast Asia, specifically in Vietnam with 81 million visitors as of 10/2021. Shopee is totally far ahead of other rivals like Lazada or Tiki and keeps pulling ahead in eCommerce blitz. Doing dropshipping on Shopee means you have more chances to expand your reach and put your products in front of millions of potential buyers. Besides, it’s unique in the sense that Shopee only charges a commission of 2.2% per transaction.
Simple selling policies is one of the primary aspects that make Shopee become a more popular platform than ever. It’s not difficult to set up an online shop and list products on Shopee. This is because Shopee doesn’t require a business license as well as censor listed products is somewhat easier than other eCommerce platforms. But, you have to ensure to sell high product quality to retain customers and build customer loyalty. With its advantages, Shopee is definitely a best-fit and potential market for you to start your eCommerce business journey.
What about dropshipping Lazada?
Lazada is an eCommerce platform that has been in the Vietnam market for 9 years and presently becomes the third-largest marketplace with almost 20 million monthly visits in Q1/2020. Besides Vietnam, Lazada is currently penetrating the market of Southeast Asian countries like Thailand, Indonesia, Malaysia, Singapore, Philippines, etc. This provides Lazada a significant advantage in the effort of linking domestic and international marketplaces.
Now, in Vietnam, Lazada is the biggest rival of Shopee in the eCommerce battle. Lazada has successfully put pedal to the metal in the eCommerce revolution in Vietnam by launching LazMall as the representative of the brand new era of genuine shopping.
LazMall currently brings together thousands of top reputable brands, famous domestically and internationally in all fields, offering diversified choices for all customers of all ages. The only thing that makes this different is that Lazada has been offering millions of shocking promotions from genuine shops which has never happened before. This not only strengthens its position in the very competitive eCommerce market but also acquires millions of new customers.
It is forecasted that, by 2030, Lazada may reach more than 300 million customers, making Lazada become an excellent place to start your first dropshipping business. You can definitely leverage this huge traffic and an absolute customer trust Lazada has got from their LazMall for your stores.
Dropshipping in the US
The US market is a perfect environment for a dropshipping store to thrive. Why? In 2021, with a population of 333 million people, 70% of those are digital buyers. Within eCommerce, the US has quickly adapted to online shipping, even in the COVID-19.
The pandemic has pushed even more U.S. consumers online, gaining over $469 billion in retail eCommerce revenue in 2021. This significant development is a testament to the adaptive nature of the population, who increasingly make purchases via mobile devices.
With around 826,803 wholesale establishments in the US, doing dropshipping is a better option than wholesale. By doing dropshipping you can test your products and your market many times until you find your perfect fit. This means that the barrier of entry is a lot lower than wholesale when you choose the US market.
Anyone can do dropshipping on Amazon. The only requirements are that you get approved for an Amazon seller account, comply with Amazon’s requirements, and enable a third-party provider to fulfill your orders.
Luckily, you can also dropship using the Fulfillment by Amazon (FBA) program. FBA offers similar benefits to dropshipping while giving you more control over your brand experience. A plus point is that you don’t need to sell products in Amazon stores to use FBA. With an millions of unique visitors each month and over 30 product categories available to target, Amazon is a highly recognizable and trusted selling channel worth considering to do dropshipping.
But, it’s important to remember that dropshipping with Amazon also incurs drawbacks. Amazon has millions of active sellers who can sell the exact same products as yours. That means Amazon is a highly competitive market. Besides, with many sellers sharing Amazon, competition can induce a “race to the bottom” in terms of pricing. If prices need to be adjusted down to stay competitive, your bottom line can suffer.
Shopify is more into dropshipping. This is because they specifically provide the Oberlo app for sellers who are in need of finding a supplier. With Oberlo, you can browse AliExpress and import the products that pique your interest directly to Oberlo connected to your Shopify store with the click of a button.
Not only that, it only takes some easy steps to build an eCommerce website. They are optimized to be friendly-beginner. So you can fix the storefront, product listings, management features with only some clicks on the settings. They are all well-organized which supports sellers to optimize their stores as much as possible. With this support, Shopify is considerably user-friendlier than other eCommerce marketplaces such as BigCommerce and Wix Commerce.
Shopify provides a free 14 days trial. So you can freely experience and know whethere it fits your business or not. Leverage this opportunity and make sure you fully understand how the platform works.
Wherever you are to do dropshipping, it’s totally fine to expand your businesses globally and serve the customers who are halfway around the world. This business model really benefits regarding costs, geographical distance, and flexibility! Making it become one of the fastest-growing industries in the thriving technology industry. It is such a great pie that you shouldn’t miss when eCommerce is maturing more than ever.