One of the easiest ways to make money online in 2020 is through drop shipping.
The growth of giant brands such as Amazon, Shopify, Etsy, eBay, and other marketplaces means drop shipping can be a viable venture if done right.
What’s Drop shipping?
Dropping is a supply chain model with which you directly ship a product from a supplier’s warehouse and directly to a customer’s house without dealing with the logistics or handling the product physically.
As a drop shipper, you’re only left to focus on the core aspects of managing your business (read: growth and scalability) as the supplier or manufacturer handles the rest.
How Drop shipping Works?
In this business model, the retailer or drop shipper doesn’t produce or keep products in stock. Instead, they partner with the manufacturer of the product that they want to sell, who in turn produces and ships it directly to the drop shipper’s clients.
With drop shipping, the client can make an order from you. You then contact the supplier, who in turn ships the product directly to the client from their warehouse.
Steps To Drop Shipping
As a drop shipper, you make money through the profits earned. You’re acting like a retailer in this case, but with no physical store. Nor are you required to keep an inventory.
Step 1: The customer places an order (on your online store or a marketplace that you signed up), at a retail price you specified (say $100).
Step 2: You then forward this order to the wholesaler or supplier at a negotiated price (of say, $50).
Step 3: The supplier or wholesaler then proceeds to ship the product to the customer. In which case, you make $50 in profits ($100 – $50).
Benefits and Pitfalls
Drop shipping also comes with its share of pros and cons.
- Zero chances of Losing Your Revenue: You can’t lose your revenue with drop shipping because you’re not keeping extra inventories.
- You can increase your revenue through up selling: There’s always room to sell one more item when drop shipping. The more items you sell, the more money you make.
- Everything is digital: You can operate straight from your bedroom, without living the house to get anything done.
- No need for Storage: You’re not keeping an extra inventory, so no need to operate a physical store.
Setbacks and Pitfalls
- Drop shipping is easy. Which means competition is stiff. You have to be really smart and creative with the strategies that you employ.
- It might take a while before profits start to come in. You have to market and wait for customers to notice your products before you can start selling.
- Product Liability. Remember: you’re selling a product that you haven’t seen. Therefore, the chances of the product not meeting your client’s expectations are high.
Who Should Dropship?
There’s no barrier to drop shipping. Anyone with interest is free to try their luck at drop shipping.
However, here’s a list of entrepreneurs that are encouraged to look into this business model:
- Beginners: Are you new to the world of online business and have yet to make up your mind on what to do? Drop shipping may be a viable option for you, especially for its simplicity and low-cost.
- On a Budget: Online ventures aren’t cheap. Some require huge chunks of starting capital, laced with enormous amounts of luck. But not drop shipping. It’s among the few online ventures that you dive into with as little as $20.
- eCommerce Business Owners: If you’re already involved with eCommerce business, then you’re the most qualified candidate to run a successful drop shipping business. You have a target audience and all the right tools you’ll need to increase leads and drive conversions.
Characteristics of Drop shipping Products that sell Well
While you can dropship anything – from toothpicks to gym equipment – not all products sell the same. You want to make sure the product you choose has the potential to sell and make you huge amounts of profits, and this is how you tell:
Not dominated by Giant Brands: Giants brands have their niche market on lockdown. You can’t compete with them and expect to win, unless otherwise. Talking of brands such as Samsung, Apple, or HTC. Smartphones are a no-go zone for the simple reason that you cannot compete with these brands.
Small and Lightweight: As a general rule, your drop shipping product should weigh less 2kg and be small enough to fit into a shoebox. That should save you from incurring extra shipping charges.
Non-seasonal: You want your product to sell all through, not in one particular season or for a limited amount of time. The product you must always be in demand, no matter what season you’re in.
Retail between $15 and $200: This price range is considered the eCommerce “sweet spot.” When the product is cheaper than this, the chances are high that your profit margin will be lean. When it’s more expensive than $200, then that means you’ll have a hard time selling it en masse. Of course, this rule isn’t written in stone. A few exceptions still apply.
About Drop shipping in Singapore
Singapore is one of the easiest countries in the world to dropship in. You have exclusive benefits that let you run the business quickly and more effciently.
High Internet Penetration: High internet penetration and smartphone usage mean you’ll have an easy time interacting with your customers.
Global Payment Gateways Available: Plus, global payment gateways such as 2CheckOut and PayPay are available in the country, which makes it easy to both receive and manage your funds.
Multicultural Business Environment: Also, the multicultural environment means you’ll have an easy time understanding various ethnic groups, which makes it easy for you to tailor your offers for different customer segments.
Supportive Government: You might also want to note that Singapore has one of the most supportive governments in the world which provide business with incentive schemes and grants. Nothing restricts you from breaking geographical boundaries and launching your drop shipping business on a global front.
What to Dropship?
You can dropship absolutely anything, so long as it’s legal and you’re able to contact the supplier. But the general rule of thumb is that you should stick with items that are unusual, inspiring, emotional.
We’ve singled out a list of products that we think fit lives up to this bill:
- Gadgets, devices and accessories: Bags, headphones, smartwatches, earrings, Wi-Fi Routers, and so on
- Supplies for crafts and hobbies:Wood frames, shapes, beads, paint, and so on
- Clothes and Fashion Accessories: Shoes, scarfs, bags, dresses, neck chains, and so on
- Accessories for outdoor activities and sports: Pocket dresses, stretch jackets, Performance socks, workout sneakers, goggles, and so on
- How décor, gadgets, and accessories: Wallpapers, lamp lights, wall clock, curtains, mats, pet gloves, water shower filters, and so on.
Important Drop shipping Stats in Singapore
- Eshopworld projects that the number of active eCommerce users in Singapore will be trailing at 4.1 million by 2021, with each of the user spending an average of $1234.
- Ecommerce user penetration is now at 69.6%, with Statista predicting it to shoot up to 73.2% by 2023.
- In a recent study as conducted by Hashmeta, 70% of Singaporeans are active on social media. Remember: you’ll be marketing your products on social media, which makes this one very important statistic.
- The high cost of living, coupled with high product prices means you have a favourable ground to compete with local retailers by importing products from a cheaper country such as China.
- Most drop shipping stores and suppliers list their items in English, which a majority of Singaporeans speak.
- 80% of Singaporeans browse the internet daily.
- The eCommerce market in Singapore would be worth $5.4 billion by 2025.
How to Start a Drop shipping Business in Singapore
With everything you’ve read so far, the question lingering in your mind is how do I get started? What’s the procedure and processes involved?
Starting by Investigating the Market
This is where it all starts; you have to understand the market that you’re about to dive in.
Part of understanding the market is knowing which niche suits you best. The next thing to take into consideration is which platform do you wish to build your business on. Your options include Magento, Shopify, and WooCommerce.
Magento: Had a wide range of extensions and customising options. That means you can easily make your website unique.
WooCommerce: A free plugin that works with WordPress. You have first to set up a WordPress website and then use the plugin to transform it into an eCommerce store.
Shopify: It’s a good platform for anyone who wants to set up an easy-to-scale ecommerce website for their drop shipping business. There’s literally no limit as to what you can do with this platform.
Finding the Perfect Product to Sell
By now you should have a few ideas on what products to sell. It’s, however, important that you don’t rush to choose the product. Take your time to research and understand the market, and make sure there’s a ready market and less non-threatening competition for the product that you wish to sell.
It all starts with finding the right drop shipping niche.
How to Choose a Drop shipping Niche
Look into the Profit Margin
How much money will you be making per each sale? Look into the purchase price and make sure it’s enticing enough. Usually, the average drop shipping profit margin ranges from 15$ to $20. It’s simple logic: the higher the purchase price, the more profit you’ll make – until someone decides to lowball on you.
Study Your Competition
After you decide on a potential niche, the next thing you want to do is research your competition and make sure there’s nothing threatening about them. If the product has more than five drop shipping competitors, don’t force it; just try something else.
Research on Future Trends
At this point, we’d like to assume that you’ve found a high-priced product with low competition to sell. You have to figure out if your inventory will continue to sell in future. This is critical for ensuring your business is sustainable.
Look into the Product’s Seasonality
Can the product sell throughout the year? If not, can you make enough profit during its peak window to take you for the rest of the year?
Seasonality Can be Broken Down into the Following Categories:
- Year-Round: This refers to products with consistent demand. They have the potential to sell all-year-round, which makes them the ideal choice of od drop shipping products. Examples include wine.
- Semi-seasonal: Semi-seasonal products have a time when they peak up. They may peak up during summer, and then drop off immediately after, but won’t completely dry up. They’re not quite ideal.
- Highly Seasonal: Highly seasonal products only sell at their peak season, and completely run dry immediately after until the next season. Products in this category should be avoided, unless otherwise.
Make Repeat Sales to a Customer: You know you have found the right product when you can sell the same product over and over again to the same customer. One-off products mean you have to keep on finding new customers.
Repeat items such as food, cosmetic products, art, and craft product – on the other hand — can be sold over and over again as you focus on growing your customer base.
Finding the Right Drop shipping Supplier
After identifying the perfect drop shipping product to sell, the next thing you want to do is identify the right supplier. The supplier you choose must not only be cheap, but also reliable.
Here are a few places to look for a drop shipping supplier:
Amazon Drop shipping: Two conditions apply when using Amazon drop shipping. The first one is that you’re not allowed to repackage the product and use another supplier’s name. The second condition is that you cannot buy a product from a supplier and make them directly ship it to a customer.
Aliexpress Drop shipping: Aliexpress stuffs all types of products. Whether you’re looking for specialised home care or jewellery supplier, you can bet Aliexpress has one for you. Not to mention their prices are just hard to beat.
Alibaba Drop shipping: Alibaba operates as a middleman by linking you up with qualified suppliers. They also don’t charge you for the transactions made through the site.
eBay Drop shipping: By choosing to use eBay, that means the responsibility of assessing your products for quality is strictly on you. They’ll also hold you responsible if a supplier fails to deliver your products. In other words, the platform expects you to be very keen on the supplier you choose.
Your business success relies on the clients you get. Your goal should be to find loyal clients. You can start by targeting your kith and kin. While at it, ask them to review your products and invite more of their friends and families to make purchases.
It’s also crucial that you weigh between various marketing options and determine which one among them generates the best marketing results.
How to Market Your Drop shipping Business in Singapore
You need customers, lots of customers, to succeed in this line of business. That demands that you step up your marketing game.
Here are a few tips to help you out with this:
Build Your Online Credibility and Trust by Adding Customer Ratings, testimonials, and Reviews to Your Website: Don’t expect your shoppers to trust you right away, let alone trust the quality of your products. You have to work on winning their trust by letting other customers put out a positive word for you and your products.
Run a Facebook Ad that Suits Your Marketing Budget and Goals: Facebook ads are highly customisable. They can be tailored to accommodate any budget, goal, audience, or product. Make good use of Facebook lookalikes, while maintaining an active presence on the platform, and you’ll be surprised by how far that can get you.
Use Social Videos to Drive Engagement and Traffic: Social videos are expected to account for about 81% of the online consumer traffic by 2021. Any drop shipper aiming to amplify brand awareness and get their sales through the roof should consider shifting their marketing strategy to social videos.
Use Retargeting to Avoid Losing Potential Customers: 98% of the customers that land on your site will exit without taking any action. That’s just how things are in the online marketing space. However, with retargeting, you have a chance to make follow-ups and recapture the seemingly lost opportunity.
Start a Blog: You need a well-optimised blog to help you drive traffic to your drop shipping business. The blog should also help you with SEO. When customers want to buy something, the first place they turn to for suggestions is search engines.
Blogging allows you to be among the search results that show up whenever a potential customer runs an online query relating to your business.
Identify where Your Customers spend the Bulk of their Time; Join all those Groups: Find out where your customers hang out most of the time and join all those groups and forums. Make your presence noticeable and your intentions known. Look into what the audience is discussing and learn to adjust accordingly as time goes.
Use Email Pop-ups to Capture Your Visitors and Turn them into Subscribers: 55% of the visitors that land on your website will leave without doing anything important. You must capture their contact information for email marketing.
Stream Business Processes: How to Take and Send Orders
Drop shipping works so efficiently because it doesn’t require you to keep any inventory. All you have to do is take orders from customers and pass the information to a supplier, who’ll then prosses everything and send the product to the customer or client.
This saves the drop shipper so much time and money. All they’re left to focus on is expanding its market.
Running Your Drop shipping Business
While there’s a lot you’ll learn once you start the business, almost everything you need to know about the business is straight forward.
However, you need a few pointers to increase your chances of succeeding in this line of business.
Start Drop shipping on Social Media
One secret to running a successful drop shipping business is mastering social media marketing. That’s where the bulk of your customers will come from. There are several ways to go about it. You can decide to runs ads, join groups, and set up a page that you’ll be using to engage your customers and prospects.
Create a Simple eCommerce Website for Your Website
While you have the option of listing your products on any of the available marketplaces in the country, it’s always good to run a separate eCommerce website on the side. You can start by purchasing a domain name. You can then use a platform such as Magento, Shopify, or WooCommerce to set up an online store, and that’s pretty much like it.
Growing Your Drop shipping Business
Your focus should be on growing your drop shipping business. You can do this by increasing your customer base and expanding your product pipeline.
Here are a few practical primers you may use to grow your business:
- Test Your Supplier and their Products: Don’t be quick to dive into the business without first testing the supplier. Have the supplier deliver the product to you and a few of your friends, and check their package, delivery time, and all the conditions you discussed with them.
- Use Effective Advertisement: You’re encouraged to advertise your business and products on the internet. You can start with the free options at the beginning, but as your business grows, you should consider experimenting with verified advertisement options.
- Start Small: The first few months of operating are for testing the waters to see how everything goes. You don’t have to pump in all your money. Learn to analyse your progress and adjust your budget accordingly as time goes.
- Choose a Product You also Like:Don’t just sell products for the sake of it. Choose a product you like, and there’s a fair chance your customers will like it too.
- Analyse Your Competition: You need to carve out your niche. But this may prove to be difficult if the competition is stiff. Learn from what your competition is doing or not doing, and you should know the direction to take.
- If drop shipping fails, try looking into affiliate marketing. Affiliate marketing is closely related to drop shipping, and can also be a great money-making scheme if done right.
How Much Does an Average Drop shipper Make in Singapore?
How much you make from drop shipping depends on which business model you’re using and how much you’ve invested in the business.
The average monthly income of drop shippers always varies from one drop shipper to another, depending on so many factors, including the marketing tactics employed, the experience of the drop shippers in question, current season, and the niche selected.
However, it’s no out of the ordinary to see a drop shipper make between $1000 and $50000 per month in revenue, and $100 and $20000 per month in profits.
In general terms, drop shippers can be categorised into four groups depending on how much they make from the business:
Beginner Drop shippers: Beginning drop shippers include all drop shippers making their first attempt at drop shipping. They’re just beginning to learn the ropes and, in most cases, they’ll be making between $0 and $1000 in profits per month.
Intermediate Drop shippers: Drop shippers with a winning product but have yet to understand the market better. This ones generally earn between $500 and $2500.
Experimental Drop shippers: These drop shippers tend to have incredible marketing skills. But they’re still trying to understand the model and experimenting with different lines of products. They have yet to develop a firm understanding of the market, and as such, only make between $1000 and $5000 in revenue per month.
The Real Pros: It takes years to be a drop shipping pro. You have to learn, research, and experiment with different models to attain professional status in this field. Also, your marketing skills must be up to snuff.
You must know how to make killer ads and grow a community of loyal customers. These groups of drop shippers have an income stream that ranges from $10, 000 to $100000 per month. They’re the top earners in the game.
The Legal Requirements of Drop shipping in Singapore
So far, we have yet to hear any case of a Singaporean being jailed for engaging in drop shipping. You, however, must exercise caution with the products that you choose to dropship, as you have absolutely no control over product quality.
You may also want to avoid consumable products such as supplements and focus more on gadgets and generic items such as phone cables, smartwatches, and clothing.
Also, be sure to check out a list of products that are prohibited for importation in Singapore.
Drop shipping Tax in Singapore
As a Singaporean citizen doing business in the country, the law requires you to pay personal income tax.
You don’t necessarily need to register your business, which means you’ll be filing your returns as an unregistered sole proprietor – unless you decide to go ahead and register your business.
It really doesn’t matter which country your suppliers are from or if your market is outside the country, so long as you’re doing business and earning money from it, you must report your income and file your tax returns on time.
Drop shipping on Amazon
Amazon is among the few platforms that come to mind whenever someone broaches the idea of drop shipping.
You can dropship on Amazon. But first, you have to apply for their seller account and be accepted as a drop shipper.
Thanks to their Fulfilment by Amazon (FBA) program, you don’t have to worry about storage, packaging, and shipping. Amazon handles almost everything for you.
Drop shipping on Qoo10
Before you dropship on Qoo10, you have first to understand how the platform operates. Granted, some ecommerce platforms are too complex to dropship on. You may have to consult an expert to figure them out.
Qoo10 is quite simple and easy to figure out. That said, here are the steps to their selling process:
- Step 1: Create a seller account
- Step 2: Create your product listing
- Step 3: Start selling items
- Step 4: Customer orders one of your items
- Step 5: You forward the order to the supplier, who processes it and ships the product to the customer
- Step 6: The customer confirms delivery
- Step 7: You make your profit
Qoo10 has a one-of-a-kind marketing technique that you pay to use. Basically, you’re paying for the space to promote your store on the platform as you learn the ropes and gain experience.
They have a virtual currency called Q-Cash that use to charge for the advertising space.
You can Purchase the Items to Sell from Chinabrands
Chinabrands is one of the leading suppliers of drop shipping products in the country. If your plan is to list best-selling products, be sure to check out their list of trending products.
With drop shipping, you’re allowed to set your own price. It’s even better with Chinabrand, considering they also offer 24 hours shipping on some of their products.
Drop shipping on eBay
You can dropship on eBay.
The problem is that you’ll be competing with sellers who offer sickening price cuts, especially international sellers and direct manufacturers.
Plus, eBay tends to be focused on offering products at the cheapest price you can find on the market. That means your profit margins will be extremely low.
So, while you can still dropship on eBay, it’s not advisable. Even more important, you want to make sure that you’re working with a drop shipper that has been approved by eBay.
Drop shipping on Etsy
Esty has all along operated as a marketplace for products that are either unique or handmade.
However, they recently loosened their firm stance by allowing production partners (manufacturers and drop shippers) to sell with them.
The only requirement is that you must be willing to disclose the whereabouts of your supplier to list your products.
How to Spot a Fake Drop shipping Company?
You have to be very careful when choosing a supplier. Regardless of what you’re searching for, you’ll come across fake suppliers and wholesalers.
So how do you spot them:
They charge ongoing fees: Real suppliers don’t charge an ongoing fee to drop shippers that want to get in business with them. Any supplier that prompts you to pay a monthly retainer is definitely fake and should be avoided like the disappointment they are.
They still operate as retailers: You’ve probably come across a supplier that also sells to the public at a “wholesale price.” The chances are good that these are just retailers selling their products at an inflated price.
Per-Order Fees: You’ll be required to pay a per-order drop shipping fee. In most cases, this ranges from $2 to $5 and even more depending on the complexity and size of the product that you intend to sell. Nothing is alarming about this fee as it caters for the cost of shipping and packing.
Minimum Order Size: Some wholesalers have a minimum order size for the first order. Suppliers do this to get rid of window shoppers and time wasters. In this situation, it’s advisable to prepay the amount to establish credibility with the supplier and meet their minimum purchase requirements
After you understand the basics of drop shipping, succeeding in this line of business should be so much easier. You can talk to us about your ideas or if you’re looking for an agency to help you out with marketing or building your website.