Want to know all there is to know about reverse dropshipping? You’re in the right place.
Whether you came across this word and wanted to know more, or are contemplating getting started with this model of business, we will answer all of your questions related to reverse dropshipping, and whether or not you should try it.
What is Reverse Dropshipping?
Well if you’re here, you probably already know about dropshipping.
Reverse dropshipping is a relatively new niche form of dropshipping that, as suggested by its name, is the exact opposite of dropshipping.
Dropshipping involves buying goods for cheap from one place and selling it at a higher price in another.
This process generally involves you looking for the product at platforms like Amazon, eBay or Aliexpress, finding a supplier for those products and listing them in your store.
After receiving an order for your product, you can contact the supplier to directly ship it to the customer. The profit margin becomes entirely yours.
In reverse dropshipping, though, high-quality products are sourced from countries that generally import those products and sold in countries that export said products.
Think of it like this.
There are two countries. One imports a product, and the other exports it.
The exporter sends all the best quality products to the importing country, because there are strict regulations regarding the export quality of products.
Now, the importing country has better quality products as compared to the exporting country.
What reverse dropshipping does, is buy high-quality products from the importing country and sell them in the exporting country.
For example, buying high-quality products from the US or UK, and selling them in Asian markets.
By now it is pretty clear that the products you buy and sell in reverse dropshipping are better in quality than the ones you deal with in dropshipping.
But who would buy something for a higher price when a less expensive version of it is available, even if in a lesser quality?
The answer is simple. People with a lot of disposable income.
They’re the target group for reverse dropshipping.
Now, it’s only natural to wonder why this business model would work.
That’s simple as well. People believe that the quality of goods produced in western countries like the US and UK is better and the product is more valuable than those produced in eastern countries like China.
What’s known as the melamine baby milk scandal is one of the biggest reasons for this.
So, now, it is safe to assume that some wealthy person sitting in China will be willing to pay more for a good quality American product, rather than buying a substandard quality one from their own country.
Seems like a great business opportunity, right?
Let us give you some reasons to consider starting your reverse dropshipping business.
Advantages of Reverse Dropshipping
1. Better Margins than Dropshipping
Dropshipping deals with a bulk of low-quality products and hence, low-profit margins.
In this business, the quality of products also affects your reputation.
Whereas, reverse dropshipping model revolves around high-quality products that are high in demand.
These products are not bought or sold in bulk, but in small quantities, so the profit margin is higher per product as compared to dropshipping.
2. Less Competition
Being a newer concept, most people don’t know about reverse dropshipping and thus, there’s lesser competition.
Dropshipping has become highly competitive due to its high popularity now.
With reverse dropshipping, there’s more market to capture, and even then, you can use a dropshipping model to create a smooth import and export experience to stand out from the little crowd that’s there.
3. Easy Return Policies
This one is simple enough.
Better quality products = Better suppliers.
Better suppliers = Easy return policies.
Return policies are a hassle in the dropshipping business owing to the poor quality of products and unreliable suppliers.
Reverse dropshipping solves this problem.
4. Scalable Business Operations
Reverse dropshipping, by design, has the top suppliers.
When they have to handle all the operations right from procuring to shipping the products, you can easily scale your business because you can actually rely on your suppliers to handle everything else.
5. Product Testing
This business model is more suitable for testing products because you can deal in smaller quantities.
You can test whether they’ll be a success because you don’t need to buy them in bulk.
6. Easy Diversification
You can diversify your products in reverse dropshipping.
This model works with a lesser number of products of higher quality, and you can save yourself from market fluctuations by carrying a highly diverse range of products.
It’s always good to have the full picture, right?
Like every other business model, reverse dropshipping has some disadvantages as well.
Disadvantages of Reverse Dropshipping.
1. Language Barrier
There’s an obvious and huge language barrier among the eastern and the western countries.
Especially in China, it’s difficult to get over the language barrier as most of the people do not know these languages, which are difficult to learn.
You will need to add content on your website, in the country of operations languages as well.
Social media sites may be different in different countries and that can be a point of friction as well.
2. Tough to Market
Handling logistics in countries like China is a difficult task to accomplish.
You might need a connection to a Chinese business that is willing to work with you in order to enter the market, and successfully run your business.
Another hindering factor is that Google and Facebook are banned in China, so you might need to learn how to use their browsers.
All your knowledge in Google ads and Facebook pixels might be of no worth when it comes to reverse dropshipping with a country like China.
3. Unpredictable Regulations
Due to the existing political conditions between the US and China, the export & import regulations are unpredictable.
This can damage your business operations and take a toll on your business.
If China increases their import tariffs or shipping costs from other countries, you might not be able to run a profitable business due to factors that are completely outside your control.
4. High Pricing Competition
China is known worldwide for its low price products and it can become really difficult to compete with their prices for businesses based in other countries.
Coupled with the time it takes for products to get delivered from so far away, it becomes all the more difficult to compete.
Reverse dropshipping may not work for these products:
All types of products won’t work with all business models, and you might want to steer clear of the following products:
Is Reverse Dropshipping Right for You?
You have read all the information there is on reverse dropshipping, its pros, cons, but you could still have trouble deciding whether or not to get into this business or not.
Well, to put it simply, reverse dropshipping is not as easy as it looks. There are reasons why people do not opt for it, apart from lack of knowledge.
The language barrier alone is such a huge hindrance that it deters people from trying out this model of business.
If you have any connections in China or if you know the language, you can operate this business with more ease than many of your competitors.
Another way you can successfully operate this business is if you employ dropshippers that are fluent in the language and business of the country of operations, like influencers or local business owners, etc.
If you have the will, you’ll find a way.
Reverse dropshipping is a niche form of dropshipping that basically reverses whatever is done in the dropshipping business.
It has better profit margins, high-quality products and reliable suppliers among other benefits over the regular dropshipping businesses.
It is not without any flaws, though, and one of the biggest barriers is language, and that too if you actually can enter the market.
Reverse dropshipping is growing in popularity every day, but still is an unsaturated market, so if you wish to try it out, now is the time!