The e-commerce market has been flourishing in Singapore for the past several years. Not only this but the growth trend is expected to continue since more and more people prefer buying their goods online.
Why do Singaporeans prefer online shopping?
In 2021, the e-commerce customer base market in Singapore was estimated at $5.6 billion, and according to future trends, the market share is expected to reach $10 billion by 2026.
One of the main reasons behind this growth is that the country is one of the most affluent in Southeast Asia, with a per capita value of $65000. This, coupled with an active 3 million plus e-commerce customers, it is easy to see why the project for the industry in Singapore is upward. Additionally, with smartphone and internet penetration rates of 93% and 98%, respectively, more than 58% of people prefer shopping online.
Dropshipping also helps business source a wider variety of products from manufacturers around the globe. Also, since the business does not have to have its own stock, it becomes easier and requires little financial outlay to be operational.
On the other hand, customers can get great prices for products they buy through drop shippers. Customers also get to be aware of different products from manufacturers around the globe that they would otherwise not know or would have to do a lot of research to find out.
In the article below, you will learn what dropshipping is, how it works, and a few pointers about this profitable venture.
What Is Dropshipping Singapore?
Dropshipping is a business model where the seller (business or drop shipper) promotes products from a wholesaler. The Dropshipper does not have to stock any of these products (solely the responsibility of the manufacturer or wholesaler). When customers online make purchase orders, the drop shippers contact the wholesaler, who then fulfills the orders.
In this e-commerce business model, the drop shipper is responsible for marketing the products and addressing any concerns and questions customers might have. They do not directly handle products and have no control over order fulfillment and stock availability.
How Does Dropshipping Business Model Work?
The entire process of how dropshipping works is not that complicated.
1. The first thing the drop shippers have to do is find suppliers or wholesalers and tell them they want to start dropshipping products to customers. Once the agreement is reached between the dropshipper and the supplier, the supplier is responsible for product stocks and storage.
2. The drop shipper then has to set up a website or a storefront on online store platforms such as Amazon to sell the products. The dropshipper is responsible for marketing campaigns for the products they sell through their storefront or website.
3. Whenever a customer orders a product, the dropshipper contacts the wholesaler or supplier with the details so they can package, ship, and fulfill the order.
4. The drop shipper then contacts the customer, informing them that their order has been processed and the purchase is on its way to them.
Of course, the dropshipper is doing this to make a profit. Let’s look at an example so that you understand how they do this:
A dropshipper can start selling a TV set for $550 on their storefront; however, the wholesale price is $450. So when the customers pay a retail price of $550, the dropshipper pays the supplier the $450 for the order. Once the order is fulfilled, the difference between the two prices, i.e. ($550-$450 =$100), is the profit that the dropshipper makes. The process repeats when another customer places another order.
Is Dropshipping Online Store Profitable?
Yes. When done correctly, it can be a successful dropshipping business. However, it is essential to note that many factors determine how profitable one’s drop shipping business can become.
One factor affecting the success and profitability of a dropshipping online store is the niche of choice. One must select a niche available throughout the year, not a seasonal one. For example, you should sell clothing that can be bought at any time of the year rather than summer clothes.
Other factors contributing to how profitable dropshipping is in Singapore can include the experience of the dropshipper, the model they are using, and how much they invest in their business, especially in marketing campaigns.
Due to all these factors, the profitability of dropshipping tends to vary from one dropshipper to the next. Typically, drops shippers can make about $1000 to $50000 monthly sales. Their profit from these sales can be around $100 to $20000 monthly.
Categorization of Dropshippers
In most cases, dropshipper can be categorized into 4 groups. Let’s look at each and the typical profits they make:
- Beginners or Novice Dropshippers: -These are individuals starting as dropshippers. They are still fresh to dropshipping and are learning about the business. These dropshippers generally earn between $0-$1000 monthly in profits.
- Intermediate Dropshippers: – These have been in the business for several months but have yet to figure out much about dropshipping. Typically, dropshippers in this group tend to make $1000 to $5000 per month in profit.
- Experimental Dropshippers: – Despite having a better understanding of dropshipping than beginners and intermediate groups, they are still experimenting with different types of products. In most cases, they earn a profit of $1000 to $5000 per month.
- Pro Dropshippers: – They have a greater understanding of the dropshipping model and have spent years in the industry. They have experience and excellent marketing skills. These are the highest earners and can bring in anywhere between $10000 and $100000 in profit each month, sometimes even higher.
Benefits and Risks of Dropshipping Online Business
Like any business model, dropshipping has risks and benefits, especially in the ecommerce industry.
Benefits of Dropshipping
- No Inventory Cost
Even though you are selling products to your customers, there is no inventory cost since the product inventory is the supplier’s or wholesaler’s responsibility. Also, you do not have to worry about stocking, arranging, and restocking the products, which requires time and money.
- Low Costs for Starting
Since you do not have to manufacture, supply, or stock the products, the initial cost of starting up your business is minimal. This means an individual can quickly start a dropshipping business with a tight budget.
- Low Cost of Fulfilling Orders
As a dropshipper, one only receives the order from the customer and then forwards the details to the wholesaler or supplier. The supplier is the one that is responsible for packaging, warehousing, and shipping the product order.
- Highly Scalable
Since one does not have to warehouse or stock any products, one can quickly and cheaply scale their business by adding the number of products one sells.
- Less Risk When Testing Products
Since there are no inventory costs involved in dropshipping, one can easily change the products they offer to their customers. Also, since the low risk is concerned, one can test out different effects on the ecommerce storefront to find out which sells well.
- Quick Set Up
Setting up a dropshipping business is straightforward. The fact that there are ecommerce platforms to host your company means that if a dropshipper has all the requirements ready, they can set up and have their dropping business online in a matter of hours, if not minutes.
Disadvantages and Risks of Dropshipping
- Lower Margins of Profit
Since dropshipping sells products that are already made, the wholesaler has factored in their margin for profit. Therefore, the dropshipper must increase the selling price to make a profit. Also, the price increment cannot be high since your products will not be competitively-price, and thus customers will prefer other sellers.
As such, the dropshipper will have to find a good balance between increasing the price to make a profit and stay competitive. One has to sell more products to realize a healthy profit margin.
- Minimal Control in Order Fulfillment
As a dropshipper, the only task is getting the customer’s order and sending the details to the supplier. From then onwards, you do not have any control over the speed of fulfilling the order.
- Minimal Branding Control
Since the products are designed and manufactured by the supplier, the dropshipper has no control over product branding and customization.
- Over-Dependency on The Wholesaler
One significant advantage of dropshipping is that one does not have to have any extra inventory since the supplier provides it. However, the dropshipper will rely solely upon the wholesaler’s inventory. In cases where the supplier stock runs out, it will affect your business since you will not have stock also.
Also, because the supplier is responsible for fulfilling the orders your customers make, you will not be able to influence the speed at which they are fulfilled directly; or be able to provide adequate customer service in cases of complaints.
How to Start Dropshipping in Singapore?
While starting dropshipping services is not the hardest thing in the world, you should be careful. You should follow steps to minimize risk and improve your chances of operating a successful and profitable business. Here are the steps on how to start a dropshipping business in Singapore:
1. Market Research
Market research is crucial since it allows you to find profitable niches you can set your business around. The niches you choose should be interesting to you, have a good profitability margin, and be trending products.
2. Look at Your Competitors
Looking at and analyzing the competition will help you understand how they do their business and, most importantly, what works and what does not. Look at how they provide customer service, the products and variations they offer, how they market their businesses, and the way they generate leads, among other things.
3. Find Reliable Suppliers
This is a critical factor in setting up your dropshipping business. Find the right suppliers with high product quality and good delivery ETAs. They should also have a good reputation for fulfilling orders and customer service. Finding a backup supplier to ensure you always have inventory for your business may also be a good move.
4. Register Your Dropshipping Business
Once you have figured out all the above factors, the next thing is to register your business in the country. Your business will become an entity with its address, personal, and documents. This way, it will be much easier if you want to seek loans to help expand your business. It also means that your business is regarded as a legal entity.
5. Set Up Your Dropshipping Storefront
Set up your ecommerce storefront so that you can begin selling products. You can set up a website or a storefront in marketplaces such as Shopify and Amazon, among others. Ensure you optimize the store for search engines and have detailed descriptions for your listings.
6. Market and Generate Leads for Your Business
Once your store is operational, you must market it to reach prospective buyers. You may use marketing campaigns on social media sites, Google ads, and any others you deem fit.
7. Monitor and Asses Your Storefront
Constantly monitor how your business is doing and evaluate areas where you think it can improve and upgrade. This will help you maximize your profits by putting more resources into what works and cutting out what does not. A good tool for this is Google Analytics.
Are You Eligible for Dropship?
Anyone interested in drop shipping can easily set up their business online. It is an ecommerce model that fits most people, including beginners, those on a budget, and even ecommerce business owners.
Ideal Products to Sell
1. Not Dominated by Giant Brands
It would be best if you avoided niches that huge brands dominate as you can never compete with them. These brands have bigger marketing budgets and teams of experts working on their online presence and awareness campaigns. Choose products in niches that do not have big names and no high competition.
2. Small and Light
Small and light products are best for dropshipping since the wholesaler can easily and quickly package, ship, and fulfill orders. Generally, dropshipper should look to sell less than 2kg products as these will have minimal shipping costs.
3. Not Seasonal
The best products are those that are evergreen. The exclusive benefits of these products are that you will be able to sell them throughout the year.
4. Cheap
Cheaper products are best since they have a bigger target market and most people can afford them. These are products that are in the $15-200 price range. Also, since these products are affordable, sometimes people tend to buy more than one product.
Sample Dropshipping Products to Sell
If you can contact the supplier and the product is legal, you can dropship it. However, choosing unique, emotional, and inspiring products is highly recommended. Sample products can include:
- Gadgets such as headphones, smartwatches, routers, and others.
- Clothes such as dresses, suits, and more
- Fashion accessories such as boats, scarves, necklaces, and others.
- Home décor such as lamps, wallpapers, curtains, clocks, and so much more.
Hobbies and craft accessories include paints, wooden frames, beads, shapes, and others.
The Best Dropshipping Suppliers in Singapore
1. AliExpress – Best for a Wide Variety of Products and Suppliers
AliExpress is one of the largest ecommerce dropshipping platforms. It allows dropshippers to source suppliers from china. One of the good things about this platform is that it is free to create an account. It also has a rating system, making it easy to determine reliable suppliers.
Price: Free
2. Worldwide Brands – Best Directory for verified and Legit Suppliers
This is a directory of suppliers from across the world. One main benefit of using this platform is that most suppliers in their directory are verified and legit. Since the suppliers are from different countries, dropshippers can source product suppliers and products from specific countries.
Price: One-time fee of $225
3. Oberlo – Best for Integrating with Shopify and AliExpress
This platform provides dropshippers with a directory of suppliers from Europe, North America, and China. Furthermore, the platform is dedicated to educating dropshippers about the industry. They provide educational blog posts, podcasts, and one on one coaching.
Price: Free and a paid plan for up to $335 per year.
Comparison Table
| AliExpress | Oberlo | Worldwide Brands | |
|---|---|---|---|
| Best For | Variety of products and suppliers | Integrating with other platforms | Verified and legit suppliers |
| Price | Free |
| One-time fee of $225 |
Tips for Growing Your Dropshipping Business
1. Analyze Your Competition
Analyzing your competition allows you to glimpse what they are doing. This will make it much easier for you to know what to do and avoid instead of using a trial and error method. It will allow you to examine the niches that make money and their competition.
2. Build Online Presence and Reviews
An online presence is critical to the success of any drop shipping business. You must ensure that you build a presence that targets prospective clients. This will increase leads to your ecommerce storefront and establish your dropshipping store.
Furthermore, ensure you deliver good services and products so your customers can leave positive reviews for your dropshipping product. These reviews will serve as testimonials that will improve the conversation rates of the visitors to your ecommerce business.
3. Create an Ecommerce Website
Your ecommerce website is your online property where buyers can go to buy products. Ensure that you create a website that is not only responsive but well optimized to help it rank better in organic search engine results related to your niche and products. Also, the website must be accessible to different people, and the descriptions and listings on it are also easy to read and well-optimized.
Ensuring your website runs seamlessly on different devices is essential in the current technological advancements. For example, your website should run smoothly on computer and phone devices. This means that a customer looking to buy your products can do so from any device with an internet connection. According to the Map of E-Commerce, Shopee ranked as the number one online selling platform in Singapore. It might be a good idea to start there.
4. Learn More About Social Media Ads and Retargeting Techniques
Social media ads are crucial since you can reach many prospective buyers through these platforms. In addition, social media platforms offer cheaper ways to market your ecommerce website and a higher ROI than other marketing techniques.
Learning retargeting techniques is another crucial factor in ensuring the success of your business. Here, you will be responsible for continuously evaluating different parameters of your business to see how they perform. In areas where you feel they are not well targeted to your client, retarget them to reach your audience so that you can generate more leads and have better conversion rates.
5. Start A Blog (For SEO Purposes)
A blog is a great way to boost search engine optimization of your online business. It allows search engines to find and show your online store but also helps generate more customers and, thus, more money for your drop shipping business.
A blog will make reaching potential customers easier through organic search engine traffic. It also provides a platform to increase awareness and educate your target audience about your products.
Other Resources to Help You Get You Started
- https://www.shopify.com/sg/blog/top-dropshipping-companies-in-singapore
- https://nichedropshipping.com/
- https://sell.amazon.com.sg/blog/dropshipping-singapore
Closing
As the ecommerce industry continues to grow, the drop shipping model is becoming popular among beginners and ecommerce business owners in Singapore. The main reason for the rise of drop shipping businesses in the country include:
- Low startup cost means even people with a smaller budget can set up and start a drop shipping business as an extra income stream. It is cheaper to create than any other model in the ecommerce industry.
- Dropshippers are only responsible for capturing order purchase details, while the suppliers are responsible for all the fulfillment operations.
- Some of Singapore’s most popular drop shipping suppliers include AliExpress, Oberlo, Worldwide Brands, and China Brands.
- Even though the profit margins are lower for drop shipping businesses compared to local retailers, with the correct implementation, even beginners can make good profits. The dropshippers have to be careful to choose the right products and sell more to get higher profits.
- More dropshippers are turning to social media marketing to market their businesses and products because they offer a cheaper way to advertise and reach large pools of prospective customers.
Check out other 7 Small Yet Profitable Business Ideas in Singapore.
We understand that even though drop shipping requires a low startup cost, it might still be difficult for people to find the funds and budget to kick start their ecommerce business ventures. This is why Loan Advisors offers a comparison between different loan options that can help you in your endeavors. Contact us today and get up to three free loan quotations.
