Everything e-commerce retailers need to know about drop shipping in 2022. Get your questions answered so you can take your business to the next level.
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What Is Drop Shipping?
Drop shipping is a supply chain management method that eliminates the need for retailers to stock inventory.
For B2C e-commerce retailers using drop shipping, the priority is sales. Customers visit the online retail store to purchase the product. The retailer communicates the purchase details to the wholesaler. The wholesaler then fulfills the customer’s order taking care of shipping, thus the name “drop shipping.” As the retailer in a drop shipping system, you don’t ever stock the product or own any inventory.
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SEA E-commerce Statistics & Projections
The e-commerce market has progressed exponentially in SEA in the past three years. Current studies show that e-commerce will exceed $100 billion in GMV by 2025, from $23 billion in 2018. That’s huge growth! If you’ve been thinking about getting started with e-commerce or growing your online business, now is the time. In Southeast Asia, e-commerce represents a hugely underpenetrated market. At only 2-3% of total retail sales, there’s plenty of room for growth and the projections show that continued expansive growth is likely.
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Benefits of Drop Shipping for Your SEA Business
- This process requires little technical expertise and comparatively low upfront investment.
- You don't need to buy inventory up front or navigate the logistics of stocking and shipping.
- It’s flexible, easy to set up, and often simpler to manage than buying wholesale.
Overall, drop shipping is a realistic choice for many e-commerce retailers. It’s especially great for businesses with limited space or limited financial resources. It’s also a great option for businesses owners who value connecting with customers on the front end but are less interested in the back end elements.
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Challenges & Disadvantages of Drop Shipping in SEA
- Profit margins are reduced because more of the cost of the product goes to the drop shipper than would with stock inventory.
- Barriers to entry are low, so there’s fierce competition.
- Drop shipping requires effort to find reliable suppliers and ensure the quality of your goods.
- Few e-commerce platforms support drop shipping currently. Sites like Shopee and Lazada may have an option for vendors, but in some cases the process is manual.
Quick FAQ: Drop Shipping in SEA
Let’s get specific about what it’s like to use the drop shipping model for your business in SEA and check out the most common questions retailers have when it comes to drop shipping in SEA.
How do you decide which products to drop ship?
- Choose a niche you’re interested in. It’s always good for business to have a solid knowledge of your products and passion for your work.
- Research your customer base to understand your potential profit margins with that product.
- Consider your wholesale options, including drop shipping and beyond.
We’ve got a great example for you. Trustana is a B2B e-commerce provider of pre-packaged food products. Although we don’t offer dropshipping services yet, our services do include many of the benefits retailers like you are looking for with drop shipping. Our minimum order quantity (MOQ) is low, so buying from us requires minimal investment. What’s more, pre-packaged food products are goods that can be easily shipped, and we’ve already ensured that your products are labelled, packaged, and ready for sale.
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2. How do you market your business without owning the inventory?
- Incentivise your customers. Offer store vouchers, express delivery, and other benefits that attract customers to shop with you.
- Use common search terms to enhance your SEO and ensure you’re visible online to potential customers.
- Be active on social media and across your personal and professional networks. Make sure people know what you’re up to, the amazing products you’re offering, and the benefits of buying from you.
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Should You Dropship?
When it comes time to make your decision, your answer has to be about what makes the most sense for you and your business. With the growing popularity and resources in e-commerce, it makes sense to strategize so you can make the most of this moment and build your e-commerce business now.
Drop shipping isn’t your only option, but knowing about it can help you discern exactly what the next best steps are for you. When you’re ready, you can be confident you’re making the decision that helps you get your business off the ground or take it to the next level.