Reverse dropshipping flips the traditional dropshipping script, giving e-commerce businesses access to niche markets and lower competition.
It is not uncommon for goods to flow out of Asia and into North America. Take traditional dropshipping, for instance. A business might source products from Chinese or other Asian manufacturers that are sold and shipped across the Pacific Ocean to North American customers.
However, there is a unique business model called reverse dropshipping where goods flow in the other direction and target emerging markets.
If you have access to reliable suppliers and can operate an online store that appeals to developing markets (particularly the Chinese market), the reverse dropshipping business may make sense for you. Here’s how reverse dropshipping works.
What is Reverse Dropshipping?
Reverse dropshipping is a retail fulfilment method in which a business sources products from manufacturers in a country that isn’t well known for manufacturing and sells them to consumers in countries with large manufacturing industries.
Reverse dropshipping flips the traditional dropshipping model of sourcing low-cost goods from middle-income countries like China and selling them to consumers in wealthier countries. There’s one key distinction between standard dropshipping and reverse dropshipping: Reverse dropshipping goods are typically premium products that fetch premium prices. Wealthy overseas buyers source from the global market because they value pristine product quality.
By contrast, traditional dropshipping typically involves brands selling products at affordable prices. Quality matters in a traditional dropshipping business, but unit price, shipping costs, and reliability may be the priorities.
How Reverse Dropshipping Works
- Dropshipping sellers select their products
- Dropshippers find reliable suppliers
- Customers shop online
- The dropshipping partner sends orders
- The products ship and go through customs
In many ways, reverse dropshipping involves the same logistical steps as traditional dropshipping. Here’s how the process works:
1. Dropshipping Sellers Select Their Products
First, the reverse dropshipper decides which goods it wishes to sell. In reverse dropshipping, sellers focus on high-quality products—often luxury items from reputable brands—that may be hard to find in the target market.
These high-value products often come from countries that produce premium goods, such as the United States, Japan, and Canada.
The idea is to capitalise on the demand for high-quality products, which the reverse dropshipper can often sell at high profit margins.
2. Dropshippers Find Reliable Suppliers
A successful reverse dropshipping business requires highly dependable dropshipping suppliers. As with traditional dropshipping, these suppliers stock products and handle order fulfilment.
Yet, unlike traditional dropshipping, the focus is on sourcing premium goods. As such, supplier sourcing may involve establishing relationships with reputable brands or small-scale artisans.
3. Customers Shop Online
Once reverse dropshippers secure high-quality goods to sell online and reputable suppliers to partner with, they can begin to sell items via a reverse dropshipping website.
A key to understanding reverse dropshipping is to remember the target audience: people who may value brand recognition and consistent product quality.
4. The Dropshipping Partner Sends Orders
Customers purchase reverse dropshipping products as they would on any ecommerce website. But behind the scenes, the fulfilment process differs.
When a customer places an order, the seller forwards the details to the supplier, who then ships the product directly to the customer from the country of origin. This direct shipping model eliminates the need for the seller to maintain an inventory, reducing upfront costs and risks.
5. The Products Ship and Go Through Customs
By nature, a reverse dropshipping supplier ships products across international borders. This often involves complex logistics, including international shipping and customs clearance.
Sellers must ensure they comply with both the export regulations of the supplier’s country and the import regulations of the target market. This may require obtaining necessary permits, paying customs duties, and ensuring the products meet local standards.
International fulfilment is one of the trickiest elements of reverse dropshipping, and why these products command premium prices.
