The three Shopify dropshipping models: Which is best for you? | Shoptimized™

So, you decide to start a dropshipping store. You wander around the internet and quickly get overwhelmed by all the things you need to learn; traffic, conversions, email marketing, finding winning products.  So where do you begin?

YouTube, of course but then you lose track of time and there you are, 3 hours later, watching a crow mimic a human voice. Wait, dropshipping.

Of course, it’s the perfect solution to starting a low-cost business. You don’t need any premises, staff or inventory and you can do it without ever getting dressed or leaving the house.

2018 was an immensely successful year for dropshippers all over the world: with Shopify’s third quarter itself producing $10.0 billion through merchants opting for dropshipping solutions.

E-commerce entrepreneurs are thriving: the dropshipping business does not seem to be slowing down anytime soon. In fact, projected sales for online businesses are pegged at 700 billion US dollars by 2022.

But selling online is not as black and white as the army of YouTube gurus will have you believe…

The model you choose to work with for your dropship business can have a huge impact on your brand: a major pothole in your business can be successfully avoided by swerving to working with the right dropshipping suppliers!

Let’s take a look at the pros and cons of three major dropshipping models dominating the market so you can put your best foot forward and get started the right way:

AliExpress dropshipping:

This is one of the most popular drop shipping models out there. Retailers can simply pick products from AliExpress and add them to their store – only to purchase a product when a customer orders it.

An immense number of successful businesses (and unsuccessful ones) have their dollar pinned to this model. With an ocean’s worth of products available at your fingertips, you can essentially target any audience, run your ads and build a business.

Why drop ship products from AliExpress:

1. The range of products:

The wide variety of products available to you is easily the best reason to operate within the AliExpress model. From the latest must-have tech gadgets to fashion to home furnishings, hundreds and thousands of sellers are promoting lucrative products that are often not found in local US markets.

2. The profit margins:

Since AliExpress products are manufactured in China, the product prices are drastically lower than the average cost of items in the US. This is attributed to a wide number of reasons, right from lack of intellectual property regulations to currency leverage and excellent infrastructure – regardless of the reason, AliExpress products are incredible hits for e-commerce businesses owing to the large profit margin they offer to drop shippers.

3. Lower shipping costs:

This point can be summed up in one single word: ePacket. A special arrangement between the USPS and Hong Kong Post and eBay China which minimizes shipping costs to a bare minimum.

Since 2011, shopping on AliExpress has become a whole lot easier on the pocket with shipping costs matching the low product prices.

Now I hear you thinking, this sounds awesome – why could I possibly not want to dropship AliExpress products?

1. The waiting:

ePacket may have made shipping a lot cheaper, but sometimes it takes a month or more for the packages to reach the customer.  With the age of instant gratification conditioned into us, longer shipping durations simply do not make the cut.

People in the US regard week-long shipping as the longest shipping duration tolerable – making them wait longer erodes your chances of repeat business—where the real money is made in e-commerce.

Product sourcing is easy with AliExpress, but order fulfilment is not a guarantee so choose your suppliers on there wisely and test them before you scale your ad campaigns.

2. Quality unassured:

The products are often cheaply made and poorly packaged.  If the quality misses the mark you just lost a hard-earned customer. The cloth is too thin, the apparel sizes are tiny, the plastic is flimsy, the glass was cracked upon arrival.

Your products are the core of your brand, and if you do not go through rigorous testing of new products, you might suffer the wrath of your customers.

3. Your branding is lost amidst Chinese paperwork:

It is a fairly common complaint that products shipped from China do not hold up to packaging expectations of customers. Rough boxes with lots of Chinese print on them could take away a lot of your brand experience.

When your customers receive their item, they know straight away that they’ve been duped.  They thought they were buying from a reputable business but instead they’re getting cheap Chinese stuff.

The Aliexpress model works but you need to work extra hard to mitigate the damage to your brand and future sales to overcome the disappointment customers can often feel.

So, what about dropshipping high-end products? Sounds a pretty sweet deal.

High-End Products:

Expensive products translate into high profits in most retailers’ minds. You can create a store based on high ticket items that are worth $500 or more. 

In this model, you would source products from local US suppliers and mark them up by 30-40%.

Let’s dive straight into the pros and cons of this model to see if it’s a good fit for you…

1. Bigger profits

A single product worth more than $500, could bring you about $200-300 in profit: whereas low ticket items such as mugs and beanies would require at least 30 orders to reach this same level of profit.

This means you have less admin to handle because there are less customers needed to make the same profit.  Less emails to answer, less tracking—less everything.

2. High-intent audience

Sure, a person may spot a funky AliExpress bracelet scrolling on Facebook and impulse buy on your store.   But with high ticket items, your audience is already decided: the only concern is the right product at the right price. You do not have to spend time convincing them to buy a product: what they need convincing of, is choosing your store to buy it from. 

3. Lifetime value

If someone purchases an electric bike and has a great customer experience with the store, there is a good chance that the next time they need to buy something related, they will go back to the same store (especially if you have solid email marketing in place).

This is known as Customer Lifetime Value, which is essentially the amount of money made from a customer before they turn to a competitor, stop using the product or service entirely or die. With high ticket products, the CLTV is generally high, while low ticket products are impulse buys with not quite as high retention value.

High-ticket items sound pretty intriguing, till you encounter the cons of the model:

1. Competition:

When you are dropshipping products such as bathtubs or white goods, your competition is not just online  but also brick and mortar stores: local, trustworthy stores that have an edge over you because people can go and see the products.

This is why it’s important to choose high-ticket dropshipping products that aren’t easy to pick up at a local store in your car or are a little bit more specialist like hot tubs, for example.

2. Your brand vs theirs:

This is an offshoot of the former piece of critique of dropshipping high-end products: building a trustworthy brand is of the essence when dropshipping products as expensive as bath-tubs. While a headband or even a pair of pants might not require the customer to put in much thought, a heftier purchase will prompt the customer to run checks and compare prices.

Any discrepancy in your brand perception might trigger the customer to skip the sale and opt for a more established, reliable opponent.

While high ticket products undeniably create room for more profit, they are also the most tricky sells.

In both the above models, hunting down reliable suppliers is not for the feint hearted. 

So, what is the middle ground between the two models?

Finding a Shopify app that has thousands of popular products, ready to ship from within the USA/EU

The best of both worlds

Spocket is zero-cost e-commerce solution that allows you to source quality products without worrying about the reliability of suppliers or manual order placement.

Discounts as high as 30-60% off the market price of suppliers guarantee your store is competitive but profitable.

Spocket is a breath of fresh air when it comes to smooth order fulfilment and easy returns too.

Pros:

1. Sensibly priced items:

With generous discounts, products on Spocket are available for resale at wholesale rates: this includes unique products that are affordable but also provide value. Right from apparel to phone cases, you can choose items to suit your needs as an online retailer. Quick impulse buys and steady items that have been performing well in the market over years combine in the Spocket model to optimise your sales.

2. Quality tested products

Every supplier on Spocket undergoes a strict quality check that involves interviews, sampling and investigation. Whether a product is worth $3 or $150, you can rest assured that your customers will not be disappointed by the quality. That is one huge worry off your plate.

3. Branded invoices

Branded invoicing assures that no supplier invoice is attached to your package and instead, your invoice, complete with your logo, personal note, and store name is pinned on for the customer. All boxes and packages sent out by suppliers are neutral, with no markings of the supplier or promotional material. Building a brand is not an easy job and small things like this go a long way.

4. Faster shipping

Possibly one of the biggest pros of the Spocket dropshipping model is that most suppliers are local to the US and EU, which means better products with faster delivery timeframes.

5. Automated Orders

Spocket allows one-click order placements: which is a major convenience when you receive multiple orders a day. Manual data entry is a waste of time: you could spend this valuable time marketing your store and creating sales funnels, while the order fulfillment is handled entirely by Spocket’s automation.

Cons:

1. Chat and call support restricted to paid customers:

With 20,000 merchants using Spocket, the chat and call support are locked behind their premium plans. The free plan allows email inquiries, but the ease of call and chat support is limited to the paid users.

Conclusion

If you’re in this for the long-haul rather than some get rich quick scheme, you need to think about your customer experience, repeat orders and back end admin.  The model you choose will affect them all, so choose wisely!

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