What Is Dropshipping and How Does It Work?

Published on
March 29, 2022

Have you ever thought about starting your own eCommerce business, but you don't have the investment to procure a storage facility? If you answered with a resounding yes, dropshipping might be right for you.

Have you ever thought about starting your own eCommerce business, but you don't have the investment to procure a storage facility?

If you answered with a resounding yes, dropshipping might be right for you.

Research shows that eCommerce sales in Southeast Asia have skyrocketed to deliver a revenue of $90 billion in 2022. And approximately 65% of these sales come from Indonesia, while the Philippines isn't too far behind.  

Considering this, this is the right time to dive deep into the eCommerce market in the region. Dropshipping is a convenient approach that enables entrepreneurs to efficiently cater to the need without investing in inventory storage spaces. 

With dropshipping, store owners can easily start their eCommerce venture without having to worry about the cost of inventory, storage, and overhead. That said, specific financial requirements must be fulfilled. 

Essentially, the eCommerce sector is one of the most competitive industries, which makes it difficult for dropshippers to stand apart from the crowd. This is why dropshipping businesses need to create a cogent strategy that yields optimal results.

So, if you're thinking about starting a dropshipping business in Southeast Asia, there are certain factors that you need to consider. This guide will provide detailed tips on the steps you need to take to start and succeed in your dropshipping venture.

How Does Dropshipping Work? 

Dropshipping is an order fulfillment approach that allows businesses to sell products to customers without keeping the said items in stock. The store owners invest in the product by purchasing it from a third party, including the wholesaler or a manufacturer. 

The third party keeps the items in stock and ships them directly to the customer when the order is placed. Essentially, the dropshipper acts as the middleman between the customer and the manufacturer to deliver orders. 

The primary difference between dropshipping and traditional eCommerce is that the store owner does not possess stock or inventory. If you are pursuing dropshipping, your primary responsibilities include communication with the customers and promoting your store. Additionally, you would also be required to communicate with the vendors and inform them about the new orders your customers have placed. 

Therefore, when your customers place the order, you would be required to share the order details with the manufacturer. Once the details are shared, the manufacturer manages the production, storage, shipping, and delivery to customers.  

The dropshipping model has gained significant popularity to decrease overhead and operating costs. Essentially, your primary investments would be marketing, vendor communications, and customer service, while the manufacturer would be required to handle inventory stocking, deliveries, and shipment. 

Although the dropshipping processes vary in terms of the service provider that you work with, the model typically comprises of the following stages: 

  • The vendor, supplier, or manufacturer produces the product
  • The vendor, supplier, or manufacturer stocks the product
  • You form an agreement with the vendor, supplier, or manufacturer to drop ship their products to your store
  • You launch an eCommerce store using Zaapi, or any other platform
  • You market and promote your eCommerce store to target your specific customers
  • Your customer places an order, and you process the payments 
  • You forward the order details to the vendors, suppliers, and manufacturer 
  • The vendor, supplier, or manufacturer prepares the order and ships it to the customer. 
  • You inform the customer about the progress of their order. 

Although the dropshipping process seems quite simple, several factors contribute directly to the success of a dropshipping store. Let's take a look at how you can become successful at dropshipping. 

5 Ways to Succeed At Dropshipping  

Since dropshipping appears to be an easy and convenient process, the competition has become relatively high. This is why it is crucial to devise a cogent dropshipping strategy before creating your online eCommerce store with Zaapi. 

1. Pick The Right Dropshipping Niche 

The niche of your dropshipping store plays an integral role in the number of sales you acquire. Choosing the right niche can distinguish your store from others in the market. Essentially, it is best to pick an industry that you are comprehensively informed about. This can help you market your products by establishing authority over the industry you are targeting. 

It is also recommended to pick a niche that you are interested in. When you are passionate about the products you are selling, you can easily promote your store and craft plans to extend and scale your business. 

It is also essential to select products that are not locally available to your target audience. This way, you can satisfy the demand and become exclusive providers of a specific product line. 

Profit margin is another factor you need to account for when running a dropshipping business. It is best to choose a market that your target audience seeks to invest in. For instance, if your target market is in Malaysia, you can feature waterproof shoe protectors, as it is one of the most trending products in the country. 

Sell Luxury Goods

It is advantageous to pick a niche of luxury, high-priced items in a dropshipping model to generate a higher profit with low startup costs. This is because the cost of customer acquisition and marketing in a dropshipping model is the same for luxury and economical brands. Therefore, choosing a luxury niche yields a relatively higher profit than an economically-priced item. 

Strategically Evaluate Shipping Costs 

You also have to weigh out the shipping costs when picking the right product niche. Although the supplier, manufacturer, or vendor manages the shipping, you still have a certain level of control over the shipping costs. For instance, if you pick a product that accumulates a high shipping cost, you can easily drive customers away from your store. However, if you select a product niche that can be conveniently shipped at a low or free rate, you can invite more customers to your store and subsequently expand your business. 

Target Impulsive Shoppers 

The primary objective of running an eCommerce store is to drive conversions. To make this happen, you need to market your products to impulsive buyers with a disposable income. You can choose products that compel them to hit the buy button without worrying about other factors. Ideally, carry out comprehensive market research and select a niche that appeals to your target audience. 

2. Leverage Online Tools For Market Research 

Market research is integral for all types of eCommerce stores. You can quickly learn about your target audience's buying habits and search intents by using online tools, including the likes of Google Keyword Planner and Google Trends. The former can provide you with detailed insight into the type of search queries your target audience makes. 

Using this information, you can optimize your store's on-page content to increase digital visibility and invite more traffic to your page. Similarly, you can also use Google Trends to learn about the most in-demand products for your target market. This can help you showcase the right products on your eCommerce store to drive conversions. 

3.Build  Your Brand 

One of the common misconceptions with dropshipping is that you are bound to sell products of different brands. This is not true. Dropshippers can create their own brands and exclusively feature those products on their online store. 

For instance, you can create an online store with Zaapi by simply downloading the application. Once your store is customized to your liking, you can partner up with a white label manufacturer that allows you to sell their products under your label and brand. 

4. Choose A Dependable Supplier 

Collaborating with an unreliable supplier can reap negative results on your investment. Therefore, it is critical to carry out comprehensive research before choosing a partner to work with. There are a few factors that you need to consider. For starters, if you are working with international suppliers, make sure there is no gap in communication and time zone. You must also make sure the supplier provides prompt responses to your messages. 

In the case of dropshipping, it is always best to work with multiple suppliers. By partnering up with two or more vendors, you can make sure that you can always cater to customer demand, even if one of the manufacturers runs short on inventory. Additionally, if your vendor stops responding or if your partnership is compromised in any way, you can continue to fulfill customer orders without experiencing a halt in your business operations. 

5. Formulate A Strategy for Customer Acquisition 

Creating an eCommerce store is no longer enough. In this highly competitive market, you need to plan to invite relevant traffic to your page. This is where a customer acquisition plan comes in. 

A customer acquisition plan provides you with a comprehensive strategy to bring customers to your online store. You can leverage digital marketing strategies, including search engine optimization (SEO), social media marketing and advertising, Pay Per Click (PPC) advertising, and email marketing. A long-term digital marketing plan will not only bring new customers to your store but also help you retain your existing customers. 

Once your digital marketing campaign is in full effect, you can also track data using relevant and available metrics. You can find which strategy is most effective for your target demographic by monitoring your conversions. This way, you can refine your approach to maximize conversions.

The Bottom Line 

Dropshipping is a convenient way to tap into the eCommerce market with minimal investment. The model allows you to create your own brand and feature products stored and shipped by third parties. If you're opting for dropshipping in Southeast Asia, you can start by picking the right niche for your target audience. 

Next, you can conduct comprehensive market research and customize your brand to appeal to the kind of people you want to attract. Don't forget to run targeted marketing campaigns to let your audiences know your brand and its offerings. These initiatives can help you ensure your store stands apart from others in the market. 

Ian Haynes
Proud Brooklynite, avid reader, writing enthusiast, and a digital marketing specialist.
Zaapi makes it easier to close your sales in chats.