Dropshipping Singapore: The definitive guide
While this article is focused on drop shipping in Singapore, the same advice applies for wherever you are in the world, so read on. We've got some great advice in store for you.
Drop shipping is becoming more and more popular among full time entrepreneurs, as well as people looking to build a side hustle in addition to regular employment. Here in Singapore, drop shipping is an especially attractive option as citizens’ regular internet use and comfort with online shopping means ecommerce is flourishing.
In 2020, ecommerce in Singapore is expected to be worth USD2,405 million - with growth projected to reach USD4.079 by 2025¹. If you’re interested in building a drop shipping business in Singapore, now is the time to do it.
This guide walks through all you need to know to get started, including Singapore drop shipping tips and tricks, and some pointers to build a successful business. We’ll also look at how you can maximize your profits when selling overseas, with Wise Business.
What is drop shipping?
Drop shipping is a popular ecommerce model, which requires little technical expertise and low upfront investment. As a dropshipper, you’ll market and sell goods to customers online. However, you won’t hold or handle your own inventory, as the supplier will directly pick, pack and send goods to the customer on your behalf once you have made a sale.
This means you don’t need to buy stock upfront and pay to store it, nor do you need to manage the logistics of shipping or returns. Instead you are free to focus on building a customer base and closing sales.
Of course, there are downsides to dropshipping too - and it pays to be aware before you jump in. Because the barriers to entry are so low, many people want to open their own dropshipping businesses - which makes competition fierce. That in turn means that you need to think carefully about pricing to make sure you have competitive products but a healthy profit margin. You’ll have to work hard to capture more market share in your niche than your competitors, through creating short and long term marketing plans. More on that later.
As a dropship business owner, you’ll also need to find reliable suppliers, monitor the quality of goods, and keep an eye on customer service. This matters because you’ll be held accountable for the customer experience - even though your suppliers manage much of it.
Dropshipping is not a get rich quick scheme - but it can be a viable business model if you are prepared to put in the work.
Is dropshipping a new business model?
Dropshipping may be presented as a new way of working - but it’s actually a natural build on sales models which have been working for many years.
Mail order companies have existed for centuries - and were thought to have been invented by none other than Benjamin Franklin in 1744². As people grew used to ordering goods and having them delivered, companies could collect customer orders in advance and then bulk buy the goods from factories to ship later. This meant the seller had guarantee of payment in advance and therefore lowered the risks involved with selling - essentially creating early dropshipping by the 1950s in the US.
Of course, as our lives moved online, and the world became more connected, dropshipping grew in importance. Connecting with customers and suppliers has never been easier - meaning skilled entrepreneurs can capitalise on cheap supplier prices in one part of the world, by creating demand and selling in another. Couple this with the fact that more and more millennials are looking to work for themselves, build a side hustle to supplement their regular income, or make some cash from a hobby, and it’s no wonder dropshipping is such a hot ticket.
How does dropshipping work?
Let’s first look at a runthrough of how dropshipping works. We’ll dive into some of these topics in more detail in a moment.
Here are the typical steps you’ll need to take to set up and run a dropshipping business:
- Choose the products you want to sell, looking for a high profit niche that interests you
- Find a reliable dropshipping supplier in Singapore or any other markets you want to work with
- Quality test products and supplier service, and draw up contractual agreements to work together
- Set up your online store using a tool like Shopify or Woocommerce, or choose to sell on a marketplace platform
- Check pricing and shipping costs to make sure you’re protecting your profits - especially if selling overseas. Wise Business can help.
- Market your products and close customer sales
- When you receive a sale, pass it to your supplier for fulfillment
- Your supplier will pack and ship the goods, and often handle queries and returns too
How much money can you make with dropshipping?
How much you can make from your dropshipping business will vary greatly depending on the products you sell, how successfully you can market your products, and how much time you’re able to put into building the business. Some entrepreneurs make a full time living from dropshipping - others choose to dropship as a supplement to other business activity or paid employment.
One of the great things about dropshipping - like many other types of online business - is that the potential customer base is huge. You can connect online with fans all over the world, and choose suppliers from other countries to make sure you get the right products for the best prices. This means that the earning opportunity is there for entrepreneurs who invest their time into building a great business.
Once you start your dropshipping business you’ll want to find every possible way to protect your profit margins. Competition is fierce so you don’t want to lose out.
One key way to cut your costs and protect your profit is to use Wise Business to lower currency conversion costs when selling overseas and dealing with international suppliers.
Open a Wise Business account to hold, send and spend money in dozens of different currencies. You’ll also get local bank details in major currencies, which you can use with your Wise account to get paid easily when selling overseas. For example, if you choose to sell in the US, and get paid via Stripe in US dollars, you’ll be able to use your Wise US bank details to withdraw the USD cash from Stripe.
Once you hold USD in your Wise account you can either spend it or convert it back to SGD using the mid-market exchange rate, to withdraw it to your regular bank account. There’s only ever a low transparent fee for currency conversion, which cuts the costs of accessing your international dropshipping profits, and boosts your margins.
You’ll also be able to use Wise to pay international suppliers easily online - with no extra costs or hidden fees for settling invoices in a foreign currency.
Interested in starting dropshipping in Singapore? Here’s what you need to know.
Ecommerce is big, and getting bigger. Getting into a growing market as early as possible makes sense - established players will prosper as more customers convert to online shopping.
Here are a few statistics to put the opportunities into context. ¹ ³
- 89% of people in Singapore use the internet to search for products they want to buy
- 52.4% of Singaporeans use ecommerce to make purchases in 2020 - with this expected to increase to 67.2% by 2025
- 3.1 million people use ecommerce in Singapore today - with average revenue per user at US$784.52
- A relatively high cost of living in Singapore means it’s possible to sell goods from cheaper countries with decent margins
- Food and personal care is the largest market segment in 2020, with nearly a quarter of ecommerce users falling into the 35-44 years old bracket
- Marketplaces Lazada, Amazon and Qoo10 are among the most searched terms online in 2019
When you start dropshipping you can choose to set up your own website using a tool like Shopify, or create a store on an ecommerce platform. Both options have their own pros and cons - but there are a number of specific rules you’ll need to be aware of if you’re considering using a marketplace site to dropship.
Marketplace platforms tend to be wary of dropshippers in case customer service or product quality are not up to scratch. This would damage the reputation of the platform. To avoid this there are usually plenty of rules you’ll need to comply with to sell on a platform - and strict penalties if you break them. Here are a few of the things you need to think about if you’re planning on using some of the most popular ecommerce platforms.
Amazon - dropshipping on Amazon is technically allowed, but there are limitations. For example, you must be the named seller on the items being shipped. You can’t have a third party name appear on packing slips, invoices or the outside of the packages you send to customers⁴. Check out Fulfilled by Amazon (FBA) as an alternative to dropshipping which is supported by Amazon and works in a similar way to the steps outlined in this guide.
There’s more about dropshipping with Amazon in our handy guide.
EBay - as an eBay seller you can fulfil orders directly from a wholesale supplier. However, you can’t sell an item and then have another retailer ship directly to your customers. This makes it a tricky platform to use as a dropshipper. Breaking the rules may mean your listings or account are suspended, but you’ll still need to pay any fees associated with the sales.⁵
Learn more about dropshipping on eBay - and some alternative options to think about - here.
Etsy - Etsy specialises in handmade, unique and vintage items. You can also buy and sell craft supplies. Most category items on Etsy aren’t suited to dropshipping, because you won’t be making or designing them yourself. Craft items do not have to be handmade, which may offer an opportunity - but there are strict rules about what can and can not be listed on Etsy, so you’ll need to check if your products meet the brief.⁶
Qoo10 - This is one of the more straightforward options. You can set up an account and start dropshipping with Qoo10, although you may need to pay a small amount for QCash credits.
Choosing the right products to sell online is an essential early step in setting up your dropshipping business. There are no absolute rights and wrongs here - but there are some products and niche areas which work better online. Here are a few things to think about:
- Start by browsing a site like Aliexpress for inspiration and to get an idea of wholesale prices. You can learn more about dropshipping with Aliexpress in this essential guide.
- Choose a niche you’re interested in. Your passion will come across in your marketing
- Research your customer to help you pick the right product, price and platform to sell on
- Aim for a market which is not dominated by big players already. Choosing something quirky, specialist or unusual may cut the competition you’re up against
- Check out the potential profit margins as soon as you’ve shortlisted products - make sure you have a realistic idea of selling price, based on market activity and demand
- Choose goods which can be easily shipped - not too heavy, not too fragile, not too large
- Make sure there are no legal restrictions to selling your chosen products in Singapore, or other markets you’re interested in
- Find products which sell all year round, and think about how future trends might impact your market
- Choose goods which produce repeat sales to make sure customers come back time and time again
Connecting with customers is one of the most difficult - and important - parts of managing your dropshipping business. By using a range of tools, creating an ongoing conversation, and providing value to your customers, you’ll build a loyal fan base you can rely on. Here are a few pointers to start you off.
When you’re creating your dropshipping website or store, start with the customer in mind. Think about how people shop online, and what will build trust in your brand. Using great images of your products and offering in depth product descriptions is a good way to help customers understand your business.
You can also include customer testimonials, ratings and reviews as well as ideas about how and where to use your products. To get started, give free products to friends and family to get their feedback, ideas, and a review for your site.
To market effectively you need to know where your customers hang out, and get into the conversation with them. This might mean joining relevant social media sites, posting and commenting on blogs, and asking for feedback about the products you sell.
Social media is the go-to for affordable and effective dropship marketing. The exact channel and approach will depend on the market you’re working in.
For example, if you’re selling to a more mature market you might choose Facebook and Pinterest as your main marketing approaches. Once you know your buyer well, you can use Facebook ads to target your customer segment, and create Pinterest boards to catch customers there. You’ll be able to use tools available online from Shopify and Google analytics to help you understand and segment your customer base, to make your marketing more impactful.
For a younger audience, you might decide that Instagram, including working with influencers and creating social videos is a better approach. By knowing your audience, and where they’re likely to spend their online leisure time, you can get the biggest return from your marketing efforts.
Creating a relationship with your customers will take time, so you’ll want to think about how you can build an ongoing conversation. Use email subscription pop-ups on your website, or offer free premium digital products for customers who sign up. This allows you to capture email addresses and market directly.
You can also follow up and retarget customers to close sales that didn’t happen. For example, Shopify allows you to email customers who have abandoned carts - that is, people who started to buy items and didn’t complete the sale - improving your chances of closing the deal.
Building your dropshipping business will take time - so coming up with a longer term strategy is crucial. Creating a blog linked to the niche you’re working in is a smart way to let people find you and your products more easily. By posting consistently, and backing your blog with a connected Facebook, Insta and Pinterest page, you’ll increase your visibility. You’ll also be offering interesting content to customers to help them get to know your brand.
>This same approach works well with both Instagram and Facebook. For example, if you sell pet products you could create a cute cats Instagram account, building a following and a community. From time to time you can promote your own products through your posts, as well as having a conversation with your followers to get feedback on current products, and product development ideas. By making your customers feel part of the product design and selection process, you’ll up your engagement significantly.
As long as you set up your operation correctly and work with reputable suppliers, dropshipping is legal in Singapore. However, as with any other business model, there are laws and processes you need to think about to make sure you don’t run into problems.
For example, you’ll need to check that the products you’re selling are legally compliant. That means they’re items which can legally be sold, with no breaches of copyright, no safety issues and so on. You’ll also need to think about how you set up your business, and how to ** file and pay tax on your income**. Do your research in advance to make sure you don’t end up in legal difficulties down the line.
If you’re living in Singapore it should not come as any surprise that you’ll need to pay taxes on any income you earn through dropshipping. Make sure you understand the requirements, both for registering your business and income, filing tax returns and paying your bills - and get everything complete on time to avoid hassle.
Dropshipping is an understandably popular business model which allows entrepreneurs to start up online businesses with very low initial outlay and risk. The simplicity of the model, though, can be deceptive. There are plenty of things to think about to set your dropshipping business in Singapore up for success. And because there are few barriers to getting started in dropshipping, the competition can be tough going in some niches.
Make sure you do your research before you start to set up your dropship business. You’ll need to have plans in place to get your business started and to ensure long term growth - including protecting your profits when you buy and sell overseas. Get yourself a Wise Business account to cut the costs of making international payments and converting currency, so you can keep more of your profits for yourself.