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September 1, 2021

The Rise of Reverse Dropshipping & What You Need to Know Before Using it

Dropshipping has been in the eCommerce world for ages, and many small business owners have used it to maximize their profits while keeping the costs relatively low.

But, as the years go by, there are new trends, and drop shipping is no different. It has transformed into something new which is now called reverse dropshipping.

In this post, we will look at what reverse dropship is and what are its pros and cons, so you can determine if it’s for you.

What Is Dropshipping?

Before we can talk about reverse dropshipping, you’ll need to understand what standard dropshipping is and how it works.

Dropshipping is a business model where a store doesn’t keep the products it sells in stock. Instead, when a customer makes an order, the retailer will purchase the item from another business — and then have it shipped directly to the customer.

So, let’s look at an example of the whole dropshipping cycle so you can better understand how it works in real life.

First, there is a customer who places an order on your site.

After that, your dropshipping automation will come into play and will automatically send the order to a third-party supplier. These suppliers, the dropshippers, then handle the whole packing, shipping and delivery.

After that is done, your customer gets the product, and you make a huge profit for doing nothing at all!

This whole model cuts the costs of shipping and storing items.

And because of that, retailers utilizing dropshipping can offer lower prices than traditional brick-and-mortar stores — they don’t need to pay extra for the inventory and storage.

So, they are able to offer a much wider range of products with a lower price tag.

What Is Reverse Dropshipping?

Reverse dropshipping is similar to the traditional dropshipping method, but it’s a bit different — reversed.

The standard dropshipping works by ordering items from low-economy countries like India and China, and delivering them to the richer countries like the U.S., Germany, Australia, etc.

That way, you get these items cheap and can sell them at a higher price.

So for instance, a customer orders a smartphone case from you for $20. You then redirect the order to the dropshipping supplier from China, where you buy it for only $1.

You will then pay anywhere from 10 – 20% for the dropshipping services, and you make a $17 profit effortlessly.

How can we reverse it and turn this model into reverse dropshipping?

The concept behind it is simple — as much as we want low-price products in the U.S., wealthier Chinese people seek the quality and don’t mind paying a little extra for it.

That’s the whole principle of reverse dropshipping.

Reverse dropshipping is a dropshipping model where high-quality products are sourced from countries that usually import products like the U.S. and are sold in countries that usually export them like India and China.

It’s the complete reverse of what we are used to, yet it’s still a dropship model that works really well.

What Are the Pros & Cons of Reverse Dropshipping?

If you are thinking about starting a dropshipping store, there are a few things you should be aware of.

Reverse dropshipping has many benefits, but there are some downsides as well, which can be a complete deal-breaker. It’s not always the best solution in every situation, so consider your options carefully.

With that said, let’s look at some disadvantages and benefits of dropshipping in reverse.

The Pros of Reverse Dropshipping

Higher Margins

Reverse dropshipping can be very profitable.

In fact, you can earn more from this model than from the standard dropshipping — which can be a huge plus.

This is mostly because you don’t buy a bunch of low-quality products in bulk and pay a lot to the dropshipping suppliers for over a thousand orders you manage.

Instead, you focus on high-quality products and sell only a few of them, which will lead to a higher profit margin and markup.

You will also increase the authority and credibility of your brand because you won’t be selling unreliable products that are likely to break or not function properly.

But of course, all of that comes with finding the right “reverse” suppliers.

Less Competition

Standard dropshipping is very popular these days, which means that there’s a lot of competition utilizing it already.

On the other hand, reverse dropshipping is relatively new, and it is a hot trend most eCommerce business owners don’t know about. And so it offers you an easy opportunity for breaking through on the market (which also cuts down the costs of Facebook ads and PPC ads because of low competition).

If you can find the right niche and serve a specific audience, you can gain a competitive advantage and make profits.

An Opportunity to Build a Luxury Brand

In some cases, reverse dropshipping stores can even allow you to build your own brand — which can go a long way.

As you start selling your goods, you will improve the brand awareness of your online business, which will help you get more customers. Soon, you will get a lot of customers into your business.

Sometimes even more than you can handle — and that’s the best time to consider starting your own brand.

You’ll have the trust of thousands of customers, and you can start shifting from a reverse dropshipping business to a real online store.

And trust me, if you can get it to that level, you can start earning millions.

Finally, you’ll be building your way to financial freedom.

The Cons of Reverse Dropshipping

Difficulty to Market

Reverse dropshipping isn’t as popular as the standard dropshipping business model, making it more challenging to find suppliers who are willing and able to work with you.

You may have everything in place, but if you can’t find the right supplier, you will fall short very quickly.

It’s extremely difficult to market compared to standard dropshipping.

And so you’ll have to spend more time and effort finding quality “reverse” third-party suppliers — they are usually more expensive, too.

Additional Costs

In some countries, reverse dropshipping is hard to do.

For instance, a common problem is the cost of duties, taxes and similar additional payments, which are increasing the pricing of dropshipping products.

If you’re not sure how to deal with it, reverse dropshipping might not be right for you. It’s important to conduct thorough research before starting your reverse dropshipping business.

Or, you risk additional costs, which may lead to negative ROI.

Barrier to Entry

Whether you believe it or not, you aren’t allowed to ship and sell certain products — at least not in all countries.

Importing products, mostly medication and food, is usually regulated.

So, when you are thinking about starting a reverse dropshipping business with these products in mind, think again.

Also, it’s more than possible that your products will be held at the border.

That prolongs the time you are able to deliver the products, which may lead to the missing of delivery times.

You certainly don’t want to start a dropshipping store with products you aren’t allowed to sell to the desired country.

Reverse Dropshipping vs. Standard Dropshipping – What’s Better?

There are a lot of pros and cons when it comes to reverse dropshipping.

Again, there is no clear winner between the two, and it all depends on your needs and the type of business you want to start.

If you’re a beginner and have no experience with standard dropshipping, I suggest sticking with standard dropshipping.

Reverse dropshipping is a lot more difficult and may lead to problems.

But, if you have at least a bit of experience, feel adventurous, or want to stand out and earn more money, go for reverse dropshipping. It can also be excellent if you are looking to build your own brand in the future.

In the end, it all depends on your experience and circumstances.

Summary

Reverse dropshipping is not very common, yet it continues to grow, and we can definitely expect to see its rise in the upcoming years.

By leveraging it, you can sell high-quality products into foreign countries with almost no competition whatsoever. This can lead to a massive boost in retail sales and conversions.

It’s very complicated, though, and requires experience to work properly.

But, if you are an online store owner who has been in the dropshipping business for a while, it may be just the right thing for you.

You can also learn how to make $300 without zero knowledge about business.

FAQ

Is Dropshipping Illegal?

Nope, dropshipping isn’t illegal in any way.

It’s a legal technique that allows retailers to sell products without ever owning them.

All they need is a marketplace that will connect buyers and suppliers, which makes it possible for e-commerce stores on different sides of the world to have an online presence regardless of their location.

Can you fail at dropshipping?

Yes, it’s definitely possible to fail at dropshipping.

If you don’t have a proper plan or strategy and are unaware of the industry trends — then your business can easily flop in no time. You also need to find reliable suppliers with quality products that will convert into online sales.

Otherwise, dropshipping (or even reverse dropshipping) won’t work.

Can you get rich in reverse dropshipping?

Yes, you can get rich in dropshipping.

You’ll need to spend a significant amount of time learning how reverse dropshipping works and finding suppliers that are willing to work with your business model.

Is reverse dropshipping profitable on eBay?

Yes, reverse dropshipping is profitable on eBay, Aliexpress, Shopify, Alibaba, and Amazon.

However, only if you’re a second-hand goods reseller and/or have experience in the industry.

Newbies should rather take advantage of standard dropshipping as reverse one requires more knowledge to work properly without any additional shipping costs or hassles.

Is reverse dropshipping expensive?

No, reverse dropshipping isn’t expensive.

It can be done in a couple of clicks as you need to just place orders on your supplier’s websites and sell the products directly from there – no extra costs involved.

Does reverse dropshipping work for any niche?

Reverse dropshipping may or may not work depending on your niche.

It’s better to choose products in high demand and have many potential customers who want them — otherwise, reverse dropshipping won’t work for you at all.

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Mike Vestil

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About the Author

Mike Vestil is an author, investor, and speaker known for building a business from zero to $1.5 million in 12 months while traveling the world.

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