Reverse Dropshipping is the name we give to the business model of importing high-quality goods from countries that are importers, rather than exporters, and selling them in countries that usually export them.
Selling ice from Hawaii to the Inuit would be an example of high-quality reverse dropshipping. Selling Saharan rain to the British, that kind of deal.
Beyond these slightly facetious examples, reverse dropshipping is oddly big business, but it works by flipping a script of traditional dropshipping.
In traditional dropshipping, you might get products that are of demonstrably low quality at low prices from, for instance Asian markets, giving low profit margins and so requiring intensive sales models to make money.
In reverse dropshipping, you’d find, say, high-quality Danish mobile phones and sell within an Asian market.
There’s a reason it sounds completely insane – but it works.
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The Pros And Cons Of Reverse Dropshipping
There’s no way in an orderly universe that reverse dropshipping should work. There are lots of seemingly natural market forces acting against you doing it successfully.
But if you have the knack, the perseverance and quite a lot of patience, you can build a business in reverse dropshipping.
Pros:
Higher Margins
We’ve said one of the drag factors of traditional dropshipping is that the margins are spirit-crushingly low.
Not with reverse dropshipping, they’re not. Quality’s higher, prices are higher, and importantly, margins per item sold are higher. Sure, technically expenditure is higher too, but not by anything like the same percentage increase as the margin you make.
That means the sales model you use can be less intensive, because you don’t need to sell 10,000 units to make enough profit to buy a cup of coffee.
Yes, you will have to work a little harder, and in the opposite direction to what feels natural, because you’re looking for high quality, high demand products. But that’s the challenge. Find them, and the margins are yours to enjoy.
Less Competition
Reverse dropshipping is still at this point a niche market, and one in which the old adage that you have to speculate to accumulate – and that you have to have money to make money – is still true.
That cuts down the number of players in the first place, and smart players in the second.
In a sense, it’s like making money out of vintage wine or caviar – the market is there, but you have to be able to afford the entrance fee and put in the smart money to get more you’re your stake back.
But fewer players means a higher potential to take more of the market share, both in your niche and overall.
Getting web-savvy and establishing a smooth reverse dropshipping sales and distribution operation will make you stand out against other, less professional players too, meaning there’s a vaguely frontier element about reverse dropshipping that has yet to mature and mellow into business as usual.
Cons:
If you have the niche relatively to yourself, on the one hand that can be great. On the other, there’s a little “only buffalo at the watering hole” caution to apply.
Where is everyone else, and what do they know that you’d better learn before the lion sinks its teeth into your hide? Be aware of some of the pitfalls.
It’s Hard To Market
Selling high-quality products from abroad to a country that already makes high-quality products in the same niche? You’ve got to be reeeeally confident of your product and your ability to market it well to your given audience.
Research, research, research – both your niche, your product, and the culture of the market in which you’re trying to sell.
If you’re trying to sell Danish cellphones to a market where there’s government money being spent to encourage people to buy domestic as an act of economic patriotism, you’re fighting not just the market but the government as well, to make a hard-earned buck on a high-quality product you could probably sell much easier elsewhere.
Affiliate marketing in your chosen nation can help you there – invest in influencers, opinion-shapers, bloggers and vloggers to smooth your way into an otherwise resistant (or even hostile) market.
Again, reverse dropshipping is not for the chickenhearted or those without the cold, hard capital to seduce twinkly-eyed influencers.
Barriers To Entry
Some countries have barriers specifically to stop people pulling something like reverse dropshipping.
Importing certain products – electronics, food, drink, medications, etc – could be a nightmare of dubious legality and intense bureaucracy that can often work by default, making it more hassle than it’s worth to reverse dropship high-quality products into a foreign market.
So be very aware of what you can legally, easily import into your chosen market without getting slapped with heavy fines or tedious paperwork.
Also, remember the fun and games of international shipping and import. It’s easier now than it’s ever been, but that doesn’t translate to an experience free of headaches, paperwork, nonsense and cash outlay.
Tariffs
Which brings us neatly on to the joy of tariffs. Tariffs exist almost precisely to stop you flooding a nation with non-domestic products at competitive or even impressive prices.
In some countries, the tariffs are designed to make it not worth your while to do this – which has the annoying point in its favor that it should work.
If reverse dropshipping isn’t going to make you your margin, then what are you doing it for? Sudden tariff rises can be enough to make operators think again and take up the practice in a country with less exorbitant tariffs.
Flip It. Flip It Good
The reverse dropshipping model is often overlooked because it can be tough and bloody to operate, and because you usually have to have a fair amount of capital to invest in doing it without immediate guarantees of returns.
But if you can get a niche to work, you can build it almost without limit and make some serious cash.
Selling high-quality goods in emerging markets, you can get in relatively near to the first floor in a market, and with the right potential for growth, you can pull off a commercial coup.
Reverse dropshipping is by no means for everyone. There are fortunes left weeping at the side of the road from potential contenders who judged their niche badly, or got hit by a tariff bomb and didn’t know when to cut and run.
But if you can do it, and do it well, this topsy-turvy sales model can be a ticket to a whole new way of doing business.
