80 per cent of Singaporeans use the internet every day, and the online market is growing steadily

According to Statista.com, by 2021, e-commerce shares in retail sales worldwide would have reached a staggering 17.5 per cent, growing from 10.2 per cent in 2017.

E-commerce penetrates markets all over the world, and buying online is becoming a common routine. In most countries, you can easily purchase clothes, order food or book tickets with your smartphone.

In this article, we will talk about the dropshipping business model, its features and dropshipping in Singapore.

Dropshipping vs traditional retail

Dropshipping is a form of retail business that became popular with the development of the internet and e-commerce.

In the traditional retail model, an entrepreneur buys products from a wholesaler or manufacturer, stocks them in a warehouse and then resells them to a customer.

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Although this scheme is a thousand years old, it has quite distinct drawbacks.

The owner of a store has to keep products in stock which causes additional expenses like renting a warehouse and increase in prices to compensate these expenses.

But the worst part of traditional retail is that you can never accurately predict the demand for your goods.

Since entrepreneurs purchase products beforehand, being unable to sell them means failed investment.

The dropshipping model implies shipping products directly from manufacturer/wholesaler to clients with the retailer serving as a mediator taking care of promotion and customer service.

This results in a number of strategic advantages:

1. The entrepreneur purchases products from the wholesaler/manufacturer only after receiving an order from a customer. It means there’s no need to predict demand fluctuations: if customers lose interest in the given goods, the entrepreneur simply stops ordering them from the wholesaler.

2. Since products are sent directly to customers, there’s no need to rent a warehouse, which saves you money, time and effort.

3. For the same reason, it is possible to do dropshipping business online. An entrepreneur can create a web store using the information and media from the wholesaler, but doesn’t need to have a real stock of goods.

4. Since a potential owner of a dropshipping business doesn’t have to invest in bulk purchase and warehouse, it is possible to start this business with a relatively little budget. As a result, almost anyone can use this model and even try it as an additional source of income without quitting their main job.

However, this model has a number of drawbacks as well:

  • It is usually the dropshipping store owners who takes care of clients’ complaints and refunds.
  • In this business, errors in shipment and inventory issues are a common problem.
  • Since entrepreneurs can’t even see the products they sell, they have no control over their quality. Same goes for quality and speed of delivery.

Still, despite these disadvantages, a lot of people find this model quite profitable.

Why do you need to start dropshipping in Singapore?

Dropshipping requires only a computer and an internet connection, so one can dropship from anywhere in the world.

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However, the choice of sale markets depend on many factors like the demand for the products within the given niche, the purchasing power of the population, the frequency of online deals in the given country and the availability of free shipment.

Thus, this is what makes Singapore a good candidate for dropshipping:

  • According to Eshopworld.com, by 2021, the number of e-commerce users in Singapore will reach 4.1 million, with each spending online an average of US$1234.
  • According to Statista.com, e-commerce user penetration in Singaporean retail equals to 69.6 per cent and by 2023 will reach 73.2 per cent.
  • According to Hashmeta.com, 70 per cent of Singaporeans are active social media users, which is an important statistic for e-commerce.
  • Due to the high costs of living and high prices, online stores importing goods from ‘cheaper’ countries (mostly from China) can easily compete with local retailers.
  • Most online stores (including dropshipping ones) use the English language which is one of the official languages in Singapore.
  • While there are big companies using dropshipping business model, individual entrepreneurs can open online dropshipping stores too. It’s become a common practice to order products from popular wholesaler platforms such as Salehoo, Amazon and AliExpress.

About 80 per cent of Singaporeans use the internet every day, and the online market is growing steadily. In fact, the e-commerce industry in Singapore is expected to be worth US$5.4 billion by 2025.

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