So you heard about dropshipping, and it sounded tempting, almost as if anybody could do it. Not to break it to you–but there are a few catches to it, some of which are specific to the AU market only. Have you got what it takes?
Read on this guide on how to dropship in Australia to find out.
What is Dropshipping?
Dropshipping is an online business model of selling products without keeping them in stock or owning the inventory. Once the customer places the order from your online store, you would purchase the item from a third party (the supplier) and have it directly shipped to the customer while handling the communication.
Now may be the best moment to jump into the eCommerce business, and here’s why:
- April 2020 saw a 31% increase in online shopping in AU compared to the year before.
- There’s a 57% year-on-year growth in online purchases in Australia.
- It’s predicted that by 2025, eCommerce will account for 16-18% of the total retail in Australia.
How does Dropshipping work?
The simplest explanation of the dropshipping process would be:
- Customer orders something from your online store.
- You forward purchase information and customer delivery details to your supplier.
- The supplier sends the order to your dropshipping company.
- You handle the communication with the customer and potential returns.
How to Start Dropshipping in Australia?
It’s important to get informed about every little detail on how to start dropshipping in Australia, but try not to get overwhelmed. Once you get a gist of it, you’ll realize it’s not as complicated as it seemed at the beginning. These are the essential factors you’ll need to consider:
- Research the market
Find the right niche for you and draw guidelines for defining your brand. Useful tools for niche research could be Facebook Audience or Google Trends, where you can learn about the audience preferences. According to a recent survey on the most popular internet activities among adults in Australia, 83% answered online shopping.
- Business licence
You will need to apply for the Australian Business Number, a unique 11-digit number for identification purposes. You can register on the Australian Business Register official website.
- Types of taxes
Consider a subscription to eCommerce platforms, shipping fees, GST (if you’re operating outside of Australia), and supplier cost. Keep in mind that, for overseas sales, you pay taxes for each item sold.
- Online store
To make your business legal, you’ll need to set up an online store, register your domain name and choose a hosting provider. Or stick to platforms such as Amazon, eBay, Shopify, etc.
- The logistics
You’ll need to figure out creative things like branding and logo and more complex ones, such as customer service. Preferably, you’d become an SEO expert as well to help your online business stand out.
- Find suppliers
You will be directly dependent on your suppliers, which means you’ll have less control over the supply chain. Hence, it’s crucial to build a good relationship with your suppliers.
- Pick a drop shipper
First, decide whether you want domestic or international suppliers. We advise going with the domestic option for starters since it’s simpler and faster. Signing a dropshipping agreement goes without saying.
In order to handle your clients’ payments, dropshippers need payment getaways. The payment options you have are determined by the e-commerce platform you’re using. You have the option of using a hosted or integrated payment gateway.
Note: For beginners, we recommend adding good customer reviews and testimonials to increase the credibility of your website.
Is dropshipping legal in Australia?
Dropshipping is a legal business model in Australia. However, you must first verify that the items you sell are legal. You’ll also need to follow Australia’s Competition and Consumer Act and the Australian Consumer Law.
Dropshipping is legal as long as online retailers follow the Competition and Consumer Act, the Australian Consumer Law and other relevant legislation.
You can also legally dropship from your supplier (outside of Australia) to customers outside of Australia.
Dropshipping vs Wholesale
People who want to get into the eCommerce business and don’t have their products usually consider wholesale or dropshipping. Wholesale could be a good option if you already have some experience and an uncompromising vision for your brand, with a certain amount of money to invest.
On the other side, dropshipping is more accessible since it doesn’t require you to invest huge capital initially or to have stock expenses, and you don’t have to plan your purchases based solemnly on what will surely sell. Still, you can also offer trending products and test different business ideas without financial losses.
Note: Free shipping could help you stand out if you decided to only sell across Australia and cover the costs within higher product prices.
Benefits of Dropshipping
Now that we’ve covered the basics, let’s mention a few more benefits of dropshipping:
- Easy to start–You can start your online business from the comfort of your home. All you need is a laptop.
- Low capital requirements–Depending on the platform where you set your online store, you can start dropshipping even with $0.
- Low expenses–Compared to other retail models, dropshipping has the lowest cost.
- Variety of products–Since you don’t have to own inventory, you can choose and create your store however you like.
Dropshipping has a few downsides to it. It’s possible to overcome these challenges, but you need to be prepared for them:
- Low-profit margins–Don’t expect to start earning a fortune right from the start. It’ll take you time, effort and experience to actually feel like it’s paying off.
- Supplier mistakes–They will happen from time to time. Even though you probably won’t have anything to do with it, you’ll be the one responsible to the customer.
- Shipping delays–Same as above, you’ll be the one to blame for any delays or mistakes related to shipping.
- Poor unboxing experience–Since you’re not doing the packing and shipping, you’re unable to add your branding or at least a thank you note.
- Returns–They’re a bit more complicated when you’re a dropshipper. Usually, suppliers have different policies or will charge you for restocking.
- Competition–Dropshipping is highly competitive, considering it’s relatively easy to start, so many stores will offer products at lower prices.
Best Dropshipping Suppliers & Wholesalers in Australia
If you’re hyped up about starting to dropship but are unsure where to find suppliers–don’t worry; we got you covered. This list of dropshipping websites will be enough to get you started, and, as you go on, you will find new suppliers that you like and will build a quality relationship with them.
- Directories–For example, Australian Dropshippers Directory or Australian Dropshippers have a huge database of available shippers in Oz.
- Reach out–If your vision includes a concrete manufacturer, ask them from which company are they getting stock.
- Ask around–Now that you know your niche ask around on forums or social media which wholesalers and manufacturers are available.
5 Australian Dropshipping Suppliers
Taking into consideration different niches that you may settle on, we’ve listed five Australian suppliers and wholesalers from different categories:
1. Simply Wholesale – Over 500,000 products, mostly available for dispatch the same day.
2. Factory Fast – Multi category dropshipper with one of the largest inventories.
3. HipKids – Unique kids toys, decor and furniture, with a possibility of personalized items.
4. APAC Distribution – Specialized in sports equipment and home and gardening products.
5. Crochead – Australian-made coil holders, working with small retailers only.
Bottom Line: Is dropshipping worth it in 2022?
If you want to start an online business from scratch, with low risks and without an enormous investment, dropshipping might be just the right option. If you prepare correctly and are willing to be consistent, there is nothing to lose if you decide to try dropshipping in Australia.
- Low risk for independent businesses
- It doesn’t require you to purchase inventory
- It doesn’t require huge investments
- It doesn’t require storage space
- You’re free from packing and shipping orders.
- You don’t have an exclusive relationship with the supplier
- You’re responsible for customer dissatisfaction
- Shipping gets complicated if you have international suppliers.
1. How profitable is dropshipping?
Dropshipping has low-profit margins, but you’ll be able to get higher earnings as you develop your business.
2. What is the first step to start dropshipping?
It all starts from research–find your niche, define your business idea, look into competitors, and find dropshipping suppliers. Then you can proceed to build an online store.
3. What are the benefits of dropshipping?
There are many benefits to it: low capital requirements, low expenses, easy to start, and a variety of products to sell.
4. Do I need to register a business entity to dropship?
In Australia, a business licence is not mandatory for dropshippers, but we advise them to apply for ABN, as described in this guide on how to dropship in Australia.