What is dropshipping?
Dropshipping is an online fulfilment method where your business uses a dropshipping supplier (typically a manufacturer or wholesaler) to source, manufacture, store and ship products on your behalf.
Why start a dropshipping business in Australia?
Many entrepreneurs have started dropshipping businesses in Australia because the ecommerce market is growing rapidly.
Experts predict the number of Australians who shop online will surpass 20 million by 2027.
On top of that, there are minimal start-up costs.
Dropshipping is a relatively simple and cost-effective way to start an online business without leasing warehouse space, and managing supply chains and inventory.
How does dropshipping work?
Here's a breakdown of how dropshipping works:
Customer purchases from your store
A customer visits your ecommerce website, adds an item to their cart, and hits check out. You'll receive a notification when the order is placed.
You send the order to your supplier
With the right software integrations, orders from your online store will automatically sync with your dropship supplier's fulfilment system.
Your supplier prepares your order
Your supplier will pick and pack the items that your customer has ordered.
Supplier ships order directly to your customer
Once the package is ready, your supplier will ship the order directly to your customer.
Pros of dropshipping
There are many pros to using dropshipping as a fulfilment method. These advantages are why dropshipping is a popular ecommerce model for small businesses.
Low initial investment required
The most significant benefit to dropshipping is that it's possible to launch an online store without investing huge amounts of cash up front.
Unlike traditional retailers or ecommerce brands that need to sink thousands of dollars into inventory, you can lean on your dropshipping supplier's stock.
Low overhead costs
Again, your overhead costs are low because you don't have to purchase inventory or manage fulfilment.
Many dropshipping stores can operate with little more than a laptop and a few other business expenses.
These costs will likely increase as your business grows. However, they'll still be low compared to retailers who lease warehouse space or work with fulfilment centres.
Can be low-risk and easier to scale
A knock-on effect of low initial investment is less risk in starting a dropshipping store.
You don't have to worry about managing inventory levels and carrying costs — your dropship supplier is responsible for all the processes around procuring, storing and shipping your products for you.
You can focus on building your brand and marketing your products. As your business grows, you can leverage your supplier's workforce and systems to scale more quickly.
Cons of dropshipping
Like all fulfilment methods, there are also some disadvantages to dropshipping you should consider, including:
No control over the supply chain
If a customer complains about product quality, an incorrect delivery or return policies, you're at the mercy of your supplier.
Even though you have very little control over the supply chain, you're the go-between. You must work directly with your supplier to correct any issues and update your customer on your progress.
Too much back-and-forth can impact the customer experience and damage your business's reputation if the customer isn't happy with the outcome.
Low profit margins
While dropshipping is a low cost, low risk way of starting an online business, the fulfilment method is notorious for low profit margins.
Many entrepreneurs will set up a dropshipping store and sell items at rock-bottom prices — they can afford to do this because their operating costs are low, too.
Competition is very high
The two most significant advantages of dropshipping — low cost and low investment — are also why competition is so high in this market.
You're likely competing with other brands who sell the same products as you.
If they're bigger companies, they may be able to spend more on marketing than you. If they have higher volumes, they may be able to offer lower prices, too.
Shipping issues
It's common in dropshipping to work with multiple suppliers. If a customer orders three items from your online store that come from three different dropshipping suppliers, you'll incur three separate shipping charges — and your customer will receive split deliveries.
Building a brand is tough
Usually, dropshipping products come as is, which can make building a brand tough.
If you want to make changes or re-brand a specific product, your cost per item will go up, and you may need to meet minimum order quantities to make it viable for the manufacturer.
Dropshipping best practices
If you follow some best practices, dropshipping may be the best way to get into ecommerce.
Ensure suppliers have strong systems and processes
You need to work with suppliers with robust systems and processes to ensure a seamless fulfilment experience.
For example, even though you don't manage shipping yourself, customers will come to you with any questions or concerns they might have about delivery.
You need to have complete confidence in your supplier and be able to work with them to resolve any issues, so any hold ups don’t reflect poorly on your brand.
Conduct thorough market research
Launching any new brand or product requires research – and starting a dropshipping business is no different.
Understanding the market will not only ensure your product is in demand and has a viable profit margin, but also help you narrow down your ideal customer and plan your marketing activities.
Beyond that, dropshipping can be a great way for existing retailers to ‘test the waters' before going to market with a new product.
How to find dropshipping suppliers
There are a few ways you can approach finding dropshipping suppliers. It's essential to shop around and connect with multiple suppliers — you want to work with reliable and reputable suppliers to avoid any dropshipping issues.
Australian suppliers directory
Start by looking through an Australian dropshipping suppliers directory, like Australian Dropshippers. These directories are an easy way to find dropshipping companies that operate locally.
Search social media
Social media platforms can be another source for suppliers. You can also search third-party online marketplaces like Amazon, eBay and Etsy.
Perform Google searches
Use Google or other search engines to search terms like ‘wholesale dropshipping', ‘dropshipping service' and ‘dropshipping Australia'.
Trying a combination of search phrases will help you find various suppliers to research.
Dropshipping FAQs
Is dropshipping worth it in Australia?
Dropshipping can be highly profitable in Australia with the right products, suppliers and strategy.
More and more Australians are turning to online shopping, and with that shift in behaviour comes an opportunity for more entrepreneurs to tap into a growing market.
Following dropshipping best practices, finding a profitable niche, and focusing on building a unique brand will help you stand out from the crowd.
Is dropshipping legal in Australia?
Dropshipping is legal in Australia and is an order fulfilment method used by many Australian retailers.
However, there are certain products you mustn't dropship (these are prohibited items for any Australian retailer, manufacturer or wholesaler).
You must also comply with the Australian Consumer Law, the Corporations Act (if you operate a company) and any other relevant legislation.
What is the best dropshipping supplier in Australia?
The best dropshipping supplier in Australia depends on your business, the products you want to sell, and the required services.
That's why it's important to research and speak to a few suppliers before committing to a partnership.
Do I need an ABN to start dropshipping?
You'll need an Australian Business Number (ABN) to start a dropshipping business.
Registering for an ABN is a legal requirement to run any business in Australia.
Start a dropshipping business with MYOB's support
Dropshipping takes the work out of sourcing, storing and shipping products to customers. But to grow a healthy and financially viable business, you need to connect all the moving parts of it in one central system.
With MYOB, you can connect your workflows so everything you need to run your business is in one place.
Check out the MYOB App Marketplace to discover which ecommerce systems integrate with your MYOB business management platform.
Find out more about building the business management platform that’s right for you.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.