It is important to pay attention to the aforementioned statistic because it indicates an emerging business model; major brands are setting up shop in Australia, but they are keeping their brick-and-mortar presence at a modest level. For brands such as Abercrombie & Fitch, Costco and Fossil, it makes more sense to increase their online marketing efforts in Australia. The idea is to make the most out of their established logistics efforts, which are often located overseas; in essence, these established global brands are taking advantage of their own drop shipping networks.
How Dropshipping is Developing in Australia
The facts of the Ozdirect Online case are as follow: Ozdirect acted as a dropshipper of consumer electronics products, which the company offered directly to shoppers on a couple of websites. The problem started when Ozdirect ran into credit line issues with its suppliers, which resulted in orders being delayed or cancelled. Once complaints from shoppers started piling up, the Australian Competition and Consumer Commission got involved and the case went to Federal Court.
In the Ozdirect case, Australian judges did not see a problem with dropshipping, a business model practiced by TVSN for years. The problems emerged from the way the company handled payments, specifically failing to deliver products as promised. What dropshippers must learn from the outcome of this case, which ended up with Ozdirect not being allowed to do business for five years, is that they are expected to deliver goods as directed by the consumer protection provisions of the Trade Practices Act.
Another issue impacting the dropshipping community unfolded earlier in 2018 when eBay Australia placed restrictions on sellers using the relatively new Fulfillment by Amazon service. Until recently, eBay was the epicenter of online retail in both Australia and New Zealand, and this is where the initial wave of dropshippers congregated. When Amazon started to expand aggressively a couple of years ago, eBay dropshippers took advantage of FBA centers in Australia, and this resulted in eBay buyers receiving parcels wrapped with Amazon shipping labels.
Although retail analysts believe that eBay’s restriction on FBA parcels is a protective reaction against the impending growth of Amazon in Australia, there is another issue at play. A eBay shoppers who received products emblazoned with Amazon branding promptly searched online and found that they could have purchased at a lower price outside of eBay. In some cases, these shoppers complained to Amazon and returned their items as provided by the TPA consumer protection laws. This situation also resulted in complaints filed against the eBay dropshippers, and this is something that deserves further discussion as it pertains to the future of e-commerce growth in Australia.
Australian Dropshipping Suppliers over Software Dropshipping
There is another side to the eBay story, and it has to deal with the e-commerce strategy known as software dropshipping, which in 2018 has been quickly losing steam. Software dropshipping is an opportunistic and “hands off” approach to e-commerce that is heavily focused on taking advantage of Amazon products that can be sold on eBay for their arbitrage potential.
Software dropshipping can be accomplished by various methods, the most common being signing up for a subscription service that allows e-commerce hopefuls to copy and paste product listings from Amazon onto eBay with just one click. When Australian shoppers browse eBay listings, they have no way of knowing that the products they are looking at come from Amazon sellers. In fact, Amazon sellers do not know which of their customers are dropshippers offering their products on eBay or other online marketplaces.
There is nothing improper about software dropshipping; however, copying and pasting product descriptions from Amazon onto eBay could be considered copyright infringement when it is done verbatim. In and of itself, the arbitrage angle itself is immaterial since it is at the heart of dropshipping; the egregious problem is that many software dropshippers are not providing customer service.
The occurrence of eBay shoppers returning products to Amazon sellers instead of to dropshippers suggests that the end of software dropshipping in Australia is near. A massive shift of online shoppers from eBay to Amazon is imminent, and the same can be said about sellers. This is not to say that dropshipping does not have a place within Amazon; this is a company that thrives on independent sellers joining its third-party marketplace, and this presents a great opportunity for dropshippers who are willing to forge strategic relationships with suppliers.
Understanding the Amazon Third-Party Marketplace
For many online shoppers, Amazon is their first stop for online retail activity. The formal entrance of this internet shopping giant in Australia was carefully developed over a period of two years, which involved positioning FBA centers, launching a far-reaching marketing campaign and localizing its mobile app specifically to the needs of shoppers across the Commonwealth.
The success of Amazon Australia will depend on attracting independent sellers who can expand the company’s massive product catalog. In the United States alone, there are half a billion active Amazon Standard Identification Numbers (ASINs), and more than half of them have been created by third-party merchants, many of them dropshippers.
In Australia, software dropshippers are not migrating to Amazon for obvious reasons. Armed with the Amazon app, shoppers can now look for products listed at prices that lower than on eBay, effectively killing off arbitrage opportunities. Australian dropshippers who have connected with suppliers, on the other hand, are finding success on the Amazon Marketplace as third-party sellers.
There are two levels within the Amazon Marketplace: first-party sellers, known as 1P, are established brands whose products are acquired on a wholesale basis by Amazon. In some cases, the first-party sellers happens to be Amazon; two examples in this regard are the Kindle electronic readers and the Echo smart speakers. 1P Amazon sellers also include global brands such as Nike, which are allowed to sell their products under special agreements.
The third-party level of the Amazon Marketplace is known as 3P, and it is intrinsic to the company’s plan to become “the everything store.” There are two ways of joining the 3P marketplace: by selling existing ASINs or creating new ones. Many sellers who intend to sell existing ASINs do not have their own product inventory; they mostly hope to profit from occasionally attracting shoppers who do not mind paying a little more for FBA items that they could find at lower prices within Amazon if they only refine their search or browse a little deeper. In other cases, third-party merchants may have run into discounted lots that they can quickly sell on Amazon; let’s say a seller is able to acquire an inventory of brand-name toothbrushes from a distributor who is undergoing liquidation, this might present an opportunity to profit on the 3P marketplace, particularly when ASINs have already been created for their convenience.
Sellers who generate new ASINs are essentially introducing new products to the Amazon Marketplace, which means that they should be properly registered with GS1 Australia. To a great extent, generating a new ASIN is in the purview of product manufacturers, inventors and white label distributors; however, this could be a niche opportunity for smart dropshippers who work with the right suppliers.
E-commerce beginners may think of white label products as a business model that requires inventory management and a warehouse for storage; while this is one way to approach e-commerce, it can also be done on a dropshipping basis. It is important to remember that dropshippers are not limited to sniping products off Amazon to hawk on eBay; in fact, some of the most successful dropshippers in Australia, and we are talking about whose businesses have been featured on ABC News segments, do not bother with Amazon or eBay at all.
To recap what dropshipping is really about, it helps to review the operations of the new FBA centers in Australia, where more than 3,000 third-party Amazon sellers are keeping their inventories. At FBA centers, product inventories await purchase orders to be shipped and handled by Amazon workers; in this fashion, sellers do not have to worry about logistics. Dropshipping goes one step further in the sense that sellers do not have to contribute an initial inventory; the supplier takes care of everything, including private label branding in some cases.
Let’s say a Queensland seller decides to launch a private label line of natural nutritional products to sell on Amazon; for the sake of example, we are going to call this line “Sunshine Coast Fusion Blends.” If this seller chooses Amazon as one of its online sales channels, the following process must be undertaken:
* Registering an Australian Business Number and IP Australia trademark for “Sunshine Coast Fusion Blends.” This may also require checking with the Taxation Office.
* Getting approved with Amazon as a 3P merchant.
* Finding a supplier of superfoods and other nutritional supplements that offers a private label program.
The steps below will depend on how the Queensland seller wants to shape her e-commerce venture:
* If needed, registering Universal Product Codes with GS-1.
* Generating new ASINs on the 3P marketplace.
* Writing product descriptions and drafting a marketing plan.
* Acquiring an inventory to be kept at the FBA center; alternatively, handling shipping from home or letting the supplier manage all logistics.
Notice how the “Sunshine Coast Fusion Blends” is not obligated to acquire an inventory to sell her private label products on Amazon. She does not have to use the FBA center either; depending on the terms of her agreement with the supplier, she may only have to worry about managing her products on Amazon and optimizing the visibility of her ASINs so that they are better positioned when shoppers search for them.
To a certain extent, Amazon can be described as a giant supplier of products for dropshippers. Quite a few third-party merchants allow sellers to list their ASINs; naturally, it would be hard to compete against their prices since they are retailers themselves. The best approach for Austalian Amazon dropshippers is to look for niche opportunities that the right suppliers can fulfill.
Going back to Sunshine Coast Fusion Blends, the seller should evaluate what other 3P merchants are already listing on Amazon to identify opportunities. Let’s say she determines that coconut milk powder ASINs are generating active sales with considerable levels of competition; this could be a good sign to check with suppliers that offer custom blending. Coconut milk powder is a fairly common ingredient offered by suppliers of nutritional supplements; the key would be to introduce innovative blends with flavoring combinations such as banana cream and orange, which could either be sold at higher or lower prices depending on business goals.
The bottom line of dropshipping on the emerging Amazon 3P marketplace in Australia is that it can certainly be accomplished with the right suppliers, and it does not have to involve paying FBA shipping and storage fees. As long as suppliers are willing to cater to dropshippers, meaning that they do not impose buying wholesale lots, they will fulfill orders originating from Amazon or any other online retail platform.
Looking Beyond eBay and Amazon
There is no question that Amazon is bound to become the king of online retail sales in Australia, and it may do so at the expense of eBay, but there is no reason why dropshippers should limit themselves to these two platforms.
As previously mentioned, two of the most successful dropshippers in the Commonwealth do not sell on either eBay or Amazon. One of these entrepreneurs, Brinley King of the Gold Coast, started off selling vintage clothing on eBay before moving on to dropshipping and later setting up a full e-commerce shop for her parents’ coconut derivatives business, which these days thrives as a B2B shop on Alibaba.com. Melvin Chee of Melbourne took the more traditional approach of registering a domain, signing up for an e-commerce hosting package and striking deals with dropshipping suppliers of trendy clothing. Similar to the King family from the Gold Coast, Melvin Chee started off in 2015 and was earning hundreds of thousands in sales within months; neither of them settled on Amazon or eBay, however, both were very careful with their evaluation of quality dropshipping suppliers.
Analysts who follow the internet retail sector believe that more suppliers such as vidaXL will cater to dropshippers in the near future, and the rationale behind this forecast is similar to what we have seen in recent years with regard to social media influencers. Brands will try just about everything to extend their reach, but they also know that they can only get so far on their own; for this reason, they have not been shy about letting Instagram stars promote their brands.
When it comes to a dropshipper such as the aforementioned Melvin Chee from Melbourne, a brand like VidaXL will be more than happy to handle dropshipping because this is a young man who really knows how to market products to other young people who happen to be very active on social media. Suppliers do not really mind if their dropshippers are selling on eBay, Amazon or other platforms, but they are bound to pay more attention to those who maintain their very own e-commerce shops because they tend to develop more loyal shoppers.
Another advantage of dropshipping in the traditional method of maintaining a web shop versus Amazon and eBay is that marketing efforts tend to be more effective. Sending shoppers from a Facebook page to an Amazon product listing, where they can be distracted by other items and sellers is not the same as sending them to your very own shop.
Evaluating Dropshipping Suppliers
In 2018, the best recommendation for dropshippers who are looking for suppliers to work with is to stick with those that are already connected to the most prominent e-commerce sourcing supplier directories. The advantage in this regard is that dropshippers can learn about who they will be doing business with, and here is a certain elements of trust present as the directories screen and list only real opportunities
Price and quality are two major factors to consider when evaluating suppliers, but they should not be the only ones. There is a caveat with regard to searching for suppliers who offer products at bargain prices, and it is directly related to quality. Looking at Android tablet suppliers on AliExpress, for example, will make you wonder at the quality of their products being offered for less than $20. A red flag among suppliers is when a few of them carry the same products at very similar prices, but a lone wolf offers very low prices in comparison; in this case, the lone wolf could be dangerous.
When evaluating suppliers on a well-known marketplace, it is important to remember that their livelihoods hinge upon tight margins and cutthroat competition; to this effect, suppliers that offer products at higher prices in crowded markets such as Alibaba.com and AliExpress.com tend to offer items of better quality. Making decisions along these lines is something that should be done with prospective shoppers in mind. Dropshippers who can operate on lower margins themselves may want to gravitate towards higher quality products because shoppers with deep pockets are not so numerous to begin with, but they are more likely to become loyal customers.
Needless to say, feedback, reviews and comments left by other dropshippers should weigh very heavily when evaluating the company that will be in charge of logistics, and this is why it is important to choose from established e-commerce platforms and marketplaces.
Here is something to watch for in 2018: as more established brands dip their toes into the dropshipping waters, scammers and fraudsters are bound to take advantage of this trend for the purpose of plying their wicked trade. If a Chinese supplier of consumer electronics suddenly starts offering Apple Watches, there is a very strong chance that they are counterfeit products. To this effect, dropshippers should not fall for promotional emails from their suppliers alluding to deals made with established brands. In the case of a brand such as vidaXL, it is easy to check their standing by going to their website and looking for their contact information.
As long as the items are affordable, making test purchases is the best method of vetting dropshipping suppliers. The advantage of test purchases is that they can actually be revealed to the suppliers so that they know that sellers are paying close attention; naturally, a test purchase handled gracefully deserves positive feedback and good reviews. Tet purchases are not the same as ordering samples, which will invariably be of the highest quality and will arrive in record time.
Dropshipping is a global retail activity; however, e-commerce entrepreneurs who wish to focus their marketing efforts on the domestic market should look for suppliers that have Australia Post shipping options. While this is not fully indicative that they have a local presence, they may have an air courier route from their countries of origin, typically in Asia, as well as a fulfillment center in the Commonwealth. This will certainly cut down on shipping times, but it may also cost more, and it may prove to be more appealing to shoppers who are familiar with Australian postage and packaging. this however is not the deal breaker. Majority of websites these days sell and provide a clear exclamation that the items are coming from overseas, and customers don’t mind waiting the extra time to secure a better bargain. This is common practice.
Suppliers that offer private label programs will do so at higher rates. Private label lines are advanced dropshipping options that often push entrepreneurs into higher levels of e-commerce involvement; in the Amazon Marketplace, private label distributors start off as dropshippers before managing inventories at FBA centers.
Lucrative Niche Selling and Dropshipping Suppliers
Niche selection is almost as important as choosing the right dropshipping suppliers. Now that Amazon is becoming the leader of online retailing in Australia, many dropshippers are looking at 3P marketplace trends to find the ideal niche. The problem with this research method is that it tends to be overly broad. When evaluating potential niche retail spaces, the three main factors are:
* Comfortable profit margins
* Low potential of customer service queries
* High potential of building sales volumes
Even before getting to the point of applying the criteria above to potential niches, dropshippers should think about their own potential insofar as being able to market the products they choose to sell; to this effect, they should think about the items they enjoy purchasing online themselves. This criteria can be tested amongst friends and relatives: What do they enjoy ordering online and how often?
To start off with, dropshippers should write down a list of at least 20 niches, and each of them should connect to customer profiles and products. The list can now be compared to the three criteria factors mentioned above; the idea is to select five or six favorite niches before they can be further segregated according to the following aspects:
* Product weight
* Product variation
Seasoned dropshippers who set up shop on the Amazon Marketplace tend to stay away from what is known as parent/child ASINs. Let’s say a seller introduces a new line of stylish sweaters in various colors and sizes. The problem with giving shoppers options is that this increases the likelihood of making mistakes and returning items; dropshippers who do not intend to dedicate too much time providing customer service should stay away from heavy product variations.
The niche criteria evaluated thus far has not touched upon shopping trends, which should always be the last factor. For this analysis, it is better to look at eBay trends more than Amazon, and it is also better to look for sales that completed at higher prices. The goal is to consider lower priced items that fit the criteria previously mentioned.
The final piece of advice for dropshippers as it relates to selecting suppliers is to keep in mind that they are sellers too. Once a supplier/dropshipper relationship is forged, the supplier will likely start marketing for the purpose of enticing dropshippers to shift their efforts towards novelty items, which are part of a niche of their own. Many niches can be profitable, but this should not make dropshippers rush in those directions. The question should always be: Can I really market these products? If the answer is yes, finding the right supplier will always be easier.