Case Study: International Dropshipping Vs. Dropshipping in the USA
Recently, a member of our Ask.Oberlo community, @KerrieWilson asked, “When starting out, should I only market to the USA instead of targeting other smaller markets?” When writing my response, at first I decided that dropshipping in the USA was the right choice, but then I started to have my doubts. Is it really the best market for dropshipping? For most dropshippers, the USA is viewed as a viable market simply because they don’t feel like their store is ready for global expansion through international dropshipping. After digging deeper, I’ve decided to write an article about what I found.
In the form of a case study about dropshipping in the USA based on one of our own Oberlo users, we’ll be answering Kerrie’s question mainly by telling you why you should opt for international dropshipping despite any knee-jerk reactions you might have to confine yourself to solely dropshipping in the USA. But first, to fully convince you of this, we’ll explore the reasons why people are inclined to dropship in the USA, and then counter those by exploring the disadvantages of dropshipping in the USA in more detail.
While dropshipping in the USA might seem like a good idea at glance, as we delve deeper you will find that it isn’t sustainable for a variety of reasons, particularly when there are many other lucrative markets to focus on instead. Thus, US dropshippers are limiting themselves by not trying to target markets outside of the United States.
Whether you already dropship in the USA and are looking to branch out, or are just getting started with your dropshipping business, this article will prove useful for deciding which markets are most suited for your business and the products you are selling.
- Dropshipping USA: the Plus Side
- Important Precautions for Dropshipping in the USA
- The Disadvantages of Dropshipping in the USA
- International Dropshipping: What You Should Consider Before Choosing Another Market
- Dropshipping Country Case Study
- Dropshipping USA vs. International: Conclusion
- Want to Learn More?
Dropshipping USA: the Plus Side
Before we delve into why there are better options than dropshipping in the USA, it’s worth shedding light on some of the other reasons why people might choose to do this in the first place. For those that insist on dropshipping in the USA exclusively, their stores are usually entirely in English, and they can only provide English customer support. If you are a native English speaker, this can admittedly give you a leg up on competition with other stores in one of the most bustling commercial markets in the world. What’s more is that for US dropshippers, the fact that shipping to locations outside the USA often takes more than 30 business days while getting parcels delivered to American addresses using ePacket only takes 14 might seem like a major draw. That said, the USA dropshipping market isn’t ideal for the following reasons.
Important Precautions for Dropshipping in the USA
For US dropshippers, the natural inclination might be to stick to what you know and sell to other people around the country, but one of the beauties of dropshipping is that your own country of residence is essentially irrelevant to the order fulfillment process itself because products are shipped to customers directly from suppliers. The majority of suppliers involved in dropshipping are located in China, and only a small handful operate out of the US anyway. With dropshipping, you can sell anywhere and everywhere, meaning the path is already laid out for you to sell all around the world rather than only dropshipping in the USA. A lot of suppliers ship to dozens of different countries or more, from G8 members to tiny countries like Kiribati (a country in Oceania). Meanwhile, dropshipping USA products wouldn’t allow you to take advantage of the global market as easily due to lower margins. For dropshippers not from the USA, you can use your unique perspective to your advantage by thinking outside the box and exploring different countries for marketing your products.
The Disadvantages of Dropshipping in the USA
Now that it’s clear dropshipping in the USA isn’t really necessary, let’s delve into some of the distinct disadvantages for doing so. The following is a list of the downsides to dropshipping in the USA. These include high competition in a saturated market that usually requires higher advertising costs. Furthermore, I have found that the disadvantages associated with dropshipping in the USA are deeply interrelated and warrant closer, more detailed examination.
Extremely Competitive Markets
Being the largest economy on earth, the USA is home to a lot of strong ecommerce giants with websites people can visit to buy anything they want. There’s Amazon, Walmart, Jet.com, and many more cropping up all the time. The presence of these companies alone can make dropshipping in the USA pretty challenging.
Not to mention, large, developed markets have tons of smaller merchants. Shopify powered 500K stores in 2017, and 70% them were based in the USA. These numbers only continue to rise. While both the giants and the smaller merchants don’t necessarily dropship in the USA exclusively, these examples give a clear image of the level of competition you’ll be up against as a dropshipper in the USA.
Customers are Demanding
This probably doesn’t come as such a big surprise, but Americans are the most demanding consumers I’ve ever worked with. Considering the fact that USA dropshipping companies like Amazon, which offers features like 2-day shipping, Americans have come to view this as standard. For a beginner, it’s often simply impossible to keep up with the the existing market conditions for dropshipping in the USA for this reason.
Advertising Costs are High
If you cater to the USA dropshipping market, you’ll find that you will need to spend more on ads in order to stand out from so many competitors. According to Ad Espresso, the average cost per thousand impressions (CPM) for Facebook ads in the US was $7.19 in Q3 of 2016. Meanwhile, for Google Adwords in 2016, it was $24.74 based on a report published by Statista.
How many of those 1,000 impressions convert into customers depends on your product, your store, and a number of other factors, but if these things are done correctly, you could reap double the profits just by switching to another market rather than attempting to dropship in the USA. For example, you may consider switching over to smaller developed markets like Norway or Finland where there is less competition. While we’re on the subject, let’s explore the nuances of dropshipping beyond the USA in more depth.
International Dropshipping: What You Should Consider Before Choosing Another Market
Whether you are a US dropshipper or a dropshipper located in another country, below we will cover three things you should consider before testing another market. Thinking about whether the country has a large English speaking population, substantial purchasing power, and sufficient delivery infrastructure will not only save you issues down the line. It will also impact the profitability of a given market because, as we will see, sometimes focusing on smaller markets can actually generate more income than confining your efforts to the world’s largest economy.
Choose a Country with an English Speaking Population
Assuming you don’t plan to invest your money and time translating your entire store into another language, you should consider the English speaking population of your selected audience. For instance, only 5% of Brazilians speak English, while in Denmark, the English speaking population is 86%.
Fortunately, the conventional ecommerce design makes buy from an online store very inuitive no matter the customer’s language. When I was running a store, I received many orders from non-English speakers from around the world. Still favoring markets where English is widely spoken is something you should keep in mind.
Handy Tip: there are many translation apps in the Shopify Apps Marketplace, which can help you get decent translations without the manual work. Click here to browse the latest options.
Consider Purchasing Power when Dropshipping Internationally
Because the cost of living is already quite high there, it seems that many Norwegians are actually okay with spending $30 on a T-Shirt. For someone in a large and attractive market like Mexico, however, $30 might be a price reserved for a high-end clothing item. Pay a lot of attention to these differences from country to country because they might significantly reduce your conversion rate.
Research Delivery Infrastructure First
Note also that some remote countries don’t have the postal infrastructure that’s taken for granted in Europe and the United States. For instance, many suppliers will say you can’t track orders shipped to South Africa or Brazil, which could lead to issues down the line.
This is true especially when combined with the fact that in remote countries, a lot of deliveries never reach the recipient. These developing markets tend to have extremely strict customs policies or flawed postal services where packages are often “lost” somewhere en route. Suppliers might also inform you that there’s an extra delivery fee for shipping to such places, even though the delivery was advertised as free.
Though you should be careful with developing markets, I strongly recommend testing them yourself before simply casting them aside. You might just hit the jackpot you failed to find in your home country.
Dropshipping Country Case Study
One of our Oberlo merchants who is also a US dropshipper agreed to share his Google Analytics stats with us for this case study on dropshipping in the USA. This information will offer some insight to help guide your decisions about which countries are worth testing. We aren’t able to disclose the personal information about the merchant including his store’s name, but we can say that he is selling a wide range of women’s and men’s clothing and accessories.
A few other important background details include:
- All of his products come from China and are dropshipped using Oberlo
- The store offers standard delivery options: 14-day delivery to the USA (with ePacket) and 30+ days delivery to other countries (China Post).
- His website is in English and has never been translated into other languages.
- The website support is also offered in English only.
- The majority of traffic comes from Facebook Advertising.
Top Countries by Conversion Rate
Quick note: a conversion rate is the % of visitors to your site who make a purchase. For the purpose of this dropshipping USA case study, you can calculate it by dividing the number of sales by the number of visitors.
The chart represents the statistics of more than 2,500,000 visitors to his site and includes only countries with 100+ orders.
The top 20 countries were:
Even though the United States is the biggest traffic source on this site, its conversion rate is 1.5 times smaller than Australia. Scandinavia (Norway, Finland, Denmark) take three of the top 10 slots, which suggest that it is a must-try region.
Other countries you might want to try include Ireland, Canada and the United Kingdom. All of these have good conversion rates, are less competitive, and easily scalable. (Your ads can quickly reach every person in Belgium, but your budget would have to be insanely high to reach everyone in the UK.)
Dropshipping USA vs. International: Top Countries by Average Order Value
In this specific dropshipping USA case study, the US is not even in the top 20 countries for average order value. In fact, the average order value in the US is only US$39.29. This matters because just as cutting your advertising costs in half might double your profits, you can also earn more by selling extra to one customer.
In this store’s case, 8 out of 10 countries on the list are in Europe, and the majority of those are Scandinavian. Norway also proves to be a top choice as it appears in second and fourth places on the charts. While Argentina looks great, I’d recommend eliminating it from your testing list since the conversion rate is only 0.46%.
These two simple graphs allow us to create a sample scenario:
Out of 100 visitors from Norway, you would receive 3.54 orders of $51.25 in value each. In other words, 100 visitors = $181.43 in sales. Out of 100 visitors from the US, you’d only receive 3 orders of $39.29 value so that 100 visitors= $117.87.
The difference is $63.56. If you have 1,000 visitors per day, you’re leaving almost $650 on the table each and every day.
Dropshipping USA vs. International: Conclusion
The goal of sharing this dropshipping USA case study is to demonstrate that the US may very well not be your go-to option. Thus, you must test other countries even if you don’t speak the language or your site is only in English. This especially applies when your budget is on the smaller side. As we’ve seen from the above examples, smaller and cheaper markets don’t always mean smaller profits.
While the stats will definitely differ for your store, use the above graphs and insights to create your countries-to-test list. Try them and track the results. Then, revise your marketing strategy. This case study also serves to show you how important it is to do the research and analysis at every step of your dropshipping journey in order to make more informed, data driven decisions to the benefit of your business.
For these tasks, we’ve laid out plenty of advice and instruction on our blog for marketing to various audiences across a number of different channels and platforms. There are also plenty of free tools and apps available to maximize the efficiency of your dropshipping processes so you can focus more on testing markets and coming up with the right strategies to grow your business.
Want to Learn More?
- [VIDEO] What Is ePacket Delivery?
- Dropship International
- How To Select Dropshipping Suppliers
- How to Find the Perfect Dropshipping Products
- Wholesale Clothing Supplier: How to Find the Perfect One?
What have you found most useful from this dropshipping USA case study? Is there anything else you’d like to know more about and wish was included in this article? Let us know in the comments below!