Recently, a member of our Ask.Oberlo community, @KerrieWilson asked: I am wondering, when first starting out should I market to the USA only, 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? Most store owners sell only to the US because they don’t feel like their store is ready for global expansion through international dropshipping. After digging deeper, however, here’s what I’ve found:
In the form of a dropshipping case study based on one of our own Obero users, we’ll be answering Kerrie’s question by telling you why you should opt for international dropshipping despite any knee-jerk reactions you might have to confine yourself to dropshipping in the US only. To fully convince you of this, we’ll explore the disadvantages of dropshipping in the USA. In short, dropshipping in the USA isn’t sustainable for a variety of reasons, particularly when there are many other viable and lucrative markets to focus on instead. Aside from convincing you to go international with your dropshipping business, we’ll cover how doing so with AliExpress products can help you to better reach a global audience.
By dropshipping with AliExpress, you can literally sell anywhere and everywhere. A lot of suppliers ship to dozens or even hundreds of different countries, 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 those that insist on only dropshipping in the USA, their stores are usually only in English, and they can only provide English support. What’s more is that shipping to locations outside the USA often takes more than 30 business days, and getting parcels delivered to American addresses using ePacket only takes 14.
That said the USA dropshipping market isn’t ideal…
Dropshipping USA: Disadvantages
Below I list a few disadvantages of the dropshipping market in the USA, such as high competition that increases advertising costs and saturates supply. The disadvantages we found while creating this dropshipping case study are deeply interrelated and warrant closer examination.
Dropshipping USA: Extremely Competitive Markets
Not to mention, large, developed markets have tons of smaller merchants. Shopify powered 240K stores in 2015 and 70% them were based in the USA. While the giants and smaller merchants don’t necessarily dropship in the USA exclusively, these examples give a clear image of the level of competition.
Dropshipping USA: Customers are Demanding
Some of you might be surprised to hear this, but Americans are the most demanding consumers I’ve ever worked with. It’s definitely not a bad thing, but for a beginner it’s often difficult to keep up with the dropshipping market in the USA because customers have gotten used to an Amazon Prime level of service and now come to expect it.
Dropshipping USA: Advertising Costs are High
If you cater to the USA dropshipping market, you’ll find that you spend more on ads. According to Salesforce Advertising Index (2015 Q1), the average cost per thousand impressions (CPM) in the US was $3.30. In France it was only $1.57. That’s more than 2x cheaper for the same result.
How many of those 1,000 impressions convert into customers depends on your product, your store, and a nunber of other factors — but if these things are done right, you could enjoy double the profits just by switching to another market.
Think of even smaller developed markets like Norway or Finland. (Fun fact: In Norway, a bottle of lager beer costs $9.00, just like a T-Shirt in your store 🙂 ).
International Dropshipping: What You Should Consider Before Choosing Another Market
Below I list three things you should consider before testing another market.
International Dropshipping: English Speaking Population
Assuming you don’t plan to invest your money and time translating your entire store, 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%.
The conventional ecommerce design makes it super intuitive to buy on a site no matter what the customer’s language. When I was running a store, I received many orders from non-English speakers from around the world. It’s still something you should keep in mind, however.
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.
International Dropshipping: Purchasing Power
From the Norwegian beer example above, it seems that Norwegians might not mind spending $30 on a T-Shirt. For someone in Mexico–a large and attractive market– $30 might be a price reserved for a high-end clothing item. Pay a lot of attention to this, as it might significantly reduce your conversion rate.
International Dropshipping: Delivery Infrastructure
Some remote countries don’t have the postal infrastructure that’s taken for granted in Europe and the United States. A lot of suppliers will say you can’t track orders shipped to South Africa or Brazil. Alternatively, they might inform you that there’s an extra delivery fee for doing so, even though the delivery was supposed to be free.
What’s even worse is 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.
Though you should be careful with developing markets, I strongly recommend testing them. You might just hit the jackpot you failed to find in your home country.
International Dropshipping: Which Countries to Try
Our friend and early Oberlo user agreed to share their Google Analytics stats, for this dropshipping USA case study, in order to help you decide which countries are worth testing. We aren’t able to disclose their store’s name, but we can say that they are selling a broad range of women’s and men’s clothing and accessories.
A few key points before we get into details:
- All of their products come from China and are dropshipped with Oberlo
- The store offers standard delivery options: 14-day delivery to the USA (with ePacket) and 30+ days delivery to other countries (China Post).
- The website is in English and has never been translated into other languages.
- The website support is also offered only in English.
- The majority of traffic comes from Facebook Advertising.
Dropshipping USA: Top Countries by Conversion Rate
Quick note: conversion rate is the % of your site visitors 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 and includes only countries with 100+ orders.
The top 20 countries are:
Even though the United States is the biggest traffic source of 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 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. Inernational: Top Countries by Average Order Value
Just as cutting your advertising costs in half might double your profits, you can earn more by selling extra to one customer.
In this specific dropshipping USA case study, the US is not even in the top 20 countries for average order value. In fact, its average order value is only US$39.29.
Meanwhile, 8 out of 10 countries on the list are in Europe, and the majority of those are Scandinavian. While Argentina looks great, I’d recommend eliminating it from your testing list since the conversion rate is only 0.46%. Norway proves to be another top choice as it appears in second and fourth places on the charts.
These two simple graphs above 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 smaller.
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. For this task, 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.
As we’ve seen from the above examples, smaller and cheaper markets don’t always mean smaller profits (Tweet This). What have you found most useful from this dropshipping USA case study?