In 2019, the world was shocked by the Covid-19 pandemic. Ensuing lockdowns and travel restrictions have forced countries to rethink the brick and mortar retail model. In return, the importance of eCommerce and the rise of online shopping have emerged.
The online marketplace has become so intense that businesses worldwide who were able to take advantage of this will expand and profit the most. And there is no doubt that the US, with its population of 300 million people, stands as one of, if not the most, attractive places to sell.
In 2018 alone, 93% of Americans made an online purchase, and that number continues to rise. With higher incomes and purchasing power than the worldwide average, the country has been one of the best to adapt to online buying.
So how can businesses in Asia or other parts of the world look to sell in the US? Language barriers, stringent laws, and expensive taxes seem to all prove too costly.
That is where dropshipping through retailers and partnerships with fulfillment centers come into play. (Also read our article on “What are fulfillment services and why do you need one while shipping to the USA?”)
In this case, overseas manufacturers can benefit from the combination of fulfilment and dropship services. They can first ship their products from their country of origin to fulfillment centers in the US. Their fulfilment partners will then fulfill any orders from retailers, aka the dropshippers, and ship directly to the consumers in the US.
The concept of dropshipping for manufacturers
Nowadays, to stay competitive, online retailers carry a wide range of products within their niche, with a large portion of these not being manufactured in-house, or by the brand at all.
With the growing sentiment moving away from brick and mortar and its high labor and lease costs, dropshipping has found its way into prominence.
Dropshipping is a retail fulfillment method whereby products are sold based on demand and are not kept as inventory by retailers. When a product is purchased, the store then sends that order to the third party supplier, who then ships it directly to the customer.
When a manufacturer partners with a fulfillment centre in the US, the fulfillment center will ship their products directly to the fulfillment partner’s warehouse on a consignment inventory basis. Next, the fulfillment partners will liaise with the interested US retailers, who will act as dropshippers, to showcase the manufacturers’ products to consumers.
Once an order is placed, the retailer will forward the order to the fulfillment partner, who will then ship the products directly to the consumers. The product is NOT sent over to retailers first before rerouted to the consumers. This reduces the time and costs associated with middle-man handling.
The main difference between dropshipping and other retail models is that the retailer doesn’t need to stock or hold inventory and passes on customer orders to wholesalers and manufacturers to then fulfill.
From the manufacturers’ perspective, the use of fulfillment partners and retailers’ services in the US allows them to sell internationally using their own brand name. When the international demand is high, they can benefit from economies of scale by producing products for both local and international markets. This in turn decreases their marginal cost of production.
Benefits of dropshipping for manufacturers
Dropshipping through retailers has many benefits for manufacturers, such as:
- Low capital and less risk when entering the international market
Probably the most significant incentive to dropshipping is the low capital requirement. You only need to export a low amount of stock to test the market. By taking advantage of the fulfillment partners’ local market knowledge and connections, you can enter the US market with significantly lower risk than doing it on your own.
- Easy and quick to set up and get started
Starting an eCommerce business is simple, with most companies partnering with online retailers or dropshippers like Wayfair, Macy’s, Home Depot and so on to streamline the process. Furthermore, there is not much after-sale work that needs to be done because most of the work is passed onto fulfillment centers with little fees.
- Low overhead cost
Without dealing with overheads in inventory and management, the risk for using the dropshipping model is extremely low. Vendors or manufacturers are only required to pay small fees to store their products in the fulfillment partners’ warehouse. Bear in mind that leasing storage space in a prime location may cost even more.
- Flexible locations and wide target markets
Dropshipping allows retailers to sell remotely. Removing the handling process from a sale frees up time as well as provides flexible locating. This can benefit the manufacturers as they can sell to a wide target market through online retailers.
- Wide selection of products to sell
Being able to sell a wide range of products allows dropshippers to target more than one niche.
This not only improves scalability but also provides a more extensive customer base. In addition, because orders are passed on, retailers can focus on expanding and increasing the selection of products to sell.
These benefits eventually flow back to the manufacturers. At the same time, they will understand the market demand better and be able to export a wider range of products to the US.
How does dropshipping work when you have partnerships with fulfillment centres?
The dropshipping process can be broken down into the 4 steps below:
- Overseas manufacturers partner with fulfillment centres for products you can sell, prices, shipping, warehouse and fulfillment as well as payment terms.
- Fulfillment partners will then liaise with retailers to advertise products on an online marketplace.
- Retailers will receive and redirect orders to fulfillment partners who then ship these orders to customers.
- Retailers can gather more insights for products that can sell and communicate them to partners and manufacturers for fulfillment.
What products can you dropship?
You can technically dropship any product. But like all successful businesses, it is important to pick emotional, practical, or unusual products. These factors will help you connect with customers and incentivize spending.
Furthermore, finding a niche and expanding on the types of products sold within specific industries can help build brand loyalty and awareness.
In addition, to successfully dropship, eCommerce businesses should also market and advertise products in a creative way to stay ahead of the competition.
Lastly, it is vital to understand the product demands and spending patterns of consumers.
5 reasons why manufacturers should dropship in the US
- 96% of Americans have made an online purchase at least once in a life. With over 300 million people, there is a huge opportunity to sell any product.
- High income and high spending habits come hand in hand. More than half a trillion eCommerce sales are made per year.
- High income also means high purchasing power. This means that Americans can pay higher prices for your products.
- A wide demographic range means that all kinds of niches can become popular and succeed.
- Since your fulfilment partners are located in the US, the shipping time and costs to customers are reduced.
How to start dropshipping in the US?
Operating a US dropship business from overseas can be complex and tedious. However, there are a few rules and laws to abide by for your business to operate legally.
To register with dropshipping platforms in the US, you will need to set up a US off-shore business.
This will allow you to process credit cards and other payment methods and provide you with a social security number. In addition, you will also need to apply for a US resellers permit which most dropshipping platforms and suppliers will require to conduct business.
To set up an off-shore company, there are two states in the US, Delaware and Wyoming, that are perfect for overseas businesses. Both usually result in 0% income taxes on profits, are exempt from filing corporate documents like annual returns, and don’t store information on directors and shareholders in an off-shore company.
However, this only remains true as long as your business operates from overseas and you are a non-resident, in which case you will still likely have to abide by your country’s tax and law obligations.
All these are made simple if you have a fulfillment partnership with a local company in the US. You are only required to have a contract between you and fulfillment partner and adhere to export regulations to the US.
Examples of MultiB2B’s leading online retail partners in USA
- Amazon – Fashion, electronics, computers, home & kitchen appliances, sports & outdoor products, etc.
- Home Depot – Decor & furniture, appliances, bath & faucets, hardware, lawn & garden products, etc
- Cymax – Furniture, storage cabinets, lighting fixtures, decor & outdoor products
- eBay – Electronics, tools, home decor, toys, sporting goods, kitchenware, beauty products, pet supplies, etc.
- Macy’s – Home essentials, fashion, jewelry etc.
- Houzz – Furnitures for living room, kitchen & dining room, office, and bedroom as well as professional services for remodeling, renovation, etc
- Petco – Pet supplies, pet food and pet products
- Walmart – Fashion, home improvement, furniture, appliances, etc.
- Wayfair – Bedding, furniture, decor, lighting, kitchen appliances & tools, etc.
- Overstock – Bed & bath, home improvement, furniture, rugs, decor, etc.
- Zulily – Furniture, bed & bath, kitchen & dining, fashion, etc.
- Target – Electronics, clothing & accessories, home & patio furniture, etc.
- Lowe’s – Home improvement items
and many more. It is not difficult to start or scale your B2B ecommerce plans in the US market when you partner with MultiB2B.
FAQs on dropshipping in the USA
Can I dropship in the US from another country?
The dropshipping model is neither illegal nor unlawful by any law or policy in any country. There is also no prohibition that a business based in any country has restrictions to dropship in another country.
That being said, businesses need to abide by certain rules and laws when dropshipping in another country such as the US. For example, regulations that need to be followed include banned or prohibited products, labeling and packaging rules, and taxation laws.
To make things simple, consult the best full-scale sales & operations partner in the US.
Why is dropshipping better than wholesale in the US?
Competing with large online retailers like Macy’s, Lowe’s and other wholesale retailers can be difficult, and businesses looking to sell in the US must find what they can offer in comparison. It takes time, money, and careful planning to do so.
Dropshipping allows a business to test their products in a new market without the high costs because there is no need to hold inventory and lease large warehouses.
As mentioned in the testimonials, MultiB2B’s one-stop integration with all major retailers in the US, overseas manufacturers or vendors makes it easy to sell through these big players instead of competing with them.
Is dropshipping in the US legal for manufacturers ?
Dropshipping is legal in the US as long as businesses follow the rules and regulations surrounding shipping, packaging, labeling, and prohibited products. These can include unethical brands, copyright infringements, and weapons.
Does dropshipping require manufacturers to pay taxes?
Any products sold in the US are subject to the rules involving the sale of goods and services. These include custom duties, tariffs, and income tax, and the best way to ensure that all documents and duties are properly carried out is to seek out a partnership with someone who knows the process well.
For fulfillment, this can be done by companies like MultiB2B, which have a strong relationship with retailers in the US and have a good understanding of their local rules and regulations.
Partnering with a fulfillment center to dropship your products
Fulfillment centers have become popular in light of the nature of eCommerce and dropshipping. Third-party fulfillment centers (3PL) are essentially service companies that help store, manage, and ship products to customers.
They are an outsourced solution that helps alleviate the responsibility and difficulty associated with fulfilling orders overseas.
3PL’s are beneficial for businesses that are expanding rapidly or those that sell a wide range of products with significant sales volume variances.
In addition, they also help make warehousing and shipping products more efficient and sometimes provide valuable inventory and logistical information to businesses by using advanced inventory tracking software.
Millions of people worldwide dream of having a profitable business that has customers all around the world.
This has become a reality for millions more as the world of e-commerce continues to dominate the global shopping market. Furthermore, the dropshipping model has become increasingly popular due to its low risk, which has seen exponential growth coupled with the ongoing pandemic.
As a result, manufacturers continue to expand operations to meet the demand. That being said, suppliers often find themselves unable to manage the surge in operations efficiently. This is where 3PLs become crucial as they help minimize vast amounts of time, costs, and responsibility in one of the most critical factors of an eCommerce business’s success, the cross-border fulfillment stage.