Drop Shipping Outside The U.S. | How Much Does It Cost?
With a drop shipping business you can have the lifestyle you want most, no matter where you live in the world. But what are the costs of starting a drop shipping store outside the U.S.?
Drop shipping outside of the U.S. costs a minimum of $274 to start. The largest cost is $238 to register your business in the United States. Then you have a monthly cost of $29 for running your Shopify store.
Here’s a breakdown of the actual start-up costs with creating a U.S. based drop shipping store while living abroad. Please note all costs will be in U.S. Dollars:
- Domain Name - ~$2 to $16: The price depends on which provider you use to register your domain name.
- Hosting - ~$25/month: With our special offer on Shopify, you can get a 21-day free trial that offers you 10% off on all months following the trial. This let’s you pay around $25/month instead of the basic $29/month.
- Business Email Address - $0 to ~$5/month: This can be done for free with zoho.com or you can choose an email with more features. For instance Google Apps charges about $5/month.
- Logo Design - ~$5.50: We recommend you use fiverr.com, where you can find a good artist to make a logo for about $5.50.
- U.S. Based Phone Number - $0 to ~$30/year: Google Voice will give you a free U.S. Based phone number you can use to route to a gmail account. From the Google Voice account you can check voicemails, receive, and take calls. There are also paid options like Grasshopper that cost about $30/month.
- Incorporating a U.S. Based Business as a Non-citizen - $238: This will likely be your biggest starting expense. You can incorporate in the "easy" U.S. states like Delaware, Wyoming, or Nevada. Please note: When using this service you don't have to pay to get the U.S. federal EIN number, you can do this yourself for free! Use My USA Corp for this task.
- Advertising - Varies: This will depend entirely on your niche and how competitive it is to advertise. We have members that pay less than $0.10 per click and others that pay well over $1.00 per click based on their niche. However, there is a free $75 Amazon Ad credit and free $100 Google Ad credit for all members. A good rule of thumb is to budget about $100/month in advertising to start with, after using your free credit.
I hope this breakdown helps you to understand the costs associated with starting a store from abroad. While the upfront cost of incorporating may seem like a lot, the money you can make from a successful drop shipping store can more than cover it.
But there is no better proof that DSL works from abroad than hearing it from someone who has lived it.
That’s why we had one of our most successful members and DSL coach Jon Warren (who is from Australia) write about what it takes to succeed abroad. He also created a course on how to apply the DSL methods from outside of the United States in the DSL member’s area.
Here is what Jon Warren had to say about dropshipping from abroad:
If you're reading this you probably live in Australia, the UK, Canada, or somewhere in Europe. This post is primarily for people who live outside of the US. But are considering drop shipping within the US. If you are considering running a US based business you’ll have to form the business in a different way.
If you’re a new member or considering becoming one, you may be wondering: “I’d love to drop ship within my own country, but does it work?” or “Is the DSL method effective in my country?” The absolute answer to these questions is YES!
With a few tweaks and the right attitude, the DSL course can be applied successfully in most countries. As long as they have an established eCommerce market. This post will take you through those tweaks and help you drop ship in your country and market. Before we jump into this post, I’d like to give you an example of what is possible outside of the US.
I am based in the Australia, which is a physically large country. But, it has a small population (on a global scale) of approx 24 million people. Drop shipping is not as common in Australia as it is in the US, but it’s growing every day.
Over the last 2 years, I’ve been involved with many profitable drop shipping stores. This includes my first store, which has turned over $100,000 in a single month. Read about selling my store here.
I didn’t apply any special tricks or knowledge to achieve this. I only applied the DSL course. Then I worked out what needed to be done differently through experimentation and testing. This post was built on that experimentation and testing. I created it to give your chance of success an immediate boost.
The best part is that I’m not alone in finding success outside of the US. The DSL community is full of people who’ve started and continue to operate successful DSL stores in Australia, the UK, Canada, and Europe. Follow the DSL forum and Facebook groups to hear some of these success stories as they evolve.
One of the secrets to success outside of the US is to be flexible. This is business and you need to be prepared to alter what you are doing or planning to do if the unexpected happens.
This is an easy one to check off. Check out this fantastic post by DSL member Jared K. on the legal considerations and business setup requirements for countries outside of the US.
The Big Picture
Before we dive into the nuts and bolts of how to apply drop shipping in your country, it’s important to get your head around the fundamentals of what’s different outside of the US and the broad implications of these differences.
There are primary differences that will be obvious to most people.
- Most countries’ populations are smaller than the US, some significantly. The population of the US at the time of writing is approx 326 million. Contrast this with Australia @ 24 million, the UK @ 65 million and Canada @ 36 million.
- Drop shipping is generally not as common outside of the US although it is on the rise. By this I mean that there are not as many suppliers who drop ship. Proportionately, there aren’t as many online retailers who sell on a drop shipping basis.
- Minimum Advertised Price (MAP) does not exist outside of the US. In many countries price setting by suppliers is actually illegal.
- Shipping can be more difficult and expensive in many countries. Particularly those with large geographical size and smaller populations. Australia and Canada are prime examples of this.
These differences mean that to effectively apply the DSL model and course we need to make some tweaks.
The Right Sized Niche
Niche selection really is the area where most people get stuck, it’s a big decision and something you definitely want to get right.
Primarily, we need to do this to ensure that we're able to reach a large enough market. So that we make enough sales to have a highly profitable site that can help us live our ideal lifestyles. With a smaller population, getting too specific with your niche can put you in danger. Avoid a target market that is too small to reach the number of sales that you need to earn a comfortable income from your store.
Rather than focusing on one type of product, a good strategy to increase your potential market size is to focus on multiple product lines.
Be careful though, there is a balancing act here. While you may sell multiple different product lines, they still need to be products that would appeal and be bought by the same customer. This will enable you to retain the benefits of running a niche store, which is what DSL is all about!
A useful way to think about how to apply this strategy is to think of a particular interest group that your niche would appeal to. If you can identify your interest group, then you have identified your potential market. Once you have identified your potential market, you can work out what products will appeal to that group.
Supplier Contact & Approval
This is a big issue for many countries outside of the US. In many countries drop shipping is not as common a practice as it is in the US. This means that the niche you are considering may have few or no existing suppliers or retailers who are drop shipping.
There are occasions you will be talking with suppliers who are not currently drop shipping their products. This is not a problem. Both my experience and that of other DSL members in countries outside of the US have demonstrated that it’s possible to get approval from suppliers as their first drop ship customer.
The reason that some companies are not drop shipping is because no one has asked them to! This presents an excellent opportunity for you to be the first person they work with this way and to build a strong relationship.
Please keep in mind that it is crucial for you to talk to these sort of suppliers! While you can send an email or fill in an online dealer form you also need to talk to them. You are unlikely to convince someone to start drop shipping via email alone.
When making contact with suppliers who don’t already drop ship keep the following in mind (some of this also applies to all suppliers):
- Always put yourself in the supplier’s shoes. Imagine being them before you call, if you were them, what would you want to know?
- Don’t talk about “drop shipping”. It’s mostly a US term, so use a different term like “direct to customer”.
- You will need to explain to them how our model works, don’t expect them to know.
- Remember that you’re starting a relationship here. While it’s great to get approved on first contact, ultimately it doesn’t matter if it takes one or three calls to get approved.
- If a supplier is not interested or says no always remember to ask why. This is important. It’s often easier for someone to say no rather than yes.
Getting product information
Something you will notice outside of the US (and sometimes inside the US) is that suppliers will often have their product information in a poor state of organization.
This includes: product images, product descriptions (often don’t exist), other technical details, MPNs, GTINs (if they exist), and prices.
Product images can initially be low quality. You may have to get other product details directly from either the supplier’s website or the brand’s website that they supply. It’s very rare that you will be provided all of the product information in a neat package. Be prepared to help your supplier with this in anyway you can, it will pay off for you later.
Pricing Your Products
When we're looking to work with suppliers in the US we focus our energy on suppliers who enforce Minimum Advertised Pricing (MAP). MAP is a legal practice in the US where suppliers can set a minimum retail price that their products are not to be sold below.
They can then legally enforce this price with their retailers. This practice is aimed at ensuring that retailers do not dump the price of a suppliers product. It also ensures that retailers will have a margin to work with that will enable them to make profitable sales.
MAP doesn't exist in many countries outside of the US. In fact, in some countries (e.g. Australia) this practice is deemed to be anti-competitive and illegal. So, is no MAP a problem? No, experience shows that even without MAP pricing, margins are usually healthy in most niches. You will come across the odd supplier on whose products the margins are too slim due to competition. But this is not the case for the majority.
The general method to do this is to compare prices of products from a particular supplier across a range of competitors who are selling it. If you see consistent pricing with minimal variation (10% – 15% is acceptable) then margins should be healthy.
On the other hand, If you're seeing large variations in price, you know that either there are competitors who are buying it very cheap (usually because they hold stock) or some sellers have dumped the price in an effort to make lots of sales at a low margin. This should raise a red flag, you could still call the supplier but don’t rely on them as one of your Gold suppliers.
If Google Shopping is available in your country it can provide a quick and easy way to compare prices on the same item. Just enter the exact product name into the Google Search bar and click into the Google box to see all the sellers of that product.
Shipping Your Products
In many countries outside of the US shipping can be an issue for a number of reasons. Either many suppliers won’t organize shipping for you or you may live in a very large country with a small population. For example, Australia and Canada are very large geographically. But they have relatively small, and in places dispersed, populations. The large distances between population centers and the infrequency of shipping services to many of these locations can raise the cost of shipping significantly. It also poses challenges to setting up your shipping costs effectively in your store.
The major risk with shipping outside of the US is that you will face potentially high shipping costs. These costs will eat up a significant portion of your profits if you don’t manage them effectively.
Start things off right, focus on selling high-value products. This will give you the benefit of large profit margins in dollar terms. Which, in turn, means that you have more of a cushion should your shipping costs be larger than expected.
This is even more important if you are considering heavy or bulky (or both) products.
In general, aim for products with an average price in the high hundreds of dollars or above. This will ensure that you protect yourself against unexpected costs.
A question that you need to answer early on is what is your competition doing on shipping? Are they offering free shipping? Or are they charging for it?
It will be difficult for you to enter a market and charge for shipping when your competitors are doing it for free. Even if your prices are lower, there is something powerful in the use of the words FREE SHIPPING.
If your competitors are charging for shipping try to find out how much they are charging and what services they are using. This can usually be done with a good exploration of their website.
If your supplier tells you that you need to organize your own shipping, you will need to find a shipping provider to work with. In some countries, it can be hard to open an account with many established shipping companies without a minimum monthly spend or business history.
You will need to take the time to ring around and see if any shipping providers will work with you. Often you will find that mid-level and small national providers will be happy to work with you.
An alternative is to book your freight through an online freight broker. These are basically bulk buying services who are able to access a range of shipping providers on behalf of their customers. In return for access to the bigger players, they will charge a small fee on top of each booking.
A final option here to remember is that in many countries the national postal service will pick up and deliver packages. Be sure to check to see what service is offered as this could be a viable option for you.
Setting up Shipping in Shopify
Unfortunately, the standard shipping settings and options in Shopify don’t allow for a great degree of complexity. Luckily, there is a range of Shopify apps that can be installed to your store and configured to provide a more precise approach to shipping. Some good examples are:
- Australia Post Shipping Extension
- Advanced Shipping Manager
- Canada Post
As we’ve mentioned earlier in this guide, smaller populations mean less traffic than you would find in the US for most products. There will usually be less competition for your niche. Which will address some of this imbalance (meaning you get a greater percentage share of what traffic there is).
It is unlikely in most countries outside of the US that Google Shopping will generate enough sale or traffic to grow your site. In some countries, Google Shopping does not exist yet. While in others in many niches, it is completely ineffective at the time of writing.
You might be thinking well, where do I start? I’m not an online marketer, how am I going to understand let alone use all of the potential traffic sources?
The good news is that the DSL course is crammed with great information, guides, and walkthroughs on how to successfully implement just about any traffic source.
Where to start
The best and most cost-effective strategy for exploring a range of traffic sources is to take it slow. Experiment with one new paid traffic source at a time. If it proves profitable, scale your spend up until you reach the limit that it can provide and then move onto the next.
The same approach is effective for pursuing free or organic traffic. Your time is the cost here, it is best to experiment with one source at a time.
Past Google Shopping, here are the traffic sources that you need to be experimenting with:
- Google Text ads
- Google Dynamic Remarketing ads
- Email marketing
Here are 10 more traffic sources that have proven to work outside of the US:
- Instagram & Pinterest
- Facebook Groups
- Industry Publications
- SEO + Content
Wrap Up & Mindset
Dropshipping outside of the US can definitely be a rewarding and profitable experience. In many countries, drop shipping is still in it’s infancy. It can be really exciting and scary at the same time to be putting it on the line and being one of the first to make it successful. It’s possible, but like everything good it isn’t always easy. You need to prepare yourself for some difficult and tough moments.
How you deal with these difficulties will determine whether or not you are successful. Focus on a mindset that finds opportunities in adversity and be prepared to be flexible. In my experience, there is always a solution to even the most complex problems. You just need to have an open mind and be prepared to experiment with new or possible untried things.
We have a great DSL community and coaches that are standing by to help you get through any sticking points or difficulties you are experiencing. We’ve been there before, reach out when you need to and let’s find success together.