Dropshipping in UAE: Understanding its Process, Pros, and Cons
If you are looking for online business opportunities, then you might have come across the concept of Dropshipping in the UAE.
Dropshipping in the UAE or in any part of the world is an online business model that can help to generate high returns for aspiring e-commerce entrepreneurs.
Keep on reading to learn more about it in detail.
1.
Understanding Dropshipping in UAE
Technically, dropshipping in UAE is an order fulfillment method that does not require your business to have products in stock.
Instead, your store sells the products, and passes on the sales order to a third-party supplier, thus, they are the ones shipping our order to the customers.
Let’s discuss it in detail.
It is important to note that the biggest difference between dropshipping and the standard retail model that most brands follow today is that the selling merchant does not stock or own inventory.
Instead, the seller will purchase an investor as required from a third party, who is usually a wholesaler or manufacturer in order to fulfill the orders.
You might be thinking that making money with the help of Dropshipping in the UAE sounds easy.
However, when you factor in all the aspects of continuing this model, you can learn about different things related to it.
To make you understand the process of dropshipping in the UAE, we will discuss a few approaches by the end o the article.
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Dropshipper
A dropshipper is a manufacturer or a supplier who manages the inventory for the retail business.
Moreover, they will ship the order to your customer.
The merchant is responsible for gaining customers by driving traffic to the store and processing orders.
Meaning, that you will act as a middleman. Additionally, you will reap the share of profit by marking up the items you sell.
It is important to note that millions of people are using this model as it has low barriers to entry and requires less money to launch.
That is what makes it more interesting. What is more surprising is that you build a business that is sustainable in the long term, while using your laptop.
Of course, there are both drawbacks and advantages to using this business model, and it is important to understand them before you start Dropshipping in the UAE.
Once you understand the advantages, disadvantages, processes, and approaches to it you can effectively start using this model.
Let’s discuss the process of dropshipping in the UAE.
Dropshipping Process
Let’s discuss how dropshipping in the UAE works. We will discuss the process step-by-step so that you can understand it clearly.
As you can see in the above image that retailer is just one piece of the puzzle.
A successful dropshipping operation relies on multiple partners are working together in sync.
You can break down the process into 3 basic steps:
1: The manufactures
The manufactures create the products and sell them in bulk or in large quantities to suppliers and wholesalers.
Let’s consider that a manufacturer is selling stationery products.
After they make the products in bulk, they will sell them in bulk to wholesalers and suppliers, and in turn, will resell the products to retailers.
2: Retailers
Suppliers and wholesalers tend to sell the products to retailers.
In this process, you will act as a retailer who searches out for suppliers for a specific type of product or multiple products.
Thus, you as a retailer and supplier can then enter into an agreement to work together.
Pro tip: While you are buying the product directly from the manufacturers, it is easier to purchase from suppliers instead.
This is because many manufactures have minimum purchase requirements that can be rather high.
Therefore, you might find it easy to buy directly from the manufacturer, and you will benefit most from buying from the suppliers.
3: Consumers
Suppliers and wholesalers do not sell directly to the public, shower, it is your job as a retailer.
The retailer is the final step between the product and the customers.
As a retailer, you provide storefronts to the customers to purchase the products.
After the wholesaler marks up the product, you can mark it up again to arrive at the final price.
That is the entire process of dropshipping, however, it is a crucial step.
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2.
Pros of Dropshipping in UAE
Dropshipping in the UAE is a beneficial business model for aspiring entrepreneurs to start a business as it is accessible.
With this model, you can test different business ideas with limited downside. Thus, it lets you learn a lot about choosing products and market in-demand products.
Keep on reading to learn more about it.
The following are the reasons as to why dropping in the UAE is a popular model :
Easy to Set Up
If you do not have prior business experience, then you need not worry.
You can easily start with this model, however, it may take some time to learn the basics, to launch your business quickly, and learn the rest as you continue.
Moreover, it is easy to start dropshipping in UAE as the start-up costs are low, especially when you want to get into other retail business models.
For instance, you do not need a warehouse to store products or need a team to help you out.
Additionally, you also do not need to worry about stocking and shipping the products.
Surprisingly, once you start with this model, you do not have to worry about the above.
This means that you can start dropshipping in UAE today.
In fact, you can start within a matter of hours after learning the basics.
For this, you will need some foundational knowledge and the right tools and resources.
By the time, we are finished with this article, you will be equipped with enough knowledge to start your dropshipping business.
Dropshipping is Scalable
As you scale up, this business model does not have to change much.
You will have to put some more effort into sales and marketing as you grow, however, your day-to-day will stay more or less the same apart from processing more orders.
One of the advantages of dropshipping is that the infrastructure cost of this model does not go high when you scale.
And because of this, you will need to allocate more to the marketing side of your business. Thus, with the help of an e-commerce website, you can start today.
With the help of graphic design software, you can design a user-friendly website to grab the attention of the target customer.
Thus, the more you focus on promoting your business and delivering a great customer experience, the better you will be.
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You do not need an Office
Interestingly, you do not need a huge space to run your business.
Instead, you can run your entire business from your laptop and you also do not need high-level investments.
However, your largest expense will be advertising.
This is a budget of your business that you can scale up as your store gains more traction.
Moreover, as you grow, your costs will be fairly low, especially when compared to traditional business expenses.
Flexible Business Model
One of the biggest advantages of dropshipping is that it is flexible.
You get to be your own boss and set your own rules.
It is so far, one of the most flexible careers that you can pursue.
Moreover, you can work from home, with little more than a laptop, and at the varying times, you find most convenient.
This is ideal for entrepreneurs who want a business that works best for them, and you will not have to bend over to get things done.
Instead, you can easily set your own pace.
Dropshipping in UAE is also flexible as it gives you room for decision making and you can easily list new products whenever you want and adjust your strategies on the fly.
Thus, if you are going on a vacation, you can automate everything to generate passive income while you are away.
The possibilities are limitless
Simpler to Manage
As dropshipping does not require you to make too many commitments like hiring staff or renting a warehouse, you can manage easily almost everything.
After finding the suppliers and setting everything up, for the most part, you are only responsible for managing your online storefront.
Moreover, you do not have to pre-purchase the items you are selling, thus, you can offer a wide range of trending products to your potential customers.
If t suppliers stock an item, you can list it in sale on your store at no additional costs.
3.
Cons of Dropshipping in UAE
You might be attracted to the idea of jumping right into starting this business model.
However, it is important to note that dropshipping has its downsides as well. Generally speaking, convenience and flexibility both come at a process.
Let’s discuss the cons of dropshipping in the UAE as follows:
The following are the few shortcomings to consider:
Let’s discuss them as follows:
Low Margins
One of the biggest disadvantages of using this business model is operating in a highly competitive dropshipping niche.
It might sound easy to start, costs are minimal, however, many stores are setting up shops and selling items at rock-bottom competing prices to grow revenue.
This is because their investment is little in getting the business started, therefore, they can afford to operate in minimum scales.
Another thing to keep in mind is that if you start dropshipping on Amazon along with the Shopify store, your margins will be much thinner.
Moreover, these sellers will also have low-quality websites and poor customer service, which you can use to your advantage.
However, this will not stop the customers from competing for their prices to yours.
Thus, this increase in fierce competition will quickly hurt the potential margins in the niche you are operating in.
Fortunately enough, you can minimize this margin by competing in a niche or vertical that is very well suited for dropshipping.
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Inventory Issues
It is easy to track your items that are in and out of stock if you yourself are stocking all your products.
However, when you are sourcing from different warehouses, which are already taking orders from multiple merchants, inventory can change on daily basis.
Fortunately, there are a number of apps that let you keep up with the suppliers.
Therefore, dropshippers can pass orders to a supplier with a click or two and should be able to view the inventory available.
Websites like Oberlo also let merchants take automated actions when the stock of the suppliers hits zero.
For instance, if a product is no longer available, you can automatically unpublish the product or keep it published.
However, automatically set the quantity to zero.
Shipping Complexities
If you are working with a number of suppliers, the products on your online store will be sourced through a number of different dropshippers, just like every dropshipper.
Consider the following example:
If a customer places an order for 2 items, and all of them are available.
Only from separate suppliers, you will have three separate shipping charges for sending each item to the customer.
However, it is probably not wise to pass this charge along to the customer.
And when it does make sense to include the charges. automating these calculations can be difficult.
Supplier Errors
You might have come across a certain situation where you made no mistake, and you still had to take responsibility for it anyway?
Even the best supplier can make mistakes fulfilling orders, mistakes for which you have to take responsibility and apologize for.
Moreover, mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments, or low-quality packing.
Thus damaging your reputation.
Limited Customization and Branding
Dropshipping does not give you a lot of control over the products themselves unless you are offering custom-made products or print on demand.
Usually, the products are already made and branded by the supplier, before dropshipping.
However, some suppliers like Alibaba dropshipping can accommodate your business’s product changes.
However, the supplier has the most control over the product itself.
Thus, any changes or addition to the product itself requires a minimum order quantity to make it viable and affordable for the manufacturer.
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Now let’s discuss the right approaches to Dropshipping in UAE to improve the sustainability of your business.
Consider the following 4 approaches to use this model effectively.
1: Market Research
Dropshipping in the UAE works better as a means to an end, rather than an end itself.
You can use this model to mitigate the risk in trying out new products and market research, rather than raising your own inventory costs.
Thus, you can test out new products with a trial period using dropshipping.
Other than just learning about the product and whether it sells or not, you will have a better estimate of how much it sells.
Therefore, giving you a more accurate number of the specific quantity to buy for your initial task.
This is important if you are trying new products which always carry an inherent risk.
For instance, you might be successful in trying out to sell a certain new product online, but would it mean that you can do it for another one?
That could be a hit-or-miss kind of situation.
However, you can always test the water by dropshipping a few products and see how it goes.
Protection from Overselling
If you already are running a brand, then you are aware of the fact that the market trends fluctuate.
Rather than raising inventory costs by overstocking to meet unlikely maximums
Thus, having a dropshipping supplier as a backup can save you money without losing those sales.
This is particularly useful for seasonal overflow.
Moreover, it safeguards against disasters and uncertainties all retailers face.
Having dropshipping options can also help to be great insurance against extreme situations.
Thus, if something goes wrong, you can still fulfill the pre-made orders by dropshipping the products from elsewhere.
The same holds true for side-stepping surprise shipping delays.
Strategic Shipping Systems
One of the complications of expanding your business is shipping complications.
The more you expand, the more you will have shipping fees.
Dropshipping can be a perfect solution for some problematic locations that fall outside your regions.
- maybe the shipping cost for far-off areas is too much or the storage prices are too high to justify setting a new center.
- or maybe there s an issue of taxes or extra fees like when shipping out of your region, or your country.
Thus, factors like these can determine the cost of your shipping.
Moreover, just as dropshipping can be useful in market research, you can use it to test new locales.
So why not use this model for a trial period in a new location to see if it is worth opening new facilities in that location?
Low-maintenance Products
It is important to note that some products can cost you more to stock and cost than other products.
In certain situations, it may be more profitable for you to dropship them than storing them yourself.
However, if you are wondering about high-maintenance products then these are the ones that need extra fees, like:
- Large products: some products take up large space, while their sales do not make up the cost for excessive storage
- Heavy products: if the weight of the product makes it cost too much to deliver, try dropshipping them directly from the wholesaler or manufacturer.
- Fragile products: these products need special care when shipping, and in such cases, suppliers or wholesalers can ship them better.
- Valuables: high volume items like jewelry, antiques, etc. need additional security. Thus, rather than rising theft, you could leave the storage to someone who can protect them
- Special conditions: Maybe you want to sell items that need to be kept frozen or certain material that is sensitive to light. Moreover, if your inventory needs special conditions, you may be better off dropshipping them than storing it
Unless you specialize in the above products, it does not make sense to pay an additional price for storage and shipping fees.
However, you can still make your customers happy by offering these products through dropshipping.
Final Thoughts
Dropshipping in UAE is not a perfect or stress-free job to build a successful business online, however, hard work always is needed to start this process. This model has some advantages, however, it comes with a number of build-in complexities that you will need to address.
With careful planning and consideration, most of these hurdles can be resolved and need not prevent you from building a profitable dropshipping business.