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International Dropshippers – Here are 3 ways to boost your profits

Dropshipping is one of the most lucrative ways to make money online without having to front up a ton of money. In fact, 33% of all online stores use some form of dropshipping to fulfill their orders.

But because the barriers to entry are so low, dropshippers rely on selling a very high volume of products for a relatively small amount of profit each.

In fact, our data shows that eBay dropshippers make on average $2.67 profit per item and compared to other forms of e-commerce, the average margin for dropshipping is around 6% vs 30%.

So, how can you squeeze more money out of your online store?

Here are 3 ways you can boost your profits, without requiring a ton of effort and/or time.

1. Use repricing software to win more sales

If I asked an online store owner to suggest some ways they could make more profit, they might suggest something like:

  • Listing more items for sale
  • Finding new suppliers
  • Changing the niche of their store

But what if you want to make more profit from your existing items?

On online marketplaces like eBay, having the lowest price amongst your competition is likely the #1 factor for winning sales – particularly as a dropshipper when you’re selling the same items as everyone else. The problem is, the competition isn’t static.

You might decide to list a green hairy wig on eBay for $20.00 because that would make you the lowest priced green hairy wig seller at the time.

But what happens when 2 days later, someone decides to join the hair battle and lists the same wig for $18.00?

Or equally, what if a competitor that was selling the wig for $21.00 stops selling it and now you’re way underpriced compared to your competitors?

This is why you need repricing software.

Repricing software (also known as repricers) lowers and raises the prices of the items in your store for you to help you make the most profit and sales possible. Some repricers are more advanced than others and have different features.

Woman outside looking at a phone

Two examples of repricing software

Salefreaks - eBay competition beating repricer

Salefreaks own dropshipping software includes a repricer that allows you to specify the profit margins you’re willing to accept. For example, if the minimum profit margin you wish to make is 10%, you can make sure the repricer doesn’t lower your prices any further.

Informed.co - Repricing software for Amazon and eBay dropshippers

If you’re managing e-commerce stores on many platforms, Informed.co may be a good choice for your business as it supports Amazon, eBay, and Walmart.

For Amazon dropshippers, your price is a huge determinant of whether you win the buybox and are shown as the default seller on Amazon. According to Informed.co, Buy Box ownership increased 63% in just 2 weeks for Amazon dropshippers that use a repricer, making it an incredibly valuable way to make more profit.

Need more info? Our partner Salefreaks wrote a whole guide about boosting profit using eBay repricing software.

2. Get an OFX Global Currency Account to minimize currency exchange fees

As an international dropshipper, you may need to transfer money between countries.

And if you don’t use the right provider, you may be stung with sneaky margins that cut into your profits, and very costly fees, which when you’re selling lots of items, could add up quickly.

Here are a couple of scenarios:

  • You’re based in a different country to the one your store operates in

Like, what if you’re American but you have an online store that sells items to customers in the UK? As your customers are British, they’ll expect you to charge them in their local currency – pounds.

Yet, when you withdraw the money you make, you’ll need to exchange or convert your pounds into US dollar to be able to spend it.

Remember, the average profit margin for dropshippers is just 6% so if you rely on the poor currency exchange rates from most marketplaces and payment providers, you could suffer rates and fees that can easily completely wipe out your profit.

  • Paying private suppliers in their local currency

If you’re doing traditional dropshipping rather than retail arbitrage, there’s a high chance that your suppliers will be based in a different country to you. And when it comes to paying them, you’ll need to provide payment in a foreign currency.

The preferred method to receive payment for nearly all private suppliers is by local bank transfer. This is because it gets rid of credit card processing fees and avoids the potential risk of chargebacks.

For these reasons, if you pay private suppliers with an international money transfer you may be able to negotiate a hefty discount too which can widen your own profit margins.

Aerial shot of a shipping container yard

How does an OFX Global Currency Account work?

A Global Currency Account allows you to receive, hold and send payments in multiple currencies. You can essentially hold the equivalent of a local bank account in major currencies, to enable you to receive and send payments with low margins and zero OFX fees.

How can an OFX Global Currency Account help you to make more profit when dropshipping internationally?

  • Lower conversion fees when accepting foreign payments

For example, let’s say a customer is buying your goods on card. One of the most popular merchants for processing card payments is Stripe, and many dropshippers use it to accept card payments through that have their own online stores (or Shopify powered stores).

If you’re collecting payments from customers in another currency - let’s say EUR, then Stripe would normally apply its own conversion fee and a high margin to your revenue as they convert it to EUR and send it to your local bank account – that’s in addition to their standard processing fee!

But if you have a Global Currency Account, you can hold the equivalent of a local bank account in EUR and link those bank details with Stripe instead. Stripe will then send the money to a EUR account instead, and you avoid a costly conversion! When you’re ready to send that revenue back to your home currency, make your transfer from within the Global Currency Account and you’ll get great rates and zero OFX fees.

  • Lower conversion fees if you’re dropshipping on overseas Amazon marketplaces

If you’re dropshipping on Amazon then you’ll need to attach your bank account to your Amazon Seller Account to withdraw your money.

But if you don’t have a local bank account for the marketplace you’re selling on (e.g. a EUR account for selling on Amazon.com), then Amazon will apply their unfavorable conversion fees when withdrawing your balance.

If you have a Global Currency Account instead, you can get the equivalent of local bank details for the Amazon marketplace you’re selling on and send the money to it instead, without Amazon’s conversion fees.

How to link your Global Currency Account to your Amazon Seller Account

  1. Log in to your Amazon Seller Account
  2. Go to Settings - Account Info - Payment Info
  3. Select Add Deposit Method
  4. Input the local bank details from your Global Currency Account

Then, when you’re ready to transfer your revenue home, you’ll get great rates and zero OFX fees.

Making an online payment by card

  • Lower conversion fees when sending foreign currency to private suppliers

When you’re paying private dropshipping suppliers you have a choice.

You could pay by card – but often this involves high fees (3%+) for both you and the supplier.

Or instead, you could pay by international money transfer.

The problem is that most banks can charge around 5% on the interbank rate when sending money overseas which wipes out most incentive to use them.

However, if you use OFX spot transfers, then the cost is normally considerably less. You may even find yourself in a situation where you have European suppliers, and you’re holding revenue in Euro from sales made on a European marketplace within your Global Currency Account. You can pay that supplier directly from the balance you hold, so you avoid currency conversion costs altogether.

3. Reduce your shipping spend by closely monitoring activity

A big advantage of dropshipping is that you don’t have to increase your logistics footprint. But here are a few tips when it comes to shipping:

Persuade as many of your dropshipping vendors as possible to ship on your FedEx or UPS account if you have one. You’ll have better visibility into your shipments and control costs. You can also use this information as leverage when asking your carrier for better terms.

International shipments cost more than domestic ones - often twice or three times as much. Additionally, international shipments suffer higher failure rates in meeting the carrier’s guaranteed service policy. Most companies don’t have time to ensure the carrier is meeting their time commitments or file the appropriate claims. Services like 71lbs can help, with an automated solution backed by a team of shipping advocates who will monitor your shipping activity and fight for due refunds on your behalf.

Accounting for accurate duties and taxes on international shipments is difficult. Harmonized Tariff System (HTS) codes vary by country of origin and destination, which adds another level of complexity. Start with the 80/20 Pareto rule, and make sure the 20% of your items that cost 80% of your duties and taxes have updated HTS codes.

Salefreaks is dropshipping automation software designed for arbitrage dropshippers that supports sourcing from Amazon and listing to eBay, Bonanza, and Shopify.

71lbs provides a human-backed automated solution clarifies the shipping process for companies, making it easier and faster for them to access shipping refunds and optimize their expenses. Solutions include late delivery refunds, premium tracking and lost + damaged claims, as well as freight/LTL savings and contract negotiations.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.

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