We know that legally it doesn't matter where you are located or where you are selling to become a dropshipper, so why is it so difficult to dropship in South Africa?
In this article, I'd like to present you with my findings and first-hand experience as a South African dropshipper.
What is dropshipping?
Let's start with a quick summary of what dropshipping involves.
Dropshipping is a business that provides equal opportunities to everyone and is a quick and low-cost business to start.
Because the dropshipping business model allows you to list and sell products you haven’t bought yet, you don’t need start-up capital for inventory.
When you sell an item, the supplier will deliver it straight to the customer. Simple!
If you're interested in learning more about the basics, I suggest checking out this article.
Now that you know the basics of dropshipping, let's look at the feasibility of this model in South Africa:
Why start a dropshipping business in South Africa?
According to a recent survey, the ecommerce landscape in South Africa is growing rapidly, spurred on by increased internet user penetration and, more recently, due to the demand for online deliveries brought about by the Covid-19 pandemic.
The survey reports that 68% of South African consumers say that they are shopping more online since the onset of the Covid-19 pandemic.
There was a 66% total growth for online retail in South Africa in 2020, bringing online retail figures to R30,2-billion. This is almost double the R14.1-billion reached in 2018!
With this young, growing economy being a gateway to the rest of Africa, entrepreneurs in South Africa are actively investigating dropshipping.
The industry is, however, immature and presents some challenges. Therefore, if you are investigating dropshipping in South Africa, you need to make several region-specific decisions about your store.
Choosing your target market
The most important one is the choice of the target market. You have three choices when starting a dropshipping business in South Africa that I’d like to outline for you.
Here are the three options that I'll cover below:
Exciting, right?
If so, let's begin:
Dropshipping from local South African suppliers to South African customers
This was the most obvious first choice for me to investigate when I started dropshipping. I know the laws, I have a fair idea of what South African consumers want and can therefore target my audience well.
After deciding on my niche, I set out to find reliable suppliers.
Suppliers prepared to work with dropshippers were difficult to find. Many were not even informed about what dropshipping involves!
I found a handful of dropshipping suppliers that provide automated integration with dropshipping stores to make the experience for both the dropshippers and their suppliers easier and uninterrupted.
On integration with some of these suppliers, I realized that the choice of both suppliers and products was limited, resulting in many aspiring dropshippers all trying to sell the same products!
Contacting wholesalers and manufacturers directly was my next port of call.
Unlike their international counterparts, I learned that South African businesses are yet to see the value of enabling dropshippers to access their stock and seem afraid of having no control of the pricing (thanks to the government’s price control laws).
These laws dictate that wholesalers cannot dictate prices to retailers. This means that big wholesalers who have built long-standing relationships with all the big chains wouldn’t be able to stop a dropshipper from undercutting their biggest retail partners, ultimately damaging the brand.
Many international wholesalers give their dropshipping sellers greatly reduced margins because the wholesaler carries the risk on the stock. The South African local market of potential customers is much smaller than that of international markets, and these margins are just too thin to be profitable.
Businesses offering ready-made stores also look to entice South African dropshippers. However, after investigating this option, I quickly realized that the "connected suppliers" were not local but based abroad.
And so, my next step was to explore the feasibility of dropshipping from China to South Africa.
Dropshipping from China to South African customers
It seemed like a solution to set up suppliers in the East who could ship products to South African customers.
Using Oberlo or even AliExpress directly (note that not all AliExpress suppliers ship to South Africa), it was possible to list their products on my site and arrange deliveries straight to SA customers as orders came in.
Important note: On June 30, 2022, Oberlo shut down completely and officially partnered with DSers to migrate its users.
If you are interested in more information about Oberlo alternatives and how to migrate from Oberlo to those alternatives, check out this article here
To keep the costs low and to make this business case successful, I would have needed to ship the parcel via China’s local postal service who hand it over to the SA postal service.
This is where this option falls over, with delivery times (if there is a delivery at all) using AliExpress taking 40-59 days and an absolutely unaffordable shipping cost.
As you can imagine, this doesn't sit well with the South African consumer who is already worried about online fraud and still hesitates before shopping online.
And unlike other dropshipping countries, there is no ePacket option to South Africa.
Furthermore, the option of sending the parcel by courier to get it to the customer quicker was way too costly.
Customs fees are the next challenge. There are duties for imported goods over R500.00 (approx. $34.00), and the consumer gets penalized further after three purchases.
A dropshipper needs to be sure to make its customer aware of these extra costs to their purchase.
I also worried about putting cash into advertising a product that I hadn't personally tested. Testing wasn't viable as, by the time I had received the product, it was likely that I had lost the opportunity to capitalize on a "winning product".
Customer returns were another barrier. To offer good customer service, it would have been necessary to provide a free replacement or a refund in light of long shipping times and costs.
The final and....wait for it... SUCCESSFUL route that I took was to research the possibility of dropshipping to other international destinations (when operating from South Africa).
Let's look at some of the factors that make operating from South Africa a little different.
Dropshipping to other international destinations (when operating from South Africa)
The model I've ultimately followed, yielding successful results for me, is to dropship from one international destination to another with South Africa as my home base.
With good management and a few tweaks, this model works.
So let's discuss what you need to watch out for when dropshipping to international destinations as a South African:
Select the correct payment gateway
A South African citizen is prohibited from using Stripe or Shopify Payments and needs to rely on Paypal.
Paypal has developed a relationship for managing their risk by putting a hold on the funds in your account until they deem that the transaction is "safe". This does not seem to be a problem if your paperwork is in order until you need to scale.
As soon as you are in that position, your funds on hold can create a worrying cash flow problem.
A further challenge is that Paypal is only integrated with one bank in South Africa (First National Bank). Because they are not my bank, I needed to get complicated approvals to withdraw my funds to my bank account.
For more information on how not to get banned when using PayPal, check out our other article here.
Prepare to establish a US company when you scale
When you enter the scaling phase, it is wise to create an LLC in the US. This will enable you to use all the available payment gateways.
It is recommended that you use an expert company to set it up and manage your earnings and tax liability.
Replace product testing with very good product research
Because I can't order a sample to test my products, I need to do in-depth product research, checking customer feedback on supplier platforms and competitor websites before advertising a product.
I recommend that you offer an exchange or a refund rather than the customer returning the product - something like this:
You can check out our refund policy template for dropshipping here.
Be aware of dollar based advertising and operating costs
South African dropshippers should expect advertising costs, Shopify fees (if you use it), App fees, and other operating expenses to be charged in USD.
These add up because of the weak currency (ZAR - South African rand).
Dropshipping in South Africa alternatives
Not sure yet about dropshipping in South Africa?
No worries! Check out the lists below to find the right country for your business:
- Best Dropshipping Suppliers in India
- Best Dropshipping Suppliers in the UK
- Best Dropshipping Suppliers in the US
- Best Dropshipping Suppliers in Canada
- Best Dropshipping Suppliers in Europe
- Best Dropshipping Suppliers in Australia
- Best Dropshipping Suppliers in Malaysia
- Best Dropshipping Suppliers in New Zealand
Plus, don't forget to check our guide on the best countries for dropshipping!
Conclusion
As you can see, dropshipping in South Africa is not without some additional challenges!
As a sustainable sales model, the growth of local dropshipping depends on the entry of larger local manufacturers and suppliers into the dropshipping area, supported by user-friendly technology interfaces for easy store integration.
Some innovative businesses are trying to do good things, and I will be observing them with optimism!
Regarding international dropshipping to South African customers, South Africa is quite far behind the curve regarding shipping, customs, and the postal system, and this model is problematic.
As described, I believe dropshipping from an international supplier to an international customer is currently the best strategy for the South African dropshipper.
So, are you ready to get started? Let's go!
As a beginner, I followed the steps in these amazing guides and hope you will find them helpful too:
- Dropshipping for Beginners: What Is It & How To Start Today
- Shopify Dropshipping: A 20-Step Guide to Starting Your Store
- AliExpress Dropshipping: A 20-Step Getting Started Guide
- How To Find Winning Dropshipping Products
Tells us in the comments about your successes and challenges when dropshipping in South Africa.
We can all learn from each other in this challenging venture and hopefully grow South African dropshipping. Good luck!
13 Comments
Hi. thank you for a very informative article. I do have questions on your successful model. 1. do you need a south african registered company with an import/export licence to operate? 2. Is your product price in dollars or rand on your shop website?
Hi Jerry
Thanks for making contact!
1. Yes, you need a registered company (mine is South African). No import/export license is required if dropshipping internationally. In SA, if you import goods over the value of R50 000 more than 3 x per year or for re-sale, you must have an import license. To obtain it, you need to go to the SARS Customs & Excise office (different from the tax office).
2. My products are priced in dollars because I only dropship internationally. I use a Currency Converter to show the price in the currency that the customer is viewing my page from.
Feel free to reach out again and good luck!
-Janet
Hi Janet,
Great post! thank you for sharing!
I have a few questions that I would love to get your feedback on.
1. You mentioned not being able to test the product, is it not viable to pay an extra delivery fee to try get the product relatively quickly? Or is this still a time issue due to SA customs etc.
2. Without getting your hands on the product, how do you go about generating original content for the product? I preferably want to avoid using the images/videos from the supplier as I feel it doesn’t add sufficient value to the customers shopping experience. This is also the part that sets you apart from the rest.
3. At what point in the scaling process do you consider branding or custom packaging?
Thanks again!
– Ryan
Hi Ryan,
Thanks for your questions. I hope this feedback helps!
1. You could invest in bringing the product to SA but timing is everything when testing and the ship might have sailed by the time you get original content together. When we identify a product worth testing, we need to get moving on finding a reliable and well-priced supplier, create the product page and plan the ad campaign. After a week of advertising, it is quite normal to drop the product if it doesn’t yield results and move on to the next one. In this scenario, there is no time to get the product to SA. I rely on the sales statistics and reviews of the product and take the plunge.
2. Yes, original content is not possible unless you engage the services of an influencer. This is a good strategy after testing the product and realising that it has “legs”. Until this time, employ the services of video ad experts to splice and dice existing content, trying to come up with something effective. In my experience, you will know if the product will sell pretty quickly.
3. Branding is highly recommended from day 1. You might find this article helpful: https://dodropshipping.com/how-to-brand-your-dropshipping-store/ Custom packaging is also recommended. Most suppliers offer it at a low additional cost as soon as you have enough orders.
So my opinion Ryan is to test first and then invest in original content, packaging etc. All the best to you!
Regards
Janet
Hi Janet,
Thanks for the Post. Really helpful.
I just wanted to find out on taxes. If I had to dropship to US based in South Africa.
What are the tax implications?
Do I need to add taxes on my products like we do here in SA?
Thanks
Hi Wajeeda
Thanks for your comments.
If you were to dropship to the US when based in South Africa, your product price would include all taxes. You would not be required to pay tax in the US. Your income (from sales made) would be taxed in South Africa as part of your annual company tax return.
I hope this helps. Don’t hesitate to ask further questions.
Regards
Janet
Hi Janet,
Thank you so much for your response. I have another question with regards to web hosting your domain.
Do you use Shopify domain hosting services?
If not, can you recommend some web hosting sites?
Hi Wajeeda
I recommend Shopify as it is so easy to set up, particularly your business email address. An alternative would be Namecheap.
Good luck!
– Janet
Hey Janet
Thanx so much for your Article, quite informative. You wrote…South African dropshippers should expect advertising costs, Shopify fees (if you use it), App fees, and other operating expenses to be charged in USD.’ Does that make Shopify easier to use or cheaper, seems different people recommend different apps. I cannot seem to decide which one to use , Wix, Wordress or Shopify. What is your opinion here, am looking for something with lower fees , user friendly and has great features.
My second question would be, Can I sell to African Customers whilst drop shipping Internationally? How does it work, they still deal with tax fees and delayed shipping, how do I set it up so that friends and family can still buy from the site?
3rd question is, Can I use different suppliers on my website, for example getting products from local drop shipping suppliers as well as suppliers from Aliexpress?
Thank you
Hi Dee,
Thank you for your amazing comment! Unfortunately, Janet is no longer writing with us, but I will try my best to help you further:
1. We wrote a great article (which you can find here) that discusses the best ecommerce platforms for dropshipping (with tips on how to pick the right one for your needs).
2. For the worldwide dropshipping part, yes this is possible, but there are certain things you need to keep in mind (which you learn more about it here).
For the shipping part, this depends on where your suppliers are located. If they are located in South Africa (or have a warehouse there), then the shipping will be faster than, for example, shipping from China. For the taxes part, this one is best to discuss with a local accountant 😊
3. Yes, you can! If you’re interested in learning more about this, check out this article here!
I hope that helps you further, and let me know if that leaves you with any more questions!
– Richard
Hi there. Very informative article, and great website.
I’m from South Africa, and interested in dropshipping. I initially wanted to do dropshipping from South African Suppliers to South African customers, but after reading this article, I’m considering international (Specifically international to US) dropshipping, instead. Are there any articles on your website that deals specifically with dropshipping to US while based in South Africa? Thanks in advance.
Hi Ashley,
Thank you for your great comment. It’s great to hear you liked our website and this article!
However, for now, this is our only article focused on companies based in South Africa. We do have this guide to starting a dropshipping store in the US — and this one with the best US dropshipping suppliers.
I hope that helps you a bit further, and good luck with everything!
– Richard
Hi Richard.
Thank you for the reply and articles. I will surely give them a read. Much appreciated. 👍