Is there a better alternative than running an online store in Shopee?
If you are currently selling on Shopee, the challenges you will be facing are doing lots of work but very low profit margin.
I know this because I have tried using Shopee app to sell prepacked baby porridge in Malaysia.
I did a lot of work such as answering prospect enquiries, product packing, invoice and airway bill printing, preparing parcel for courier service collection, follow up etc.
Because I was running my business from home, sometime I would have to work until 2 to 3 o’clock in the morning to prepare all the items that my customers ordered.
At the end of the month after burning all the midnight oil, my profit margin on a good month was less than RM500.
Why is the profit from selling on Shopee so low?
One of the reason is the buyer’s mindset on Shopee.
Firstly, not many people are willing to buy high ticket items on Shopee.
Secondly, Shopee app users are looking for sellers who are willing to sell at the lowest price!
As a seller, we are not able to differentiate ourselves other than selling cheaper then our competitors.
When we tried to be the cheapest, we have to sacrifice our profit margin.
If you are a seller on Shopee, do you experience the same issue?
What is the solution to low profit margin selling on Shopee?
To make a higher profit margin from your home business, there are 2 things which you have to focus on.
1) Start selling high ticket item (premium product) with high profit margin
2) Use a different platform to promote your product
For my business, what I did was shift to selling premium product using a Business to Consumer (B2C) dropshipping model.
From my experience, I know to be successful in B2C dropshipping, there are 6 essential pillars.
The pillars are:
- Company founders
- Marketing plan
- Education system
- Business culture
- Using technology
The pillar number two is the product in the business.
I will explain the importance of product for a dropshipping business in the form of a story.
The idea of product selection is from the book The Blue Ocean Strategy written by Renée Mauborgne and W. Chan Kim.
There were 2 good friends name Michael and Jeffry.
Both Michael and Jeffry went to the same primary school, secondary school and college together.
When Michael and Jeffrey graduated from college with their diploma at hand, they have the aspiration to start their own business.
Both have some saving in their bank account because they worked part time when they were studying in college.
Michael took out all his saving and started to look for product to sell for his business.
He wanted to sell smartphone accessories because everyone has at least one such device at hand therefore the market is huge.
He decided to to buy the smartphone accessories in bulk from China and sell it locally with a profit.
What Michael has done trying to sell smartphone accessories is equivalent to trying to fish in a Red Ocean.
The characteristics of a red ocean are:
- Compete in an existing market space
- Beat the competition
- Exploit existing demand
- Make the value-cost trade-off
- Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost
The fact is, it is unlikely Michael will succeed in his business due to the nature of red ocean where the competition is very stiff and the only way for him to differentiate with his competitor is to reduce his product selling price.
By being cheaper than his competitor, he will slowly but surely bleed his business until he cannot sustain it anymore.
The blood of every business in the water is turning it red…thus the name Red Ocean.
Is there a better approach to choosing product for a business?
That was what Jeffry thought to himself after seeing the bad experience Michael had with his business.
A better approach to selecting a product is using The Blue Ocean Strategy.
What are the characteristic of a blue ocean?
The characteristics are:
- Create uncontested market space
- Make the competition irrelevant
- Create and capture new demand
- Break the value-cost trade-off
- Align the whole system of a firm’s activities in pursuit of differentiation and low cost
For a better understanding of The Blue Ocean Strategy, check out the 2 minutes video below by Harvard Business Review.
In the video above, it highlighted a case study on Cirque du Soleil using The Blue Ocean Strategy to grow and excel in an industry with limited growth potential.
A compelling aspect of Cirque du Soleil’s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children. Instead it created uncontested market space that made the competition irrelevant.Blueoceanstrategy.com
Jeffry realised that to be successful in his business, he has to avoid the red ocean at all cost.
Instead, he has to find a product which is in the blue ocean of uncontested market space and make the competition irrelevant.
How do you find a blue ocean product?
How do you find a blue ocean product ideal for dropshipping business?
Firstly, I would suggest you get a copy of the Blue Ocean Strategy book and read it.
By reading the book, it will give you some ideas on how to identify the best product to promote in your business.
By chance, back in 2018, the B2C company that me and my husband partnered with has a blue ocean product line.
It is a type of athleisure garment with far infrared ray (FIR) emitting properties.
Back then, there were no large or established product brands in that category in South East Asia countries.
The company that we partnered with created a new product category making competition irrelevant.
In less than 3 years, the company has dominated the category with its core product in Malaysia, Singapore, Brunei, Hong Kong and Indonesia.
We managed to grow our dropshipping business quickly with customers located locally and internationally by leveraging on the blue ocean product.
Building a dropshipping business in Malaysia is not difficult. All you have to do is do lots of marketing activities to generate leads and you will be able to generate sales sooner or later.
However, if you want to build a successful dropshipping business with high profit margin, there are 6 essential pillars that you will need to understand.
One of it is using blue ocean product.
If your business is selling low value product which is in the red ocean category, it will make building your business very difficult.
Be smart and start fishing in the blue ocean instead.
Thank you for reading this article and I hope it was insightful for you.
If you are currently using Shopee to sell your product and you would like to explore an alternative B2C dropshipping business model with blue ocean product, please click the link below to message me on WhatsApp and I’ll be happy to share more with you.