Dropshipping has become a really popular money making method. It's proven to be a great stepping stone for anyone looking to get into the world of ecommerce.
While most people love planning a dropshipping store, many never follow through because they feel confused or they feel they don’t have enough information to start their own dropshipping business.
Therefore, we’ve compiled the most asked questions related to dropshipping and we’ve answered all of them to help anyone who’s looking to start their own store.
Dropshipping is a business model in which you set up your own online shop, take orders from customers and have your supplier ship the products directly to customers. You hold no inventory and the customer receives their orders with your business label.
Dropshipping is a very attractive business model for a lot of people because it eliminates the need for holding inventory, which often is a major contribution to business startup costs. With the dropshipping model, you just need a laptop, internet, and a good supplier. And of course, demand for what you’re selling.
The Dropshipping model works on its virtue of low start-up cost and the division between retailer and manufacturer.
As mentioned before, dropshipping is a model where a retailer processes a sales order, and the order is delivered by the supplier/manufacturer themselves. This eliminates the costs and risks of holding inventory.
Although dropshipping isn’t capital intensive, to make dropshipping work, you still have to plan and ensure a few things to get the best results. You should make sure that you:
Dropshipping has only become an accessible business format to the public over the past decade or so. With the growth of the information age and almost universal accessibility to phones and the internet, more and more people have sought to become online middlemen.
In essence, all a dropshipping business does is connect the consumers to the manufacturers, keeping a cut for themselves.
Yes, dropshipping is completely legal. If it wasn’t, there wouldn’t be all these people setting up dropshipping businesses. But since this is a genuine, valid question that anyone should ask before getting into any sort of business, here’s what you need to know about dropshipping legalities.
First, dropshipping works like any other online retailing business, so the same laws apply here. However, just like any business, there are some good practices to follow to ensure your new business is not breaking any laws. One of the most legal concerning areas of dropshipping is taxes.
To ensure you don’t violate any taxation laws, just make sure to check the applicable laws in the country where you decide to set your business up. To avoid any guessing and stay free from tax troubles, its best to consult a lawyer regarding country-specific laws.
Another area of concern is copyright infringement. When you are listing brands in your catalogs who have trademarked images, colors or taglines, be sure to confirm if you can reuse them on your website. You need to make sure that you did your due diligence to investigate that the products are not fake and that you are allowed to sell them.
For websites selling in Europe, you should be aware of EU cookie law. If you are using analytics tools like Google Analytics, you have to inform your visitors when they visit your website.
You can land severe penalties for not disclosing this information. Also, make sure you are in compliance with GDPR regulations if you collect leads through your dropshipping business
And yes, dropshipping is legal on eBay, Amazon, and Alibaba.
In the simplest manner, these are the steps you must undertake to start a dropshipping business.
Any business begins with an idea, a plan. The same applies to dropshipping.You can find these steps neatly explained in this guide. You can also take a look at these successful dropshipping store examples to get inspiration before you start dropshipping yourself.
To start selling on Amazon, you have to create an Amazon seller account first, then you have to register your email with Amazon seller central. Then you have to get your product category approved from Amazon.
You can find the approval guidelines here. If you have an existing store with a platform like Shopify, you can link them up to create a product listing of existing products on Amazon.
On Amazon, allowing a third-party to fulfill orders to customers on your behalf, is generally acceptable. However, Amazon has certain policy measures they enforce, which they call the Seller Code of Conduct. According to the code, you must:
Amazon also mentions examples of dropshipping it doesn’t allow
First thing, you have to create a Shopify account, which will barely take you 5-10 minutes with their user intuitive setup wizard.
Once you’ve signed up, you need to add payment options to your account. The payment account you provide will be used to receive all the profits you make from sales.
Then you need to create a store policy (which Shopify also assists with) followed by setting shipping rates. To avoid complex calculations and varying shipping rates for different regions, offer free shipping. Just add the shipping cost to the product you’re selling. So you can display a $50 product for $54 and offer ‘free shipping’ with it.
Now to launch your store, go to the “Sales Channels” option on your Shopify settings. Then select the “add an online store” option.
Now you have a fully functional, running store. But you’re not done just yet. You need to add the actual products to your catalog. If you have a supplier, you can just list the products you will be sourcing from them.
You can also use a service like Oberlo to add products to dropship. Oberlo integration lets you find products to sell and also helps you choose what to sell if you’re unsure, or if it's your first time with online commerce.
Note:Whether you're selling on Shopify, Amazon or any other platform, it's important to create sales funnels that convert visitors into customers. To turn visitors into customers, it's important to establish multiple contacts with them before they are ready to buy. This makes collecting their email lists very important.
Once you have their email addresses, you can drive them through the sales funnel and increase your overall sales.
Here's a great guide to dropshipping on Shopify that covers important aspects of starting a business such as costs, level of skill required and the overall control of the operation.
This is the most straightforward way of finding a supplier. If you know what you want to sell and you know where the product gets made, you can contact the manufacturer to find a list of suppliers that sell their products.
Most manufacturers will ask for proof of legitimacy of business before they provide supplier information. So make sure you have documentation to prove your business, like a tax ID.
Using Google search to find a dropshipping supplier is slightly tricky and requires some effort, but it is nonetheless a valid method to find suitable suppliers.
Most wholesale suppliers don’t focus on marketing and their websites aren’t optimized for SEO, so you may have to go through pages of Google results to find a suitable supplier.
Remember to use modifiers in your search results. For example, instead of just searching for Notebook wholesalers, also try searching for notebook ‘distributers’, ‘resellers’, ‘warehouse’ etc.
Oberlo is built with dropshippers in mind. It has a lot of nifty features that easily allow you to import products from suppliers to your Shopify store.
The Oberlo integration also allows you to fulfill orders automatically, customize your products and automate your prices. This comes in handy when you are deaing with exchange rates between two different currencies.
Tradeshows provide the best opportunity to meet with all sorts of suppliers, manufacturers and relevant people in your niche.
They also provide you with a chance to have personal, meaningful interactions with people you may end up doing business with. It's a great way to make contacts and research your products and suppliers all in one spot.
Pitfalls to Avoid
When looking for suppliers, you’ll probably find a lot of fake wholesalers. These are usually retailers or middlemen posing as wholesalers. To avoid doing business with them, look for these signs in a fake wholesaler:
Conversely, signs of an authentic wholesaler are:
Dropshipping is like any other business, it’s hard. The hardest thing you’ll ever do is running a business and trying to succeed.
Here’s how Damien Defranco, a serial entrepreneur, and venture capitalist describes the realities behind dropshipping success:
“If you go into it blind without researching, without proper resources, then the likelihood of succeeding and making money from dropshipping is almost zero.
If you prepare yourself, get coaching from someone who’s succeeded before, and if you are willing to put in 70–80 hours a week minimum, you stand a chance.”
And if you do put in the hard work and thinking involved, you can expect to reap huge rewards. If you’re looking for motivation, look at these 4 stories, or this guy’s journey to becoming a digital nomad to get you pumped.
Have more questions related to dropshipping? Feel free to reach out to us in the comments and let us know. We love to hear from our audience.
Rukham is the Content Lead at Mailmunch. He believes trust should be the basis for all marketing communications.