Updated: Aug 23
Making money with a dropshipping store on Shopify has never been easier! In this post you'll learn how to:
Set up your Shopify store
Choose products for dropshipping
Find reliable dropshipping suppliers
Market your new eCommerce business
Table of Contents
Did you know that there were 2.05 billion online purchasers in 2020? It might even surprise you more to know that the number is expected to reach a whopping 2.14 billion this year.
Along with this unprecedented increase, comes several eager opportunists. If you’re someone looking towards making a small fortune in online e-commerce, chances are that you’ve come across the term ‘dropshipping’ - usually followed by promises of massive returns on investment in minimal time.
Contrary to what most people believe, dropshipping isn’t a get-rich-quick scheme. Sure, you might think it sounds like easy money - selling other peoples’ goods and taking your cut. Once you consider the obstacles, drawbacks, and daily management, you’ll soon notice that it’s not so simple. Nevertheless, the right approach and the adoption of proven strategies will produce a successful business… just not as fast as you’d like.
Before you invest your savings into a dropshipping business, it would be wise to invest some time in learning the basics. A prudent entrepreneur researches thoroughly before making any business decisions, after all.
In this guide, we take you through the ins and outs of dropshipping, how to launch your business, and the benefits/cons of the process.
You can also check out this free webinar offered by Shopify titled: "How to Get Started with Dropshipping."
What Does Dropshipping Mean?
This retail fulfillment technique doesn’t involve keeping products in stock. Instead, when you use this model to sell products, you purchase the items from a third party, which ships the items to a customer directly.
Consequently, you don’t need to worry about direct product handling and inventory management.
The business model is extremely popular for new entrepreneurs, particularly, millennials and Gen-Zers with internet marketing skills that surpass their financial capacity. Since you won’t need to handle or stock the products you’re selling, it’s possible to launch this business with restricted funds.
How Legal Is Dropshipping?
The business model itself is legal. However, you must consider numerous aspects of legality when developing and operating an online business. It’s equally important to note that certain issues depend on the geographic location of the business proprietor and the clients.
This implies that based on the country where you’re conducting business operations, some requirements on the business taxation and registration must be in place. Simultaneously, clients’ residence countries might have particular regulations on the kind of products that can undergo safe importation.
Here’s a lowdown on some of the legal questions you may have surrounding dropshipping:
The first question that comes to anyone looking to get into this business is whether a business license is necessary. In this case, a license isn’t necessary to create a store and start product selling. Nonetheless, it doesn’t mean you can’t consider it in your business dealings.
Based on the country in which you intend to run your business, various options exist when it comes to registration. Just make sure you assess your options diligently to determine the best option.
Based on your geographic location, taxes and duties may vary when considering catering to clients in other nations. This element remains one of the most significant in legitimizing a business and having your country and customers recognize it.
Some taxation elements to consider are the sales tax on products and income tax on profits. Since e-commerce law is ever-evolving, ensure you consult an accountant and tax attorney before proceeding.
The absence of a license means you're personally responsible for any issues your clients encounter after buying an item from your e-commerce store. To ensure full protection from liability, you'll require more than a business license.
It's advisable to also buy liability insurance to protect you against legal risks in case the product you sell ends up being low quality. In case you need defense in a lawsuit where the claimant cites property damage, injury, or financial losses, the insurance will cover the legal expenses.
You can protect yourself against liability by ensuring you only collaborate with reliable suppliers.
Along with the business license decreasing personal liability, you can consider obtaining product liability insurance. This type of general liability insurance guards your business against legal and financial risk stemming from poor quality products.
It's worth noting that product liability cases can be very costly to litigate. You might want to inform your clients of your business practices as well. This might include the refund policy and the way you'll conduct exchanges or returns.
If you're looking to forge solid relations with suppliers, or come across as a trustworthy product source, having a license legitimizes your business in consumers' eyes and any other businesses you intend to work with.
Over time, you'll need to file supplier documents or conduct other business transactions. Authenticating your business will permit you to enhance legitimacy in these situations and avoid future problems.
Some jurisdictions might lack a legally-enforceable privacy prerequisite, though users will access your website globally, so you'll need one. The law doesn't necessarily require terms & conditions. However, taking the time and effort to put this down provides a strong legal framework for your business.