Have you heard the rumors? There’s an easy way people are making money without needing to leave the house or even their sofas! That’s right; we are talking about dropshipping, a trend that has set the internet on fire!
You might be wondering, can anything that offers you a profit so quickly be legal? Or, at the very least, can it be ethical? Like us, we bet you have hundreds of questions surrounding dropshipping and nowhere safe to voice them.
Well, you can voice them here! For we have all the dropshipping answers for you! We will be looking at whether dropshipping is legal or not and provide you with all the information you need to turn you from a dropshipping novice to expert!
What is dropshipping?
For those in the room unsure, let’s have a little recap. Dropshipping is a retail fulfillment method where the product isn’t in stock at the store. Instead, the seller will purchase the time from a third party and send it directly to the customer, usually at a higher cost.
Dropshipping means that the seller doesn’t handle the product directly; it is all done by a third-party seller. This means that the seller does not have their stock or inventory; instead, they purchase it from a third party to fulfill your orders.
These third-party sellers tend to be wholesalers or manufacturers and ship the product directly to the customer.
The seller will usually charge more than the manufacturer to profit, but these margins can often be slim. Now that we have covered what dropshipping is let’s look at the legalities of it.
Is dropshipping legal?
Yes, dropshipping is legal. You are legally able to drop ship products across the country with ease. However, you can run into some important legal issues to discuss when it comes to dropshipping.
As you don’t see the product when dropshipping, you need to be careful when selecting a third-party seller. If the seller is using counterfeit products, a trademarked logo, or another company’s intellectual property, you too can be legally liable as you have sold the item to the customer.
Any illegal activities your supplier is involved with you become complicit in, so be mindful of this. There are Dropshipping Agreement Contracts you can sign to avoid some of these issues, but not all.
It’s worth thoroughly researching your suppliers before entering into business with them and considering the contracts to avoid any trouble.
While dropshipping is entirely legal, some people have ethical concerns. Generally speaking, using a third-party seller is a common business model and is ethical.
The biggest issue with dropshipping is setting the cost of your item. Setting the price too high can be seen as exploitative of others.
You must consider these implications to ensure that your dropshipping business runs successfully.
Benefits of dropshipping
There are a few benefits to drop shipping that can help boost your business. Let’s take a quick look at these now.
Easy to start
You can easily set up a dropshipping or eCommerce business as you won’t need to worry about physical products, warehouses, tracking, returns, or paying employees for these services.
A lack of these services means that your overheads are very low, meaning you can run the business from your home easily! There are likely to be some increases in your overheads as your business expands.
These costs are likely to be minimal compared to having a physical store or warehouse to maintain.
Less capital needed
You can set up your dropshipping business without needing to invest thousands before beginning.
Compared to traditional retailers, you don’t need a large startup fee. Instead, you just need to purchase a site and begin building your online presence to attract customers.
It's a popular method for those wanting to start a business but might not have as much disposable income to throw at a new business venture.
When it comes to dropshipping, there is a fantastic range of flexibility. Not only can you work from anywhere, but you can sell a wide range of items without needing physical space for them.
It allows your site to be diverse, appealing to a wide audience. You can use this flexibility to test out selling a range of products and finding your niche. If certain products are selling well, you can venture out and become the one-stop shop for them.
Issues to consider when dropshipping
But what about the bad side? Dropshipping is not always an easy task, and there are some factors you need to be aware of before diving in!
We touched on this earlier, but low-profit margins are a common issue with dropshipping. It can be challenging to profit when selling other sellers’ products at a slightly higher price. You need to avoid charging too much to attract customers, but not undercharge as you will lose money.
Many dropshippers struggle with the low-profit margins starting out and often need another income to pair with their dropshipping benefits.
When things go wrong
Issues with faulty items arriving, shipment issues, or returns can be challenging to deal with when dropshipping. In these cases, you will need to liaise with the third-party seller and the customer, which can be challenging to find a resolution, with the customer placing the blame on you.
You might also run into issues with poor quality items arriving that your customer will want to be rectified. Carefully selecting sellers to work with can help to avoid this.
Shipping costs and tracking can also be an issue. Be sure that you check the seller’s shipping policies to provide your customers with accurate information to avoid any frustration.
And there you have it! Dropshipping is not only legal but can be a fruitful way to make some extra cash or set up a successful eCommerce business!
While it is not without its complications, it can be a viable business venture for many new businesses for entrepreneurs. Why not give it a go today?