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Is dropshipping legal? What are the Risk Factors?

Is dropshipping legal?

Yes, dropshipping is legal. Drop shippers are just the mediators who handle marketing activities and customer support. The rest of the aspects like stock maintenance, inventory management, packing, and shipping are taken care of by the third-party vendors.

You just need to create a website, research about the best suppliers and products, market and attract clients with your best offers on products. Many big companies even use dropshipping as the additional channel for increasing their sales.

Is Dropshipping Profitable?

Yes, Dropshipping is profitable, but you get the amount that is the difference between the original price and the increased price you have set in your store. The profit amount you get is low. Here, you don’t need to invest in inventory but only on the marketing activities, website creation and transaction charges.

Will the Buyers know that I am dropshipping?

No, your buyers won’t know that you are a dropshipper. For them, you are just an eCommerce store selling the products they like. As long as they are receiving the right products on time, they are not at all concerned whether you are a seller or a drop shipper.

Is Dropshipping allowed on eBay, Amazon and other Marketplaces?

Let’s have a look at where all this eCommerce model works and which marketplaces allow it.

Is dropshipping legal on eBay?

Dropshipping is legal on eBay as long as you will fulfill the terms of delivering the products to buyers within 30 days. Being a dropshipper it’s your responsibility to communicate with the suppliers and see that the product is delivered on time and manage the buyers as well.

It’s very important to find a reliable and reputable supplier to make your selling easy and uncomplicated.

Illegal Selling Practices on eBay: eBay is strictly against Shill bidding. Few sellers engage their family and friends in the shill bidding activity so as to inflate their product prices. If you are found doing this on eBay, then eBay would not only ban your site from dropshipping on eBay but will also report to your state attorney general for prosecution.

Is dropshipping legal on Amazon?

If you strictly follow the Amazon policies then yes dropshipping is legal on Amazon. Whenever you sell a product on Amazon, the eCommerce giant would charge you a transaction fee that can be up to 15% of your profits. However, even though not much profit is expected from this site but it is a great place to start with as you get enormous traffic. To be on the good books of Amazon you just need to follow the regulations below:

Which Countries allow dropshipping?

As you research on the internet you will find too many queries of “Is dropshipping legal in the country”? This question arises because still there are some countries who are finding ways to limit the growth of eCommerce business while some countries promote the growth of the eCommerce industry.

Is Dropshipping legal in the USA?

Dropshipping is legal in the USA, you just need to follow certain rules. For dropshipping in the USA, you need to have a USA Reseller Permit. You also need to check the USA Tax regulations.

Is Dropshipping Legal in the UK?

The UK also allows the Dropshipping concept. You need to first register a company. You are considered as the sole trader if you have begun trading through dropshipping eCommerce model. But you will need to do VAT registration in the UK.

Is Dropshipping Legal in India?

There is no issue as you opt for dropshipping in India. Ecommerce companies like Amazon, Flipkart, and others support dropshipping. Also, you can take help of eCommerce store like Shopify for creating the best dropshipping website.

Is dropshipping legal in Singapore?

Yes, dropshipping is legal in Singapore as well. You can start the business without the need of registering it but as you gain a stable revenue you might need to register it.

Every country has a law and you should be aware of the laws if you are thinking of starting a dropshipping business in a particular country. The laws of the countries are subject to change at frequent interval. To maintain the success of your online store you need to stay informed always and protect your business from any untoward setbacks.

Real Risks of Dropshipping business

Like every other business, dropshipping also comes with real risks. You need to be well-informed, stay focused and at the same time know the remedies as things go wrong. We have listed down the real risks and its remedies.

Risk 1: Fraud Suppliers

Your first crucial step in dropshipping business is contacting the right supplier. Many people who start the dropshipping business are not much aware of the suppliers and so they may end up facing scams. You may find various stories online by inexperienced sellers who tell you how they were deceived by the fake suppliers.

Remedy: Know the various Red flags

Do transactions very safe while you are dealing with the suppliers online. Don’t just pick anyone based on the Google results and start providing them your credit card details. Be suspicious if the supplier is:

When it comes to dropshipping you won’t be short of suppliers as you will find many. So, don’t just bump into one even if it gives you bad vibes.

Risk 2: Less Profit Margin

Many times, it happens that you have listed the same product as of another seller. You might have listed it for 15$ and the other seller might have listed it for 14$. To be competitive, you then reduce it to 13$ and again the other seller reduces it to 12$. To fight back, you then again reduce it to 11$. The significant drawback here is in order to stay competitive you have to lower your profit margins.

Remedy: Sell the products that come with MAPs (minimum advertised price)

Minimum Advertised price is a way where product suppliers would make sure that the seller doesn’t undercut each other to the price point where it will affect the brand image. The sellers while competing with each other hit a price basement and profit margins lower drastically. The MAPs concept prevents this by forcing the sellers or drop shipper not to market the product below a certain price range.

Risk 3: Fulfillment Errors

One of the most attractive aspects of dropshipping is you will only pay for the products you have sold. Here the investments are low. But if there are any fulfillment errors it eliminates the benefits. When you list a product from the supplier you might not be sure if the supplier has the required stock? If the customer places an order of the higher quantity than what your supplier has, then it may pose a major problem.

Remedy: Use Product Tracking software

Product tracking software might help you to lessen the gravity of fears such as overselling and stock-outs. These systems are best for managing dropshipping efficiently. They scan the marketplaces you sell on; they would even inform you on your competitor price change, automatically update your inventory quantity on all your channels. If your supplier doesn’t have the stock, then the website would automatically make the item unavailable. The software handles everything thus keeping your profit margins high.

Many of the sellers quite easily as they face different risks on dropshipping. People get easily overwhelmed because of various legalities, risk factors, and lower profit margins. Dropshipping doesn’t attract much profit during your starting days but would be a bit difficult. You just need to stay focused and work smartly.