Dropshipping: selling products online

Dropshipping may look easy, but there is more involved than you might think. There are rules to follow and you must offer good customer service. As a dropshipper, you work together with a supplier in the Netherlands or abroad. With international dropshipping, you have to deal with extra rules. In this article, you can read what the advantages and disadvantages are and you need to look out for as a dropshipper.

What is dropshipping?

Dropshipping is a form of e-commerce, where you supply customers without keeping products in stock yourself. A customer orders a product from your online shop. You then place the order with your supplier and they send the product to the customer. Because you do not have to maintain an inventory, you will have to invest less.

Advantages of dropshipping

Dropshippers sell products from dropship suppliers in their online shop. These suppliers are usually manufacturers or wholesalers, either domestic of foreign. Dropshipping has the following advantages:

• You do not keep any products in stock yourself, so you do not have to rent or purchase storage space.
• You run no procurement risk. You pay your supplier only after your customer buys the product from your online shop. Your selling price consists of the purchase price, order fulfilment costs and shipping by your dropship supplier, plus your profit margin.
• You do not need staff to pack and ship the order to the customer.
• You easily expand your product range because you do not have to invest in expensive new stock. And you do not have to worry about leftover stock.

Disadvantages of dropshipping

Dropshipping sounds like an easy way to make money without having to invest much in advance. But it also has important disadvantages:

• You are responsible for providing proper customer service, such as resolving delivery issues. If a shipment arrives late, fails to arrive, or the product is damaged, you have to help your customer. If your dropship supplier makes a mistake, your reputation will suffer. Make clear arrangements with your supplier about matters such as warranty terms, returns, delivery times, and available stock.
• Dropship suppliers usually sell their products to other online shops as well, and your competitors may choose to sell them at very low prices, making do with lower profit margins than you would like.
• Because you do not deliver from stock, you cannot check whether the product is in good condition before it is shipped. Or even if the correct product is being shipped.

Overseas dropshipping suppliers

Working with foreign dropship suppliers brings several challenges. For example, longer delivery times, potential communication problems, customs rules, and higher shipping costs.

In international dropshipping, you put products from foreign suppliers on your website. They will ship these directly to your customer. Make clear agreements with your foreign dropship supplier about delivery time, warranty, and returns. Record these agreements in a contract. You may not trade in counterfeit goods. Have your supplier agree in the contract that there is no infringement of an intellectual property right.

Delivery time and returns

Tell your customer about the expected delivery time in advance. If your supplier is based in China, it will take anywhere from 2 to 3 weeks for the product to arrive. It is also important to be clear about the returns procedure. If you want your customer to return products to the foreign supplier, you have to tell them in advance. If you fail to do so, you will have to pay the return cost yourself. Being clear is in everyone’s best interest, as it helps prevent unwanted surprises, conflict, and dissatisfied customers, sellers, or suppliers.

Product safety

Do you work with a dropship supplier outside the EU? The products you sell to EU consumers must always comply with CE marking or other European product requirements. It does not matter whether you have large-scale or small-scale operations, or whether you sell from your own online shop or through an online platform.  Consumer safety comes first. 

European regulation (EU) 2023/988, the General Product Safety Regulation (GPSR) applies to all non-food consumer products entering the European market. Medicines, animal feed, live plants and animals, animal by-products, plant protection products, antiques, and food are not covered by the GPSR.

There are also special requirements for many products. These include toys, cosmetics, and electric and electronic products. Your customer can hold you liable for (injury) damage caused by a defective product. Ask your supplier for technical documents proving that their products are safe and of good quality. Read more about product safety responsibilities.

Customers outside the EU

If you want to sell your products to non-EU customers, read up on local laws and regulations in the country or countries in question. Laws governing consumer protection, product regulations (product requirements), and internet purchases often vary from country to country.

Customs and import duties

Do the products come from outside the EU and the value of the shipment exceeds €150? Then the EU importer often pays import duties. The amount of the import duty depends on the product. The importer also always pays import VAT. Customers do not expect to have to pay these costs directly to the delivery company, unless you let them know in advance. Make arrangements with your foreign dropship supplier for transport and customs clearance.

Do you have customers outside the EU? Then there are often different customs rules and import taxes. Be clear here too. Let customers know that customs clearance costs are part of the selling price of your product. Or that your customers have to pay these costs afterwards when their product is delivered.

VAT rules

Specific VAT rules apply to dropshippers who sell products from (foreign) suppliers to consumers in the EU. The rules vary depending on whether you are selling something to a private person or a business. It also makes a difference if you are doing business within the EU or outside the EU. Every situation is different and you need to take several things into account. Find more information about dropshipping and VAT (in Dutch) . You can hire a tax expert for complicated situations and specialist advice.

Starting a dropshipping business

To start a dropshipping business, you need to register a domain name, register your online shop with KVK, and keep financial records. Dropshippers have to abide by the same laws and regulations as any other online shop, which means you have to provide correct information about delivery times and return options. The best way to do this is to set up customer service. This E-commerce checklist (in Dutch), has a quick summary of all the rules. There is also more information on dropshipping on Business.gov.nl.

DAC7

The Digital Platforms Revenue Transparency Act (DAC7) affects you if you sell products on European digital platforms and digital platforms with European customers. The DAC7 Act states that these platforms are required to provide information about you as a seller to the Netherlands Tax Administration. including the income you receive through the platform, your account number, your name, and your address information.