Dropshipping: selling products online

One of your options as an e-retailer is dropshipping. But what is dropshipping? 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. With dropshipping, you do not keep any products in stock yourself, which means you will have to invest less.

Dropshipping has advantages and disadvantages. A customer orders the product from your online shop. Therefore, as a dropshipper, you are responsible for correct delivery. You solve complaints and problems yourself, not your supplier. This supplier may be in the Netherlands or abroad. With international dropshipping, you have to deal with extra rules. In this article, you can read what to pay attention to as a dropshipper.

Advantages of dropshipping

Dropshippers sell products from dropship suppliers in their online shop. This can be either manufacturers or wholesalers. 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 lots.

Disadvantages of dropshipping

Dropshipping sounds like an easy way to make money without having to invest much in advance. But dropshipping 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 an agreement. You may not trade in counterfeit goods. Have your supplier include in the agreement 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. Your customer can hold you liable for (personal) damage caused by a faulty product. Ask your supplier for reports, analyses or statements proving that its products are safe and of good quality.

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. For more information, read the article 'International dropshipping and VAT: how it works'. Discuss the implications for your VAT obligations with your financial services provider.

Selling on platforms

In addition to dropshipping, you can also sell products on online platforms, with AliExpress, eBay, Zalando, Bol.com, and Amazon being some of the most well-known. If you are looking to use these online platforms as a marketing channel for your products, learn about the benefits and disadvantages.

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. In our E-commerce checklist (in Dutch), you will find a quick summary of all the rules. There is also more information on dropshipping on Rijksoverheid.nl (in Dutch) and 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 Dutch Tax Administration. including the income you receive through the platform, your account number, your name, and your address information.