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.

Customers order products from your online shop. As a dropshipper, you are responsible for proper delivery and resolving complaints. Here are some of the benefits and disadvantages of dropshipping.

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 fulfillment 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 inventory.
• 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 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.

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.

Overseas dropshipping suppliers

In addition to dropshipping in the Netherlands, you can also partner with foreign dropship suppliers. All you have to do is place products from these suppliers on your website and they will ship the products straight to your customer. There are several obstacles to keep in mind when it comes to international dropshipping, such as longer delivery times, potential communication problems, and higher shipping costs. Investigate whether international dropshipping is actually commercially feasible for your shop.

Make clear agreements with your foreign dropship supplier about delivery time, warranty, and returns and lay down these agreements in a contract. You are not allowed to trade counterfeit goods, so have your supplier lay down in writing that their products do not infringe on intellectual property rights.

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. Clarity is in everyone’s best interest, as it helps prevent unwanted surprises, conflict, and dissatisfied customers, sellers, or suppliers.

Product safety

If you are in business with a non-EU dropship supplier, it is important to remember that the products you offer to consumers in the EU as a dropshipper must always have CE marking or comply with other European product requirements. It does not matter whether your business is large or small or whether you sell products from your own online shop or on an online platform (in Dutch). Consumer safety is paramount. If they sustain an injury or some other form of damage occurs due to a defective product, they can hold you liable. Ask your overseas dropship supplier for reports, analyses, certificates, or other documentation showing the quality and safety of their products.

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

When you import products from countries outside the EU, you may have to pay import taxes. Importers have to pay import duties for shipments over €150, as well as import VAT, which applies to all shipments. Your Dutch customer will not expect the courier to present them with the bill for these costs, unless you inform them in advance. Make arrangements with your foreign dropship supplier on transportation and clearance with Dutch Customs.

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' with advice from international VAT specialist Raymond Feen. 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 Alibaba, 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, take a deep dive into the benefits and disadvantages (in Dutch) first.

DAC 7

As of 1 January 2023, the Digital platforms revenue transparency act (DAC 7) has been in effect. This 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.