While creating a successful side business may seem like a challenge, even 14-year-olds are currently raking in six figures through international drop shipping. The business model continues to be a well-defined formula for success, as long as you know the methods and logistics.
To help you get started on your drop shipping journey, we’ve put together an extensive guide of information and laws to review before launching your store. Read on for your crash course in drop shipping 101.
Drop shipping is a form of e-commerce in which the store owner (or in this case the drop shipper) does not hold their own inventory. Instead, all or most of their orders are fulfilled by third party vendors.
The drop shipper is then paid either through commission (as an affiliate) or in the price difference if they have marked up the cost of the original product. Shipping is also handled by the third party vendor.
Drop shipping is one of the few businesses that can be started from virtually anywhere with minimal investment. To set up a drop shipping store a drop shipper must first choose an e-commerce platform (such as Shopify or Woocommerce).
From there, the drop shipper selects the products they want to feature. Since the products are fulfilled by a third party, the drop shipper does not need to purchase any products to sell themselves
There are a number of benefits that come with being a drop shipper. Some of these benefits include:
While drop shipping is a great business opportunity there are still some disadvantages to be aware of:
While drop shipping may seem like easy money, if you want to have a successful drop shipping career you’ll have to keep a constant flow of traffic to your website.
This means knowing how to properly lay out a store, how to use content, email marketing, and SEO methods to speak to the right audience. This also means regularly checking product popularity and adjusting your choices accordingly.
All things considered, drop shipping is also a great wait to earn a living. The average annual sales for a drop shipper will vary from store to store.
There have stores reporting anywhere from €100,000 a year to €1.8 million a year. Unfortunately, there are countless variables in drop shipping (from finding the right niche to choosing the right domain name) that will determine your overall success.
Like all businesses, there are some myths surrounding drop shipping and how it works. Here are some important myths to be aware of:
One of the most important factors in having a successful drop shipping company is choosing the right niche market. It has less to do with trends and more to do with products with a high search rate and low competition.
You can research keywords using Google tools or utilizing one of the available drop shipping niche tools.
Like all businesses, there are important drop shipping and e-commerce laws you want to abide by in order to avoid legal problems in the future.
Many drop shippers work under the false assumption that such an industry comes without regulation, however, this form of thinking can quickly bankrupt you.
To help you avoid the headache and the hassle we have rounded up some of the most important laws to know as a drop shipper.
Some drop shippers choose to create their own products through a service like Printful. This can be a great way to offer original product choices and enhance your traffic.
However, it’s important to be sure that any of the wording or imagery used on your products are not already trademarked by another corporation.
In the event that they are not, it’s highly recommended that you trademark your designs to avoid them being stolen and trademarked by someone else.
One of the more prominent laws in e-commerce is the anti-spam act. This act pertains to your email or other information being exchange or sold to additional parties.
Once your email is passed on you’ll quickly notice an increase in spam email that you did not opt-in for. The Anti-spam act is designed to protect you and your customers from such an instance.
Data protection is similar to the Anti Spam act in the sense that it is designed to avoid the selling or exchanging of private information without permission.
However, this law pertains to any information (from card numbers to phone numbers) being exchanged. Often advertisers will buy insights to what consumers are looking for, without the consumer’s information this information exchange is forbidden.
Your business structure laws will also vary depending on what country your business is based in. These laws are predominately focused on the number of employees you have and where those employees are located.
You’ll also have to abide by minimum wage laws in the case of employing others. It’s important to remember that the minimum wage laws that are to be followed are dependant on the location of the employee, not the business.
Consumer protection ensures the store owner is upfront and honest on the details of each product. This is why it’s highly recommended that drop shippers order at least one sample of each product they are selling in order to inspect the quality for themselves.
In the event that a product is not as described, it will be the drop shipper that is held accountable not the vendor.
Depending on where your store is based, there may be specific laws in regards to returns and refunds. Often these laws require a specific amount of time in which the customer can make a return and/or receive a refund.
In some cases, these laws can be avoided if the drop shipper clearly states their own return policy prior to the customer checking out.
When it comes to e-commerce, legally speaking everything must be in writing. This means that every purchase must result in a written order confirmation within 3 days of the order (unless otherwise agreed upon).
This law is applied in most countries and is intended to protect the consumer by providing them with proof of purchase. The same applies to physical stores.
If your drop shipping store is UK based you will need to abide by another set of e-commerce laws that offer customers a specific set of rights.
One such right is the right to a “cooling-off period”, typically a length of 30 days in which consumers have the right to change their mind on an e-commerce purchase.
While the right to a cooling off period is mandatory the amount of time in which a decision can make tends to vary from store to store.
While delivery times may vary depending on the location and the type of delivery method chosen by the customer, there are still laws surrounding the process of delivery.
One of these important laws is to provide an accurate and reasonable window of time when the customer can expect to receive their purchase. Since you are responsible for providing your customer with accurate information (not the vendor), you will be held responsible for the information shared.
Sales tax is also an important factor to keep in mind, especially if you plan on handling your own accounting. While taxes are a guarantee for any business, the exact amount depends on the country and state that you live in.
It’s advised to check the current laws with your local tax accountant in order to accurately factor in any additional taxes when creating your prices.
No matter what the laws are in your area, you can always err on the side of caution by simply practising transparency. Always test your products so you can accurately describe them and put your full faith behind what you sell.
Try several “test runs” of shipping products to offer an accurate timeline on what the customer can expect. Finally, create a solid warranty to show customers you’re there for them.
It’s important to equip your international drop shipping business with all of the tools it needs to succeed. From choosing the right web hosting platform to finding the perfect domain name, it’s worth investing in your business to help it thrive.
If you’re not sure where to start on setting up your drop shipping website, we suggest checking out our hosting packages to provide your customers with a speedy shopping experience.