Yes, Dropshipping is legal. Dropshipping is a fulfillment method for retailers in which a store does not keep the products it sells in stock but markets what the manufacturers produce, ultimately making a profit after a sale.
When customers place an order from the store, they purchase it from a third party, which is then shipped directly to the customer.
Therefore, as a dropshipper, you won’t have to handle the items you sell; the supplier does all the production and delivery work.
Your only job as a drop shipper is to link with suppliers, market their products, and, once you generate sales, make a profit in the long run.
The only difference between the typical retail model and Dropshipping is that you don’t have to own the inventory as a merchant.
Your main job is to market and fulfill the orders once customers start buying.
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This is why Dropshipping is legal.
Some factors can make a business illegal, but a dropshipping business doesn’t fall under any category of illegal online activity to start.
When starting a dropshipping business, you must register an LLC company since PayPal requires a business account to connect to your Shopify store.
Without a business PayPal account, you won’t be able to receive cash from your sales since Shopify doesn’t work with personal accounts. Also, read Why Paypal Bans Dropshipping Stores.
For any business that requires a business name and maybe tax information like SSN, then that business is not illegal.
It answers the question of whether a dropshipping business is illegal online.
Dropshipping is legal since you sell products in exchange for cash, and the products bought by your online customers are shipped to their respective addresses.
The fact that you have no power over the inventory or shipping doesn’t make a dropshipping business illegal to involve yourself in.
It becomes unprofessional when you get sales and decide not to fulfill customer orders.
There have been a few cases of dropshipping scammers who create Shopify stores, get sales, and then close the shop without fulfilling the products. Now, that is illegal.
When you conduct a clean business online and ensure that your customers get what they pay for, you are in the right company.
How Dropshipping Works
The good thing about Dropshipping is that it doesn’t require any upfront inventory costs.
You don’t even need logistics for shipping. Dropshipping enables you to send products directly to your customers from the wholesaler.
Here are some of the steps that show how Dropshipping works:
- A customer places an order in your store
- You fulfill the order by sending all the details to the supplier
- The supplier prepares the order for your customer
- The supplier then ships the order directly to the customer
As you can see from the above steps, Dropshipping is relatively easy, and the process is fast and efficient.
It involves minimum costs on your end since you don’t need to have inventory. The manufacturer and supplier produce the items you market and sell, which they then ship to customers.
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How Beneficial is Dropshipping?
Dropshipping has plenty of benefits. Starting Dropshipping is relatively easy since it doesn’t involve a lot of costs.
Dropshipping is a business you can start with low costs and make profits if you do it right.
Of course, no business is guaranteed to succeed, but when you put in the required effort and use a solid strategy, you are bound to reap rewards in the long run.
However, this business model must be long-term, not a “get-rich-quick scheme.”
Here are some of the benefits of Dropshipping.
1. Minimal Capital Needed to Start
A huge notable benefit of Dropshipping is that it doesn’t require a lot of capital to start.
Internet marketing skills needed for this business outweigh the financial capacity, which is a good thing.
Since you don’t need upfront inventory as you link to suppliers with the products in your niche, this minimizes your starting costs.
Before, retailers needed substantial capital to start an eCommerce store since you had to have upfront inventory, but the case is different now and much better.
Dropshipping allows you to purchase the product once your customer has made and paid for the sale.
Therefore, such a model allows you to source products and begin your Dropshipping business with minimum capital.
2. Dropshipping is Quite Easy
Dropshipping is very easy because you can run it without physical products.
With Dropshipping, you won’t need to manage or pay for a warehouse, pack or ship orders, track inventory for accounting reasons, or even continue to order products and maintain the level of stock—all that is done by the manufacturer or supplier.
Your work is to source products, market them, fulfill them, and make your profit.
However, you must ensure that you work with reliable manufacturers and suppliers.
3. The Overhead is Low
Another benefit of Dropshipping is that overhead costs are low. Since you won’t have to deal with inventory or warehouse management, this helps to keep the costs low.
Therefore, you can run your Dropshipping businesses anywhere in the world or at home.
You need only an internet connection, a laptop, and internet skills to run this type of business.
4. Wide Range of Products to Choose
Not only is Dropshipping flexible, but it also offers a wide range of products to choose from when you want to launch.
You can sell plenty of products on your Dropshipping store to people worldwide.
There are no limitations since you can target millions of people worldwide.
5. Test Easily
Another benefit of Dropshipping to consider is that you can quickly test it and determine whether it is a suitable business model.
You can source products, launch your Dropshipping store, and test out new products to determine your success.
Since it requires less capital to start, it provides an opportunity to test out the business very quickly.
6. You Can Easily and Fast
Another benefit of the Dropshipping business model is that it is easy to scale and can be done quickly.
Once you source the items you need to sell and launch your store, you can begin testing out the items you feel have the potential to make you as much money as possible to see if they are scalable.
After testing the products and finding the ones that are selling better, you can gradually increase your marketing budget and scale your business much faster.
That also helps you learn many things as you progress in your business.
7. Flexibility
As you can imagine, starting a Dropshipping business doesn’t require a lot of capital, and you can run your store with just a computer and an internet connection. Thus, it is quite flexible.
You can run this business from anywhere in the world.
Most drop shippers run their businesses from home.
The Disadvantages of Dropshipping
Just like all other businesses, Dropshipping also a few disadvantages which are essential for you to know about.
Although this business model requires little capital to start and has plenty of benefits, here are some of the disadvantages that you need to know before you launch your Dropshipping store.
1. The Profit Margins Are Quite Low
One massive problem of Dropshipping is the low profit margin. Since starting a Dropshipping business is so easy and requires only a small amount of capital, anyone can do it, which eventually creates a lot of competition.
Therefore, some stores set their prices too low to outperform their competition, which may force you to sell products at a lower cost to attract customers.
These are some of the things that negatively affect the profit margins.
2. High Competition
Dropshipping also involves a lot of competition. There are always stores willing to sell products at meager prices.
Also, since launching a Dropshipping store is easy, the market can quickly become saturated with stores selling the same products.
These factors create a lot of competition, which requires you to find ways to be different to stay ahead of the game.
3. Issues with Inventory
It is easy to keep track of your inventory, but since you don’t need to have your inventory with Dropshipping, keeping track of your supplier’s stock may be challenging.
The inventory tends to change daily from your suppliers, and it may be challenging to know which products are lacking or less from your supplier.
Therefore, this may end up causing you a lot of issues with your customers.
4. Supplier Issues
Another disadvantage of dropshipping is the reliability of suppliers. Some suppliers might cause problems by delivering the wrong products or low-quality items.
Such issues may cause customers to return products and request refunds, which can eventually destroy your brand’s reputation.
Therefore, you need to check the reliability of a supplier before you decide to work with them.
5. Shipping Legal Issues
Usually, as a drop shipper, you will work with multiple suppliers, which complicates the shipping legal issues and costs.
For instance, if a customer orders several items that you have sourced from different suppliers, this might complicate things and raise extra shipping costs, which could result in losses and low profit for you.
Since you wouldn’t want to pass such fees on to your customers, you may end up covering all the costs, which may result in a loss.
Therefore, this is one of the disadvantages of Dropshipping and something you need to monitor to help you prevent it if you want to make considerable profits from the sale of items.
How to Build a Successful Dropshipping Store
Building a successful Dropshipping store involves taking the proper steps to ensure your business is well done and can bring consistent profit.
You also need to ensure that you build a strong brand that will grow and benefit you in the long term. Below are some of the steps you need to take when planning to build a successful dropshipping store.
1. Choose Your Niche
When looking to launch a Dropshipping business, you first need to select a niche that you are passionate about.
There are plenty of niches to choose from, and some examples include home and garden, pets, and fashion. Whatever niche you choose, just make sure that it is something that you love and are passionate about.
The reason is that you need to sell items from a niche that you are fully aware of to help provide the right information to customers when marketing the products or sourcing them from suppliers.
It will also help you build a strong brand that will attract regular customers. Once they find out you know what you are doing, they will know that they can fully trust you.
2. Conduct Thorough Research
Conducting thorough research is vital when launching your Dropshipping business.
You first need to research your niche, determine which products most appeal to customers, and learn more about your competition.
Since Dropshipping is highly competitive, you need to find out what your competitors are doing to effectively strategize how you can win customers and make more sales like them.
Find the average prices of the items you sell in your niche, their shipping costs, and the suitable suppliers to trust and work with.
Learning all these factors will help you position yourself better once you launch your store.
3. Choose the Right Suppliers
Before starting your Dropshipping store, you need to choose suppliers.
Therefore, when looking through the list of suppliers, select the ones with high ratings and those you can fully trust. Avoid choosing suppliers with low or new ratings since this can be risky.
Remember, your brand will suffer most if the suppliers you choose upset your customers.
Therefore, you have to be very keen when selecting suppliers to work with.
4. Design Your Dropshipping Store
As a Kenyan launching a Dropshipping store online, you must approach this process correctly.
It would be best to design a bright, beautiful, responsive store that is fast and efficient for your customers.
For this, you can choose an expert web designer to help you or check on Shopify experts to assist you in developing an efficient store.
Platforms such as Shopify and Alidropship enable you to design and launch your Dropshipping store fast – you can do it even in a day.
5. Efficient Customer Support
Once you develop your Dropshipping business, you must ensure you have the proper customer support set up.
Provide different means for customers to contact you in case they have any questions or issues.
Social media pages like Facebook and Instagram can help you market and interact with your customers quickly.
Also, provide email support and a contact form on your site for customers to use to get help.
Conclusion
Dropshiping is legal, and it is the same as any other person across the world.
The Dropshipping business model suits everyone, provided they know what they are doing and are willing to keep learning and scaling the business.
If you want to start a dropshipping business, make sure you find as much information as possible and do the right thing to help you reap good fruits in the future.
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