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5 Facts That Proves Dropshiping is legal And Viable
16. 5 Facts That Proves Dropshiping is legal And Viable
Yes, Dropshiping is legal. Dropshipping is a fulfillment method for retailers whereby a store does not keep the products they are selling in stock but markets what the manufacturers produce then end up making a profit in the end after a sale.
When a customer places an order from the store, they purchase it from a third party, and then it is shipped to the customer directly.
Therefore, as a dropshipper, you won’t have to handle the items you are selling as the supplier does all that work or production and delivery.
Your only job as a dropshipper is to link with suppliers, market their products, and make a profit in the long run once you generate sales.
The only difference between the typical retail model and Dropshipping is the fact 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.
This is why Dropshiping is legal
Some factors can deem as business as illegal, and dropshipping business doesn’t fall under any category of illegal online activity to start.
When starting a dropshipping business, you will need to 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 if a dropshipping business is an illegal online business.
Dropshiping is legal since you are selling 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 business to involve yourself in.
It becomes unprofessional when you get sales and decides not to fulfill the orders to the customers.
There have been few cases of dropshipping scammers who create Shopify stores, get sales then closed the shop without fulfilling the products, now that is termed as illegal.
When you are doing a clean business online and ensures that your customers get what they paid for, then 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 which show how Dropshipping works:
- A customer places an order on 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 quite easy, and the process is fast and efficient.
It involves minimum costs on your end since you don’t need to have inventory. The production of the items you market and sell is done by the manufacturer and supplier who then ship to customers.
How Beneficial is Dropshipping?
Dropshipping has plenty of benefits. Starting Dropshipping is quite easy since it doesn’t involve a lot of costs.
Dropshipping is a business that 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 on the required effort and use a solid strategy, you are bound to reap high fruits in the long run.
But, you have to look at this business model as a long-term one and not as 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 to have upfront inventory as you link to suppliers who have the products in your niche, this highly minimizes your starting costs.
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Before, retailers needed to have 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 the sale has been made and paid by your customer.
Therefore, because of such a model, you can source products and begin your Dropshipping business with minimum capital.
2. Dropshipping is Quite Easy
Dropshipping is very easy because you get to run it without the need to have any physical products.
With Dropshipping, you won’t need to manage or pay for a warehouse, pack or ship orders, track inventory due to 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 need to ensure that you are working with reliable manufacturers and suppliers.
3. The Overhead is Low
Another benefit of Dropshipping is that your overhead costs are quite low. Since you won’t have to deal with inventory or warehouse management, this helps to keep the costs so much lower.
Therefore, you can run your Dropshipping businesses from anywhere in the world or even at your home.
All that you need to run this type of business is an internet connection, a laptop, and internet skills.
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.
There are plenty of products you can choose to sell on your Dropshipping store, and you can sell them to people worldwide.
There are no limitations since you can target millions of people from across the world.
5. Test Easily
Another benefit of Dropshipping to consider is that you can quickly test it and find out if it is a suitable business model.
You can source products, launch your Dropshipping store, and test out new products to see if you’ll be successful.
Since it doesn’t need as much capital to start, this provides you with an opportunity to test out the business very quickly.
6. You Can Easily and Fast
Another good thing about the Dropshipping business model is that it is easy to scale and at a faster rate.
Once you source out the items that you need to sell and then go-ahead to launch your store, you can begin testing out the items which you feel have the potential to make you as much money to see if they can be scalable.
After testing out the products and find the ones that are selling better, you can go ahead to increase their marketing budget gradually and scale your business at a very faster rate.
That also helps to learn a lot of things as you progress in your business.
As you can imagine, since starting a Dropshipping doesn’t require a lot of capital and you can run your store with just a computer and internet connection, it is quite flexible to run a Dropshipping business.
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 low capital to start and has plenty of benefits, here are some of the disadvantages that you need to know before you think about launching 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, this enables anyone to do it, which eventually creates a lot of competition.
Therefore, some stores set their prices too low to knock out their competition, and this may force you also to sell products at a lower cost to get customers to buy.
These are some of the things which 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 easily become saturated with stores selling the same kinds of products.
These factors create a lot of competition, which requires you to find ways to be different to be on top of the game.
3. Issues with Inventory
It is easy to keep track of your inventory, but since with Dropshipping, you don’t need to have your inventory, it may be quite challenging to keep track of your supplier’s stock.
The inventory tends to change daily from your suppliers, and it may be difficult for you 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
The reliability of suppliers is also another disadvantage of Dropshipping. Some suppliers might cause problems for you by delivering the wrong products or low-quality items.
Such issues may cause customers to return products and request refunds, which eventually may end up destroying the reputation of your brand.
Therefore, you need to check the reliability of a supplier before you decide to work with them.
5. Shipping Legal Issues
Usually, as a dropshipper, you will end up working with multiple suppliers, and this ends up complicating 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 bring up extra shipping costs, which might result in losses of low profit for you.
Since you wouldn’t want to pass such fees to your customers, you may end covering all the costs, and this may result in a bit of a loss.
Therefore, this is one of the disadvantages of Dropshipping and something you need to keep an eye on to help you prevent it if you are looking at making considerable profits from the sale of items.
How to Build a Successful Dropshipping Store
Building a successful Dropshipping store involves taking the right steps to ensure your business is well done and can bring in 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 on building 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, among others. Whatever niche you decide to choose, just make sure that it is something that you love and are passionate about.
The reason being, 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 since they will know that they can fully trust you once they find out you know what you are doing.
2. Conduct Thorough Research
Conducting thorough research is vital when launching your Dropshipping business.
The first thing you need to do is research your niche, find out which products mostly appeal to customers, and also learn more about your competition.
Since Dropshipping has a lot of competition, you need to find out what your competitors are doing to help effectively strategize on how you can win customers and make more sales like them.
Find the average prices of the items you are selling in your niche, their shipping costs, and the right 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, ensure you select the ones with high ratings and ones that you can fully trust. Avoid choosing suppliers with low ratings or the new ones since this can be very risky.
Remember, your brand will be the one that will suffer most if the suppliers you choose end up doing the wrong things and upsetting 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 need to approach this process in the right manner.
You need to design a smart, beautiful, and responsive store that is fast and efficient to 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 need to make sure that you have the right customer support set up.
Provide different means by which customers can reach out to you in case of any questions or issues that may arise.
Social media pages such as Facebook and Instagram can help you market and interact with your customers fast.
Also, provide email support and contact form on your site that customers can use to contact you for help.
Dropshiping is legal, and it is the same as any other person across the world.
The Dropshipping business model is suitable for everyone, provided they know what they are doing and are willing to keep on learning and scaling the business.
If you are looking to start a Dropshipping business, make sure you find out as much information about as possible and do the right thing to help you reap good fruits in the future.
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