“Is dropshipping legal” is a question that many ask when considering launching a dropshipping business.
In the age of e-commerce, it’s becoming easier than ever before for entrepreneurs to create and launch a business with dropshipping. Within this article, we're going to discuss this topic and a few more frequently asked questions on dropshipping as well.
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First, let’s talk a little bit further about what dropshipping is. Many times, it can be confusing for beginners first trying to find information on the topic. Often on the internet people try to spin it as a get-rich-quick scheme.
Dropshipping is merely a business model that some companies or entrepreneurs choose to use when setting up their businesses.
Essentially, if a business chooses to dropship, this means that they never actually hold inventory. Instead, when a customer places an order the business owner then places an order with his or her supplier to ship the product directly to the customer.
This model has a couple of benefits, with the main one being that the business owner never has to hold inventory. In the next section, we'll talk a little further about what some of the benefits are and why many are considering starting a dropshipping store in 2022.
Why Many are Choosing to Dropship
Before we get to the question “is dropshipping legal”, let’s talk about the benefits of dropshipping and why many are choosing this business model in 2022.
Benefits of Dropshipping
Dropshipping has several benefits. The main one is, as we mentioned earlier, that the business owner doesn’t ever hold inventory.
This is advantageous when you're first starting because it greatly reduces the amount of capital needed to start a business. Typically, a new business needs a good amount of inventory to sell, but with a dropshipping business, you can launch your business without buying anything.
This also allows you to add new products and test different items quickly and easily to see how well they'll sell. With a traditional business model, you have to invest capital in the inventory for new items to sell them.
If the new items don't sell well, you will have to discount the product or eat the costs of purchasing the inventory. With dropshipping, you can add a new product to your site and if it doesn't sell well, you haven't invested any money upfront.
Aside from not holding inventory, other benefits of dropshipping include lower overhead costs and the outsourcing of the packing and shipping process. This makes it easy for one person to quickly set up a dropshipping store and launch their new business idea.
Why Many are Choosing to Dropship in 2022
Side hustles have been a concept for a while now. However, since the pandemic hit, more and more people have been interested in having a side hustle in addition to their day job. Having a second source of income can create more security in the chance that you lose your job. If they're successful, they could also be a path to a more fulfilling job if you're unhappy in your current role.
Dropshipping in particular is a side hustle that many are turning to in 2022 because it has the potential to be very successful if you select the right products and can be relatively passive once you get the business up and running. Many apps available on platforms like Shopify can help automate the order process to make it minimal upkeep to manage your dropshipping business.
Is Dropshipping Legal?
Now, to answer the main question: Is dropshipping legal?
In short, yes, it is 100% legal to set up a dropshipping business. At the end of the day, dropshipping is simply just the model that you use to fulfill your orders. There's no rule or regulation against fulfilling orders directly from your supplier instead of from a warehouse.
Other Frequently Asked Questions
Let’s talk about some other frequently asked questions related to “is dropshipping legal”.
Is Dropshipping Legal on Amazon?
Many think that dropshipping only applies to setting up your storefront on platforms like Shopify. However, there are other options you can consider as well.
The first platform people generally think of after hosting their storefront is Amazon. With the massive amounts of traffic that Amazon pulls in, it’s easy to see why this is the most appealing platform for some.
You can dropship product that is sold on Amazon, however, there are a few rules and regulations that you should be aware of. Amazon requires you to be the seller of record for all of your products and identify yourself as the seller on the invoice, packing slip, and other related documentation.
Additionally, Amazon will take a percent of the profits as well if you choose to sell on their marketplace. The exact percentage will vary, but it is usually between 10% and 15% of the total profit. However, with the amount of traffic and exposure your product will get, it can still be worthwhile to dropship on Amazon.
Is dropshipping legal from AliExpress?
AliExpress is one of the most popular marketplaces to source from in the dropshipping world. It is legal to source products for your dropshipping business from AliExpress.
While AliExpress is one of the most popular options for sourcing, there are some drawbacks to sourcing from this marketplace. Generally speaking, the product quality from AliExpress can be questionable. On top of that, because it’s one of the most popular marketplaces you run the risk of sourcing product that is already being sold by many other drop shippers.
Fortunately, there are some ways to help increase your odds of sourcing a good product from a high-quality supplier. AliExpress publishes reviews of suppliers so you can read others' experiences before placing an order. This gives you visibility into the supplier's performance, and you can also message the supplier to ask questions ahead of time.
Additionally, you can see the number of orders placed and if it’s a trending product on apps like Oberlo. Oberlo is an app that you can integrate into your Shopify store directly. It provides several metrics you can use to evaluate product. Oberlo also helps automate the order process with just a few clicks.
The last topic we want to cover is how to dropship ethically. While most of these categories are not answering “is dropshipping legal”, they are relevant when building a business plan.
Most consumers want to buy from a brand that has ethical and sustainable business practices. Ensuring that you have these in place can help build your brand and create a better customer experience.
Sustainable products that are good for the environment are a niche that is trending in 2022. Many consumers care about minimizing their impact on the environment and are willing to buy products accordingly.
An example of a product that you could dropship in this niche would be reusable beeswax wraps for food. This product replaces plastic wrap, which goes straight into landfills. Products like this are items that people will remember your brand for, and it creates a positive experience for them.
Sourcing from Ethical Suppliers
Another topic that is trending in 2022 is the labor practices behind a brand. An example of this is brands that source from fair trade certified suppliers. Brands like Starbucks have gone through each of their products and ensured that many of them come from fair trade suppliers, which ensures that their supply chain is built on ethical labor practices.
Consumers care about how the product gets to them. They want the brand to have ethical business practices and treat their employees and partners well.
For dropshipping, you could choose to source from fair trade certified suppliers and then market that on your website. This will help build your brand and help you tell a story for your customer when marketing to them.
Retail Arbitrage Dropshipping
One last method of dropshipping that we want to talk about is what we're referring to as retail arbitrage dropshipping.
This refers to when a product is listed for sale on Amazon or eBay, and when the product is bought the person sources the product from another retailer like Walmart that sells it for a lower price. The price difference is what the dropshipper makes in profit in this scenario.
While some people do choose to follow this method, it's generally frowned upon and against many platforms' policies. Amazon and e-Bay for example do not allow this type of dropshipping on their marketplaces.
Additionally, the margins on dropshipping like this are very thin, and generally, this type of business model is not very lucrative for the dropshipper.
Conclusion – is Dropshipping Legal?
Drawing back to our original question: Is dropshipping legal? The answer is of course yes as we've mentioned earlier in our article. Dropshipping is nothing more than a business model, and it’s totally legal to source your product directly from suppliers to fulfill orders.