Is Dropshipping Legal? The most important information about Dropshipping

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For aspiring e-commerce sellers, it sounds almost too good to be true – sell on the Internet without much effort, capital, and storage space and simply make a profit. This makes many people ponder and ask themselves: is dropshipping legal? In this article, we get to the bottom of the question. We’ll also look at the pros and cons so you can decide if it’s the right business for you.

Is Dropshipping Legal?

Dropshipping means: If a customer orders a product in your online shop, you simply pass the order on to your wholesaler or producer. He then takes care of the logistics – you have nothing to do with the supply chain.

Is dropshipping legal in Germany? The answer to this question is clearly “yes”. According to German law, it is allowed as long as you comply with the applicable laws for sellers and the operation of an online shop. Your site is subject to the same rules as an online store that has the products in stock.

A right of withdrawal applies throughout the EU, which means that customers can withdraw from the purchase and send the product back without giving a reason. However, you do not have to provide your return address, so the product is returned directly to the wholesaler or producer. This is not recommended in terms of customer loyalty, because return shipping abroad can be very expensive. By the way, dropshipping is legal in Switzerland, as well as in EU countries like Austria. Be sure to check your local laws before you start dropshipping, though.

The pros and cons of Dropshipping

Making big bucks dropshipping without working for it? It’s really not as easy as some YouTube clips make it sound. This business has its advantages and disadvantages that you should know about. The main argument for wanting to get started with a dropshipping business is: You only need a few hundred euros of start-up capital for samples, your webshop, and marketing – you do not get your hands on the goods and therefore do not have to store or pre-finance them.

What some retailers praise as an ingenious business model in fee-based tutorials also has its pitfalls. What many don’t mention: The risk is quite high because you have to take responsibility if your wholesalers deliver too late or offer poor quality. Because you have no control over the supply chain, your shop’s reputation is at stake with every order. The time required should not be underestimated either. You save yourself all the steps involved in fulfilling the goods, but you first have to make a name for yourself as an independent e-commerce retailer.

What are the advantages and risks for customers?

If you want to be successful as a dropshipper, you should always keep an eye on your customers. Keep in mind that you have to set your business apart from your competitors in terms of price and quality. The main benefit for buyers is the low price you get by shopping from dropshipping stores.

What customers don’t like at all, however, are long delivery times and unclear return modalities. Luckily, you have control over that, so offer free returns where possible and choose producers that aren’t too far away or have a warehouse nearby.

Other legal considerations

While dropshipping is legal, there are a few other things to consider before you get started. It is advisable to think about your own security, but also to calculate taxes and take care of the necessary administrative procedures.

In addition, your shop and your information pages should be ready before the launch: inform your customers of their 14-day right of withdrawal, publish the terms and conditions, the data protection declaration, and an imprint. Otherwise, you can expect legal warnings and fees.

Safety of the products

Since your customers pay you, you are also responsible if something goes wrong or the goods are defective or even processed in a way that poses a safety hazard. And even if the manufacturer is usually liable for his goods, you are considered the manufacturer when dropshipping with AliExpress, for example, because China is considered a third country for tax purposes. With producers within the EU, on the other hand, you can breathe a sigh of relief in this regard.

You should therefore always check products that you buy from non-EU countries very carefully – also with regard to additives. If you don’t have the time or resources to do this, only work with wholesalers who you can trust and who can meet EU-recognized safety standards.

These products from China that are not suitable for dropshipping due to the increased security risk:

• Liquids
• Cosmetics and care products
• Products for children and babies
• Clothing and jewellery
• Licensed Goods
• Electronics with batteries

Also important is that if you intend to make a profit with your business, you must register a business. In order not to be liable with your private assets, the establishment of a GmbH is an option.

Import VAT, customs, and other costs

Since July 2021, the exemption limit of 22 euros for import VAT which was previously valid no longer exists. That means: For all goods that you order in a third country such as China, Great Britain, or the USA, import duties apply to the purchase price. Customs duties are only due in Germany for goods with a value of 150 euros or more.

Another tip: You should also observe the packaging laws – you usually have to buy a packaging license, because your business generates waste. Distributors and manufacturers are obliged to pay for a dual system.

Is Amazon Dropshipping Legal?

Of course, you can also do your dropshipping via Amazon and save yourself time. When selling via the trading platform, you don’t have to set up and promote your shop first, but instead can simply use the marketplace with its marketing strategies, secure payment options, and algorithms.

Please note, however, that Amazon has set some rules for dropshipping-type sellers that you should definitely follow. Otherwise, your account could be blocked.

• You must be identified as a seller everywhere – a reference to the manufacturer or wholesaler on packaging or invoices is not permitted
• Dropshipping may only be done through the Amazon FBA program
• You are responsible for processing returns
• Make sure that your producer can really deliver all orders so as not to endanger your seller account
• Purchasing goods from wholesalers and manufacturers is permitted, but the resale of products from retailers is subject to severe sanctions

There is an additional 10 to 15 percent fee for dropshipping on Amazon. Therefore, you should carefully consider whether doing business on Amazon is worthwhile for you or whether you would rather open your own shop.

Conclusion

In theory, dropshipping is a good option for anyone who is just starting their business, has little money at their disposal, and may have another job on the side. You should by no means underestimate the risks, but if you approach the matter realistically, you will certainly be rewarded with good sales. We hope that our guide was able to provide you with some good inspiration!