In recent years, e-commerce has been expanding rapidly. New methods are emerging. One of these is dropshipping.
With this online sales system, the seller is solely responsible for marketing and selling the products. This advantageous business model is becoming increasingly attractive.
Indeed, with the development of turnkey modules, dropshippers can easily create their online shop. Moreover, this business model does not require any major investment. Costs are reduced (no own premises, no storage costs, no delivery costs), while offering a wide range of products.
Although the dropshipper is not responsible for delivery, stock and after-sales service, he is still responsible for the proper execution of the order. It is therefore essential to master a few basics before starting to trade on the Internet.
What is dropshipping?
The principle of dropshipping
Dropshipping is an activity specialising in the sale of products online with distance selling (DSL) and e-commerce.
The owner of the merchant site, e-merchant or dropshipper, does not hold any stock. He essentially manages the online availability of products on his online shop and coordinates marketing via webmarketing campaigns on social networks (Snapchat, TikTok, Facebook), search engines via Search Engine Optimisation (SEO) and Search Engine Advertising (SEA) (Google Ads for example) and influencers.
The dropshipper also manages operational tasks such as sourcing, invoicing and customer service.
The logistical part (acquisition of stock, packaging, shipping, etc.) will be handled by the supplier or agent of the e-merchant.
How dropshiping works?
Dropshipping brings together three actors:
- Le fournisseur (ou grossiste) qui propose ses produits au revendeur ;
- Le revendeur (ou dropshipper) qui propose à la vente les produits du fournisseur sur son site e-commerce ;
- Le client qui achète les produits du fournisseur sur le site du revendeur.
The buyer places an order online with the seller.
The dropshipper places the order with the supplier.
The supplier processes the order and sends it directly to the buyer.
Starting a dropshipping business
The basics
Although the deployment of this type of business is advantageous, the creation of a dropshipping business requires, like any other business, the study of several factors. Indeed, many parameters must not be neglected when creating an e-commerce site, such as the choice of the site, its hosting, the choice of suppliers, the products sold, the payment solutions, etc.
Today, one of the main advantages of dropshipping is the ease of creating an online shop. Many platforms (WordPress, PrestaShop, Shopify, etc.) offer turnkey solutions to create and manage the content of an e-commerce site independently.
These e-commerce solutions give access to the e-commerce tools necessary for the proper functioning of an e-business. However, the dropshipper must take care to choose a relevant domain name when creating his site. This is the address of the website on the Internet. It is with this name that customers will find it.
In addition, it is essential to select quality products. Not all products are equal. It is therefore essential to carry out a market study in order to position your website on a market with little competition and high potential.
On the other hand, the dropshipper must ensure the quality of the products offered on his site, but also the reliability of his suppliers (delivery times, returns management, compliance with European standards, minimum packaging, contact possibilities, etc.).
The dropshipper is responsible for the proper execution of the sale. As a result, the dropshipper is liable in the event of a problem. It is therefore essential to surround yourself with suitable and reliable suppliers so as not to tarnish your image with consumers.
Finally, the dropshipper is responsible for promoting his online shop. As the products are identical to those of other retailers, the dropshipper will have to differentiate himself from his competitors through marketing actions. They must therefore develop a marketing strategy to develop their business and have a profitable e-commerce site. All means are good: SEO and SEA, sending emails and newsletters, publications on social networks, influencers, etc.
Legal obligations to be met
Anyone wishing to create an online business must respect certain legal obligations in order to carry out their activity legitimately and not expose themselves to sanctions (general terms and conditions of sale in accordance with the regulations in force in the country of consumption, GDPR).
Firstly, the dropshipper must register with the relevant authorities as a commercial activity in the country in which it is established and potentially also in the country in which the products are offered for sale. For example, if a dropshipper wishes to carry out his activity in France, he must register with the Registre du commerce et des sociétés (RVS) and have a KBIS extract.)
Several legal forms can be chosen depending on the ambitions and needs of the e-merchant:
- La micro-entreprise ou auto-entreprise ;
- L’entreprise individuelle ;
- La société (SARL, SAS, EURL).
On the other hand, the dropshipper, whatever his field of activity, is obliged to include the following information on his site:
- les mentions légales ;
- les conditions générales de vente (CGV) ;
- la politique de confidentialité ;
- la barre des cookies.
The impact of the new e-commerce VAT reform
With the introduction of the VAT reform applicable to e-commerce and distance selling on 1 July 2021, dropshipping activities are faced with new regulations applicable to some of their operations.
The dropshipper must therefore, before launching his business, check three elements:
- Si ses opérations entrent dans le champ d’application de la réforme e-commerce ;
- Si ses opérations sont réalisées via une marketplace ;
- Si la société peut opter pour un régime particulier pour le e-commerce (OSS – IOSS).
This reform introduced the concept of intra-Community distance selling (transaction between a Member State 1 to a Member State 2) and the concept of distance selling of low-value imported goods (transaction between a country outside the EU to a Member State 1).
Since the transport of the goods is the responsibility of the supplier, only transactions classified as distance selling of low-value imported goods are affected by the reform.
The dropshipper will therefore have to determine whether he can benefit from a special declaration regime that will allow him to reduce his obligations (subscription to the IOSS one-stop shop) and ensure the VAT treatment of these operations.
This reform is completed by the introduction of the notion of marketplaces’ liability. As such, marketplaces are considered, for VAT purposes, as having bought and sold the products themselves (they collect and pay back the VAT). However, this liability only applies if certain conditions are met.
Finally, the company must determine whether these transactions allow it to benefit from a special reporting regime introduced by this reform. Intra-Community distance sales, for example, can be declared via the EU OSS (Union scheme). Distance sales of low-value imported goods can be declared via the IOSS (import scheme)
To find out more about the new e-commerce VAT regulations from 1 July 2021, see our dedicated article.
ASD Group will support you in the development of your project. With its international experience and qualified partners, ASD Group will provide personalised support for your e-commerce project.
Thanks to its team of experts and its international presence, ASD Group will simplify the administrative procedures necessary for your e-commerce project:
- L’étude de votre business plan ;
- La création de votre société ;
- Le sourcing, le choix des fournisseurs et la logistique ;
- La création de marque ;
- La tenue de votre comptabilité.
This will allow you to concentrate fully on your business, win new markets and optimise your productivity.
Throughout this process, ASD Group will centralise all information and be your single point of contact.
In addition, as a dropshipper and e-merchant, benefit from a personalised consultation with a member of our e-commerce team to facilitate the development of your online sales and receive a free e-book.
For more information on dropshipping and branding to develop your VAD/e-commerce business and make your sales take off, contact our experts.
