Is Dropshipping Legal and Legitimate [A Dropshipper’s Answer]

Being a dropshipper for the last 5 years I can say that dropshipping is legal in most countries and it’s a legitimate business if you follow some rules and regulations.

I do my dropshipping business in India and sell my products in India and the USA. I never faced any legal issues in my dropshipping business.

Well, dropshipping is totally legal in most of the countries there are some dos and don’ts you should be aware of. Such as, if you want to do dropshipping on Amazon or eBay you have to follow their rules and take the complete liability for the product.

Also, you need a business license, GST, etc to do dropshipping business in India, the USA, or any other country.

In this article, I will show you the building blocks to start dropshipping business legally in any country, which Includes,

spocket ad
  • Legal processes in dropshipping
  • Steps to build a legitimate dropshipping business
  • Amazon and eBay dropshipping
  • And, the risks involved in dropshipping business

You will read,

Disclaimer: Before starting this article, let me tell you I’m not a lawyer. All the points I have covered in this article are from my personal research and experience. So, before taking any decision please contact your legal expert for better suggestions. This article is just for educational purposes.

Well… Is dropshipping really legal?

is dropshipping legal and legitimate

Yes, dropshipping is totally legal.


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If, and only if, you have a genuine dropshipping supplier. You should be aware that some dropshipping suppliers often use other company’s intellectual property, pirate their products, and even scam you through low product quality and shipping scams.

If you don’t get trapped by these Phishy suppliers then you will get succeed in dropshipping otherwise you will be in trouble from both your capital loss and legal issues.

Don’t worry, there are legitimate dropshipping suppliers available in the market. I personally use,

  • Spocket to dropship in USA
  • BaapStore to dropship across India

Both are legitimate and help me grow from zero to a well-settled dropshipping business.

So, the point is, getting success and becoming safe from legal issues in dropshipping totally depends on your supplier.

How does dropshipping work?

To play the safe dropshipping game you should first know how dropshipping works and the weak points of it to get rid of.

Do you know why a majority of people have doubts about whether dropshipping is legal or not?

Because, it has been always served as a rich quick business option by digital marketers, influencers, and internet freaks. But, it’s not a rich-quick type business. Even, not any business makes you a millionaire on the first day.

You need dedication and experience to get success in any business and dropshipping is no exception.

The other reason why people doubt its legality is, like other businesses it does not require your products on your hands. That’s actually a flaw because you can’t check the quality of products physically and totally depend on the dropshipping supplier.

If you continuously start selling low-quality or copyrighted products then you will get in trouble. The supplier will get lost and you will find yourself in the consumer court.

So, first, you should get the full knowledge of how dropshipping works and then take your first step in dropshipping business.

Workflow of dropshipping business

In the above illustration, you can see that there are three parties involved in the dropshipping workflow.

  • Seller
  • Supplier
  • Customer

In traditional brick-and-mortar businesses and even in the eCommerce businesses, there are only two parties, the seller and the customer. But in dropshipping, the seller needs a supplier who ships the product to the customer on the behalf of the seller.

In short, the seller gets an order from a customer, passes on the order to the supplier, and the supplier ships the product to the customer on behalf of the seller.

In this process, the key to success always is always in the supplier’s hands. There are many risks involved in dropshipping, such as,

  • Supplier can aquire seller’s customer by directly contact the customer.
  • Suppller can ship duplicate and copyrighted products to the customer which leads the seller legal trouble.
  • Supplier can cheat on seller after getting the money.
  • There could be delay in shipping.

So, legal risks are always involved in dropshipping, however, you can minimize it by researching and signing up with genuine suppliers.

Whenever a third party is involved in a deal the risks will increase. This does not mean a business model is not genuine. In many businesses, a third party is involved even the business succeeds.

If you do proper research for the supplier and go through required legal processes then you could minimize the legal risks involved in drop shipping which I always suggest my readers and followers do before starting their dropshipping or any kind of business.

Let’s have some knowledge of the legal processes you should go through in dropshipping.

Legal Processes in dropshipping

legal process in dropshipping

Disclaimer: Different countries may have different legal processes. I have shown here for India, so do your own research or consult your local CA and legal advisor for better suggestions.

First thing first,

Pan Card apply

The first step you should take for any business is to get a pan card on the business name. If you are an individual then you can apply for a proprietorship pan card in your business name. If you want to start your business in partnership then first you have to get a registered partnership agreement and then you can apply for the pan card on the firm name.

Also, you need a registered office for communication addresses for pan card and GST.

For more information about the various types of business titles, you should consult a local CA or legal advisor.

Current/Checking account opening

After getting the pan card you should apply for a checking or current account by which you do all the financial activity in your business.

It’s very important to have a current account to do business in India or United States.

Business Registration with local authorities

Now when you have a pan card and current account along with your office, you should apply for the business registration with local authorities such as your municipality.

Again it’s very important to have registered your business with government authority.

GST Number

Now apply for the GST number because any online business that involves shipping needs GST. You should contact a CA for a GST application.

IEC number (for international shipping)

If you want to do business abroad then you have to get an IEC number or “import-export code” from the custom. You can do it online from the Directorate General of Foreign Trade website.

These all are important steps if you want to do dropshipping legally. These processes also help you get out if you get in trouble with any legal issue.

So, Maybe all of them seem difficult for you but these are one-time processes. So you should go through

How to Build a Legitimate Dropshipping Store?

legitimate dropshipping store

Building a legitimate dropshipping business is not as tough as you think. I have already shown you the process that you follow to build a trustworthy dropshipping business.

These processes act as a barrier between you and legal issues if occur.

But the main thing is you must find a legitimate and genuine dropshipping supplier who cares for the sellers, not cheat on them.

Well, it’s good news that some trustworthy dropshipping suppliers are out there in the market.

I want to suggest two out of them.

I have already mentioned both of them in the very first of this article. These two companies are time tasted and there are thousands of dropshippers already doing business with them.

See, success in any type of business depends on the quality of products and the ease of service. Both the companies mentioned above provide the same ease of service and quality products.

So, you can trust them.

In fact, I did a lot of my dropshipping business with them when I was fully doing dropshipping. Now I am shifted from dropshipping to eCommerce.

With that said, I want to give you a disclaimer that, do your own proper research on both the dropshipping companies before proceeding.

Now, many of us may ask if we can do dropshipping on Amazon or eBay? Is dropshipping legal on Amazon or eBay?

Well, in the upcoming sections I will give you the answer.

Keep reading.

But, before, you should check out my other articles on dropshipping. Such as,

Can You Do Amazon Dropshipping?

amazon dropshipping

Amazon allows dropshipping but there are some strict rules and regulations that you have to follow.

Here are these rules and regulations.

  • Dropshipping is only acceptable when you clearley disclose to the customer that you are the you are the seller in record.
  • In packing slips, external packaging etc it sould be clearley stated that you are the seller of record.
  • In packing slips, invoices, external packaging, or other information indicating a seller name or contact information it is striclty prohibited to show dropshipping suppliers name. Your name as a seller should be there.
  • You must always have an agreement with your supplier that they will only identify you as a seller of your products packing slips, external packaging, invoices, etc that included or provided with with the products.
  • Seller should be responsible for accepting and processing returns of the products.

If you can fulfill all the above rules and regulations then you can start a dropshipping business with Amazon.

Note: If Amazon gets a complaint regarding the identification of the seller for products then they can remove you from their seller central program.

What About eBay Dropshipping?

ebay dropshipping

When it comes to dropshipping, eBay policies are more strict than Amazon. They clearly stated that they don’t allow dropshipping on their marketplace.

However, you can start dropshipping with them if you identify yourself as a seller of your products packing slips, external packaging, invoices, etc that are included or provided with the products.

But, if they get complain against you for violating their policies they will take action against you and ban you to sell on their platform.

That’s why always recommend doing dropshipping independently through other platforms such as Baapstore and Spocket. You can use social media advertisements to sell your products and create a customer base.

I have a detailed guide on social media marketing that can help you in getting success with social media ads for your dropshipping business. Let’s have a look at my guide,

Risks Involved in Dropshipping

risks involved in dropshipping

There are certain risks involved in dropshipping but you can mitigate them by awareness of these risks and taking the right actions.

Here are the risks in dropshipping,

  • The dropshipping supplier may cheat on you and try to aquire your customers by sending them thier contact details. This way they build thier own customer base and sell them direclty in future. This will also leads you to ban from marketplaces such as Amazon and eBay.
  • Dropshipping supplier could run away aftet taking your money. This is common if you don’t choose relaible droipshipping supplier.
  • You may end up selling products that are not in your supplier’s stock. As you don’t have your own inventory, you don’t know which products are in sotcks and which are out of stock.
  • Shipping may take more then ususal time. As you pass on the order to the suppiler, then supplier process and ship the order which takes longer time.
  • Because you don’t have the products on your hand, this leads you to ship defective and low quality products and ultimatly you may fall in legal trouble.

So, you have read some of the common risks involved in dropshipping business. But choosing a reliable and trustworthy dropshipping supplier reduces these risks to the minimum.

FAQ

Is dropshipping legal?

Yes, it’s legal until you dropship the good quality products on time. However, you may indulge in legal trouble if your products are not the same as shown on the website, are of good quality, the shipping time is more than usual, you don’t accept returns, etc.

Is it safe?

It all depends on your dropshipping supplier, if you choose a good supplier then it’s very safe, on the other hand, if you choose a fraud supplier then you may end up losing your money.

Can you do dropshipping on Amazon, eBay, etc?

Amazon allows dropshipping with some rules and policies. If you follow them strictly then there is no harm in doing dropshipping with them. eBay does not directly allow dropshipping.

What document do you need to start dropshipping?

Business license from the local authority, company PAN card, current/checking bank account, GST, official address, and IEC (for international shipping).

What are the other options than dropshipping?

Own eCommerce store, Amazon FBA, and affiliate marketing are the other options than dropshipping that can make you millions.

Wrapping Up: Is Dropshipping Legal

Well, above you have learned all the legal and other risks involved in dropshipping business. No doubt, dropshipping is a lucrative online business idea, but it also has some risks involved.

The good news is, you can minimize all of these risks by choosing good dropshipping suppliers. In dropshipping all your success depends on your dropshipping supplier.

That’s why always suggest my readers and followers choose reliable and trustworthy suppliers. I know it costs you more money to go with them but this saves you from legal actions and other risks in the future.

For dropshipping, I always recommend two of my favorite services Baapstore (for India) and Spocket (for the United States)

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Gautam Roy is a recording engineer and a blogger from India. He loves music, writing and travelling. He is also an active investor and a successful entrepreneur.  

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