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Many Kiwi entrepreneurs are looking to dropshipping as a potentially profitable side hustle, where all you need is a stable internet connection and time. You can use well-known online marketplaces like AliExpress or Amazon to operate your dropshipping business, or start from scratch and make your own website. But, this is a business model that you cannot just begin and wait for the money to arrive. A dropshipping business requires careful preparation and active maintenance to be profitable. If you do not manage your dropshipping business correctly and in line with NZ’s laws governing selling online, you could find yourself in both financial and legal trouble down the track. This article will explain: 

  • how dropshipping works in NZ;
  • how you can set up a dropshipping business; and
  • dropshipping’s profitability as a business model.

What Is Dropshipping?

Dropshipping refers to the business model where: 

  • customers order and purchase items through your website;
  • you forward the order to a third-party wholesaler, paying them for their product;
  • the wholesaler then ships the product to the customer; and
  • you pocket the price difference.

For example, say customers purchase headsets from your dropshipping website at $50. You then place the order with your headset supplier and pay them their price of $40. They organise shipping the headset to the customer, and you pocket the $10 difference.

You do not have to handle inventory yourself, which means you do not need to store the products or facilitate delivery. This means there is a low barrier to entry for dropshipping and could be a good option if you are looking to break into e-commerce. Dropshipping is legal in NZ, as long as you comply with laws around selling online, such as:

Tip: Make sure to draft appropriate terms and conditions for your website, as well as a privacy policy and other important legal documents. This goes towards limiting your liability and avoiding potential legal issues later on.

Starting a Dropshipping Business

Operating a dropshipping business seems simple on paper, but once you get into the finer details, you must carefully consider your path forward. It is your job as a dropshipper to curate products for your customers, and facilitate the advertising of those products and the ordering process. Plan ahead, and you can save yourself a lot of trouble. If you want to start a dropshipping business, you need to:

1. Choose a Product

To operate a successful dropshipping business, you need to find profitable products. Do your research, and find a gap in the market. When choosing your products, consider:

  • marketability;
  • ease of shipping;
  • price margins;
  • availability locally; and
  • potential expansion to similar products.

For example, selling smaller, more durable products (such as novelty phone cases) may make the shipping process more manageable, and there is less potential for something to go wrong.

2. Find a Supplier

The next crucial step is to find a reliable supplier. Because you rely on them for delivery and product quality, make sure to do your research and find an appropriate wholesaler. You can find suppliers and contact them individually. There are also online supplier directories, like: 

  • SaleHoo; and
  • Oberlo.

In all cases, carefully read through any contract you sign with a dropshipping supplier. Be clear about what happens if there is an issue with delivery timing, or if products are damaged during shipping.

3. Create Your Website

The variety of e-commerce platforms available now means that you have many options to choose from when deciding how you will operate your dropshipping business online. Shopify is a useful option, and they offer many services for dropshippers in particular, including Oberlo integration.

Another option is to reserve your own domain name and create a website or operate from an online marketplace. Regardless of what you choose, make sure it offers a secure payment method, and carefully read through any terms and conditions of the online store platform you use.

4. Sell, Market and Engage

Once you have set up your website and listed your products, you can get to selling. Your success will hinge on how well you can market and engage customers, and maintain that engagement as you add new products. Start an Instagram page to showcase your products, and focus on providing good customer service. Take advantage of SEO and other web algorithms to draw customers to your site. 

Is Dropshipping Profitable?

With comparatively low set-up costs, dropshipping can be a profitable business model if you put in the time and effort to market your products and develop your place in the market. If something goes wrong, you are the first point of contact for customers. It is your job to hear their complaints and resolve their issues. Make trustworthy customer service and availability a focal point of your business, and you can establish footing against larger competitors in the market. 

Key Takeaways

Dropshipping is a business model where you curate and sell products to customers, but a third party supplier manages inventory and the delivery process. Be mindful of the time and effort you need to make this business model profitable, engaging in effective marketing practices and maintaining customer goodwill. If you would like more information or help with your dropshipping business, contact LegalVision’s e-commerce lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is dropshipping?

Dropshipping refers to the business model where customers purchase products from your website, and you place their orders with a third party supplier, paying cost price. The supplier then facilitates delivery, and you profit with the price difference.

Is dropshipping legal in NZ?

Dropshipping is legal in New Zealand, as long as you comply with NZ’s laws regarding trading online. This concerns consumer guarantees, privacy, and engaging in fair trading practices

Is dropshipping profitable?

Dropshipping can be profitable if you take the time to invest effort into it. Do the market research to see what would sell well, and develop a good way to engage customers and maintain momentum.

What do I need to watch out for in dropshipping?

You do not need to handle inventory in dropshipping, which can take away a lot of the risk associated with storage. But this means you cannot confirm product quality yourself and have to rely on the guarantees of your supplier.

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