Dropshipping has many grey areas. Learn the restrictions and possible violations of this eCommerce model to ensure a successful dropshipping business.
Have you been planning on launching your own dropshipping business? If so, you probably started delving deeper into this eCommerce model by examining the basics of this industry, its risks, and how to maximize its opportunities. But have you considered the possibility of whether it is legal? Or have you thought about the legal restrictions concerning this business model?
Over the years, eCommerce has become more popular, which lead to the birth of new business models. Dropshipping is one of the offspring of this advancement. Many became attracted to this business because of its low capital requirement and convenience.
In dropshipping, the seller holds no inventory of the products. The seller establishes a contract with a third-party supplier who will supply and deliver the goods to the customers. Hence, there is lesser work on the part of the seller. The seller also earns usually through commissions and from what has been stipulated on the contract with the supplier. Inasmuch, dropshipping is a simple and easy way to earn income without investing a lot of capital.
Is it Legal?
First of all, dropshipping is 100% legal. What make people doubt the legality of dropshipping are the rampant fraud deals. Likewise, many are suspicious of its legalities since it remains unfamiliar to some despite its increasing popularity in some locations. Also, even dropshippers and suppliers admit that dropshipping has a lot of grey areas.
What are the Possible Legal Issues and Concerns of Dropshipping?
Before diving deep into this business, you need to familiarize yourself with dropshipping legalities and possible issues that come with it.
The most common issues in this industry are ethical violations. Price inflation is inevitable in this business. For example, eCommerce platforms such as Amazon and eBay are the primary sources of exciting products. A huge percentage of these products often comes from people who have seen them on Walmart for instance. These people simply upload images of these products on eBay and Amazon for selling. The retailer to retailer relationship causes massive price inflation. Though increasing the price is reasonable, too much inflation is ethically wrong for the customer.
Another issue concerning dropshipping, which is also common in eCommerce, is selling products that a seller is not entitled to. Many sellers want to sell popular and reputable brands with the hopes of gaining more sales, when in fact, it could lead to legal fees and issues.
Problems such as infringement and copyright are possible issues that could happen in dropshipping. Some sellers upload counterfeit, replicas, and knockoff products which could lead to serious copyright issues.
Additionally, some sellers don’t obtain a business license. It is a requirement that is commonly overlooked in dropshipping since no law prohibits a seller from starting such business. However, for ethic’s sake and legality, every seller is compelled to obtain a business license. It proves the legitimacy of the store and obtaining one can help prevent the rise of legal issues in the future.