Drop-Shipping – A Quick Money Solution … Is It Legal?

Drop-Shipping: The Quick Money Solution - Fact or Fiction?

Is drop-shipping legal? The simple answer is YES.

Drop-shipping is a legitimate business model many entrepreneurs have used to build successful eCommerce stores. However, you need to know some legal requirements and considerations before launching your website.

What Is Drop-Shipping?

  • Drop-shipping is an arrangement whereby a supplier agrees to sell goods to a retailer, who sells the goods to customers. 
  • The retailer does not take possession of the goods but acts as an intermediary between the supplier and the customer. 
  • There is no specific law relating to such arrangements. Still, it is governed by general contract law, agency law, and logistics principles.
  • A contract or agreement binds the supplier and the seller in a typical drop-shipping arrangement. 
  • Many major eCommerce platforms, such as AliExpress, Amazon, eBay, and others, have recognised and allowed drop-shipping, but with strict terms and conditions that the seller must follow. For example, Amazon does not allow a drop-shipping seller to sell items from suppliers like Amazon itself or suppliers already selling on the platform.
  • Singapore has no specific regulations or laws governing the drop-shipping industry. This freedom and discretion allow sellers and suppliers to regulate their relationships as they see fit. 
  • While this lack of regulation may seem chaotic, it allows for great creativity and innovation within the industry.

Key Clauses For Drop-Shipping Contracts

When working with a drop-shipping supplier, you’ll need to pay attention to the following 3 key clauses.

  • Delivery – You must be clear about the delivery terms. This means that you will need to agree on the delivery date and time, and you will also need to agree on who will be responsible for the delivery costs.
  • Payment Terms – You must agree on the payment terms. This means you must agree on when and how the supplier will pay for the goods they provide.
  • Refund and Cancellations – You must agree to the return policy. This means that you will need to agree on what will happen if the delivered goods are not as described or if they are damaged.
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Other Precautions

  • Like any other business, drop-shipping businesses are also susceptible to legal risks if they do not take the proper precautions.
  • To reduce legal risk, you should take note of the following steps to protect yourself from legal liabilities:-
    • Obtain A Business Licence – This goes a long way regarding taxation on your products and profits and limits your liability if an issue arises. In addition, it helps improve the legitimacy of your store in the eyes of consumers and suppliers.
    • Create Documents That Outline Your Business Practices – This includes having a refund policy, outlining your legal agreements, website terms and conditions, privacy policy, and any product and practice disclaimers you may require.
    • Follow Ethical ‘Best Practices’ In Marketing
      – Utilise eCommerce and social media platforms without manipulating the rules. Don’t be deceptive in your advertising; follow all email marketing rules and regulations.
    • Sell Safe And Appropriate Products – Work with reputable drop-shipping suppliers. Only sell genuine products which you are authorized to do so, particularly those trademarked or branded.

Despite what some YouTube experts assert, drop-shipping is not a get-rich-quick scheme.

Because of the low entry hurdles in drop-shipping, the market can be very competitive.

Therefore, doing your homework before starting a drop-shipping business would be best. In addition, an effective company strategy must include securing earnings when purchasing and selling goods or services in/from other countries.

Every business is different. As such, the difficulties that you face will vary. We offer video consultation via Lawyer Anywhere and can help you navigate the ups and downs of starting and running your own company.

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