Dropshipping is a technique of order fulfilment in which a business does not hold its products in stock. To fulfil orders, the seller instead obtains inventory from a third party — typically a wholesaler or manufacturer — on an as-needed basis. The primary distinction between dropshipping and the conventional retail model is that the selling merchant does not stock or own inventory; instead, they serve as a middleman. In this article, dropshipping agreement, we take a look at the process involved and the options available to you.
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What is a dropshipping agreement?
A dropshipping agreement is a contract between a business and the manufacturer or distributor of a product that the business wishes to sell, in which the manufacturer or distributor (rather than the business) sends the goods directly to the business’s customers. It is a legally binding contract between a seller and a product supplier.
A Dropshipping Agreement, also known as a Reseller Agreement, is an important contract that establishes the essential parameters of the seller-manufacturer relationship, as well as the parties’ respective rights and responsibilities.
Is it possible to start a dropshipping business without a specific agreement in place?
If you’re just starting out with dropshipping, a contract may not be necessary because you don’t earn enough sales for it to matter. However, as your business expands, a contract will become essential. Consider, can you think of a large retail chain that does not have a supplier agreement?
Inventory is not held in this business model. Additionally, the supplier ships the items you’ve sold to your consumers. They are responsible for product quality, accurate shipment times, product compatibility, and the images or item descriptions. Any error made by your manufacturer may result in poor reviews or product returns.
Therefore, forming a business alliance with the provider will benefit both parties. A legal agreement that explicitly explains the repercussions and costs of delayed, damaged, or lost products will be of great assistance. It is better than just an oral agreement.
Many e-commerce platforms, including eBay, Amazon and Shopify require dropshippers to upload a Dropshipping Agreement or a Fulfillment Agreement before beginning online sales. In addition, several online payment systems or financial institutions, such as PayPal and Stripe, need this agreement prior to the opening of a recipient account.
What should you ask your supplier?
There are many important questions you need to ask your dropshipping supplier and these include:
What are the average shipping timeframes to your target countries?
This question should always be asked; they may offer a turnaround time between 20 and 40 days, but this is typically exaggerated to manage your expectations.
Also, inquire about recent tracking numbers or delivery.
What is the average processing time after placing an order?
This is the time between placing an order and its actual shipment. In most situations, your order will be dispatched the following business day, however it may take up to three days or even longer during certain times of year.
Is the supplier also the product’s manufacturer?
On some Chinese supplier websites, it is more likely for your product to pass through multiple dealers before reaching your potential source. For a number of reasons, you must first determine whether or not they are the product’s makers.
With numerous middlemen between you and the manufacturer, are you receiving the lowest possible price?
Also, how much inventory does the supplier have in the event that your product sells exceptionally well? Specifically, are they able to meet your demand?
What type of packing is utilised?
More importantly, if you are pursuing an eco-friendly path, you cannot have plastic packaging because it would contradict the image of your business.
Also essential if you do not want their logo emblazoned on the package.
Do they support dropshipping?
This is an extremely crucial topic to discuss, as not all vendors support dropshipping.
You do not want your consumer to receive an invoice from your supplier for half the amount they paid, coupled with promotional materials.
Do they provide branding?
Some vendors may be able to imprint your logo on both the goods and its packaging for a fee. If you intend to pursue a fully branded strategy, this is an essential issue to ask.
Are their rates set in stone?
With the listed price, there is always opportunity for negotiation, so feel free to inquire.
But don’t approach the supplier empty-handed; if you show them the prices of their competitors, they will typically provide a more favourable price.
You can also do this later when ordering a large quantity of products from the same vendor. You may then attempt to obtain a discount.
Is a minimum order quantity required?
On sales platforms such as AliExpress, this is seldom an issue; however, certain suppliers may have a minimum order quantity (MOQ), therefore it is crucial to inquire about this beforehand.
What is the procedure for returns and refunds?
If your consumer is dissatisfied with the product, you must understand how your supplier handles this issue.
In most circumstances, they will just want a photograph of the product issue; however, you should verify that this is also the case with your dropshipping provider.
How will your supplier manage the situation if the order is delayed in reaching your customer?
You will find that the majority of suppliers prefer an open communication on this topic, as disputes affect their reputation on the sales platform.
At some point, you will need to have this talk, and there is no better moment than before you begin generating sales. Some vendors may have dubious return policies; it may be worthwhile to search the reviews area for hints about this. (If one exists)
Can they supply high quality photographs of their goods?
Typically, suppliers can give high-quality images of their products for you to use in your dropshipping store. If they do not have any on hand, it is typical for them to contact you later with some. In either case, it doesn’t hurt to inquire.
Using images that the seller does not genuinely own is a common error that can land you in hot water. Due to loose copyright regulations in China, this is actually a problem with AliExpress vendors.
If they provide you with images for your online store, ensure that you don’t encounter any copyright difficulties.
Who pays for customs fees?
At some point, you will experience this issue; a customer will inform you that they were required to pay a customs fee release cost. Normally, your customer would be responsible for this, but it could irritate a few of them.
Some vendors will handle this exceptionally effectively and refund your customs taxes if you have this arrangement in place beforehand, but the majority will (and correctly so) state that this is the recipient’s obligation.
What occurs if the order fails to arrive?
This will occur on occasion; but,do not allow your provider to pass the buck by continually requesting an additional week’s delay.
Discuss this in person and determine how many days must pass before they will issue a reshipment or refund.
What happens if I deplete the supplier’s stock?
This is another wonderful topic to ask your dropshipping supplier if you anticipate selling a substantial quantity of their products.
Nevertheless, it is prudent to ask this question even if you don’t believe you will first sell a lot. Ask them what happens if they run out of the product you are dropshipping and how quickly they can make more.
If you know the answer to this question, you can determine whether you need to find a backup provider for this product.
Inquire about the product’s particulars
Whether a consumer asks about the product’s contents, specifications, or modifications, you must be extremely knowledgeable about your product.
Before you dropship a product, it is usually advisable to purchase it yourself, but before you do so, be sure to ask any concerns you may have about its specifications.
How we can help
We have a proven track record of helping clients deal with the process involved in creating a dropshipping agreement. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to Contact Our Corporate Solicitors
It is important for you to be well informed about the issues and possible implications of a dropshipping agreement. However, expert legal support is crucial in terms of ensuring your business is set up correctly.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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