Running a dropshipping business from Europe

[xabi]

Is it possible to run a drop-shipping business from Europe supplying US customers? The customer would be in the US and the suppliers also, but I would be running the business from Europe, anyone doing this? The benefits I see are that I wouldn't have to pay any import/export fees on the goods. I would obviously pay income tax and corporation tax in my country, what about VAT?

 

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[ToniLene]

As long as you offer a 'no returns policy,' you should be fine. Choose your product wisely.

 

[s7g]

That sounds pretty interesting! Where do you intend to keep your inventory? If in EU - how do you want to deal with long delivery times?

 

[xabi]

That's the point, I don't need to keep inventory if I'm dropshipping, the customers would be in the U.S. as would the supplier. The U.S. market is much more lucrative for dropshipping than in Europe. I want a way to tap into it from here, the plan is to setup an LLC in the U.S. run the business from here.

 

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[BKMoney]

I was looking into dropshipping like 5 years ago and it seemed like the perfect business model to me at first... Until I realized margins are close to nonexistent, the hundreds of issues that may arise when dropshippers screw up an order (especially if you sell on Amazon and Ebay, one mistake on their side and you're done), and the main issue still exists - driving traffic. So if you plan on going down that road better stick to affiliate marketing where you can get up to 50% commissions, compared to 7-12% with dropshipping. Or if you really want to run your own E-Commerce Store and stuff, look into private labeling where margins can be over 300% and more, depending on your products.

 

[WestCoast]

I was looking into dropshipping like 5 years ago at it seemed like the perfect business model to me at first... Until I realized margins are close to nonexistent, the hundreds of issues that may arise when dropshippers screw up an order (especially if you sell on Amazon and Ebay, one mistake on their side and you're done).

My company drop ships 10-15% of our orders each week, we're in a fairly small and protected industry... but GOSH there is margin pressure all over the place.

I would be very careful about just jumping in thinking it is free money. If you have west coast suppliers who are GMT -8 and you are +1, that adds some complexity to getting orders out the door and processing any problems that come up.
Drop ship companies run out of stock... don't tell you, your customer is mad, you are asleep....

We do drop shipping (and we do a bit of private labeling, although 300% markup, yeah, doesn't happen with us), but mostly as a way to fill our own inventory gaps, not as a primary way to sell.


--
Also, brief note, as it is my pet peeve:

Markup is the % above your cost that you price an item.
Margin is the % of the retail price that is your profit.

Margin can never be over 100% (and is only 100% if your cost on the the item is $0.00).
A normal retail markup is 100%, resulting in a margin typically around 40-50%.
Anyone who gets those confused should be treated with a bit of suspicion (no disrespect intended BK Money)

 

[BKMoney]

My company drop ships 10-15% of our orders each week, we're in a fairly small and protected industry... but GOSH there is margin pressure all over the place.

I would be very careful about just jumping in thinking it is free money. If you have west coast suppliers who are GMT -8 and you are +1, that adds some complexity to getting orders out the door and processing any problems that come up.
Drop ship companies run out of stock... don't tell you, your customer is mad, you are asleep....

We do drop shipping (and we do a bit of private labeling, although 300% markup, yeah, doesn't happen with us), but mostly as a way to fill our own inventory gaps, not as a primary way to sell.


--
Also, brief note, as it is my pet peeve:

Markup is the % above your cost that you price an item.
Margin is the % of the retail price that is your profit.

Margin can never be over 100% (and is only 100% if your cost on the the item is $0.00).
A normal retail markup is 100%, resulting in a margin typically around 40-50%.
Anyone who gets those confused should be treated with a bit of suspicion (no disrespect intended BK Money)

English is not my native language so I do make some mistakes here and there which I apologize for. Thanks for the correction.

 

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[BKMoney]

Is it possible to run a drop-shipping business from Europe supplying US customers? The customer would be in the US and the suppliers also, but I would be running the business from Europe, anyone doing this? The benefits I see are that I wouldn't have to pay any import/export fees on the goods. I would obviously pay income tax and corporation tax in my country, what about VAT?

Regarding the second part of your question if you have an US based company you will have to pay income and state tax in the US. And if your country has a double tax treaty with the US (which it most likely has) you will not have to pay any taxes in your home country again. And VAT is only due if the goods enter the EU. There is no VAT in the US. Of course I'm speaking from my own experience, this is not a tax advise and you should consult with a professional.

 

[ToniLene]

Google JonnyFD blog. Good insight there; he's based in Thailand and drop shipping successfully worldwide. He was recently featured in a few business magazines.

The 'trick' with drop shipping is to sell high market items, so that you'll have higher net profit -electronics and organic bedding are good examples.

As far as stock goes, if you're dealing with a reputable company, they provide daily updates(realtime CSV data feeds) on product availability, so running out of product won't be an issue if you know what you're doing and stay on top of your business.

 

[BKMoney]

Besides that investing time and money to develop someone elses brand is a waste. And dropshipping suffers from a huge lack of control. As WestCoast mentioned when dropshippers run out of stock and screw up orders it's all blamed on you and your business.
Here is a better business model:
1. Find a product you are passionate about, make your own design, tweak it, or combine 2 products in 1
2. Order 500-1000units
3. Put in on FBA or use some other fulfillment service
4. List it on Amazon, Ebay, your own site and any other marketplace
5. Profit.
You have full control over the inventory, price, profit markups and everything. Now all of your efforts will be targeted towards marketing and developing your own business and product instead of someone elses. And you can do this from any part of the world.

 

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[ToniLene]

Besides that investing time and money to develop someone elses brand is a waste. And dropshipping suffers from a huge lack of control. As WestCoast mentioned when dropshippers run out of stock and screw up orders it's all blamed on you and your business.
Here is a better business model:
1. Find a product you are passionate about, make your own design, tweak it, or combine 2 products in 1
2. Order 500-1000units
3. Put in on FBA or use some other fulfillment service
4. List it on Amazon, Ebay, your own site and any other marketplace
5. Profit.
You have full control over the inventory, price, profit markups and everything. Now all of your efforts will be targeted towards marketing and developing your own business and product instead of someone elses. And you can do this from any part of the world.

You're describing a different business model that is not drop shipping. Many people that choose to drop ship do so as a starting point BECAUSE they don't have start-up cash or space to purchase and/or house inventory.

As far as your comment about investing time and money to develop someone else's brand? What the what? Business is business and money is money. Passion helps, but you don't have to be passionate about a product to be successful. You just need to be smart and creative.

If I want to sell brand name Cell Phones & Wireless Accessories, whether I decide to dropship or buy inventory --it's still not my brand. Regardless of my passion, people are still going to place orders because they want that phone or that bluetooth.

Even if you create your own brand there is no guarantee when or if your product will sell, so you're out the money indefinitely. Drop shipping is an economical way to break into eCommerce, get your feet wet and find out if it's profitable for you. It definitely doesn't hurt to try after thorough research and sourcing.

All that said, I make and sell my own jewelry, so I understand and appreciate the power of branding. That doesn't diminish the drop shipping business model and how it can work if you know what you're doing.

 

[AntEmpire]

You're describing a different business model that is not drop shipping. Many people that choose to drop ship do so as a starting point BECAUSE they don't have start-up cash or space to purchase and/or house inventory.

As far as your comment about investing time and money to develop someone else's brand? What the what? Business is business and money is money. Passion helps, but you don't have to be passionate about a product to be successful. You just need to be smart and creative.

If I want to sell brand name Cell Phones & Wireless Accessories, whether I decide to dropship or buy inventory --it's still not my brand. Regardless of my passion, people are still going to place orders because they want that phone or that bluetooth.

Even if you create your own brand there is no guarantee when or if your product will sell, so you're out the money indefinitely. Drop shipping is an economical way to break into eCommerce, get your feet wet and find out if it's profitable for you. It definitely doesn't hurt to try after thorough research and sourcing.

All that said, I make and sell my own jewelry, so I understand and appreciate the power of branding. That doesn't diminish the drop shipping business model and how it can work if you know what you're doing.

Are you also doing dropshipping in addition to your jewelry business? Or have you done it before? What was your experience like?

 

[ToniLene]

Are you also doing dropshipping in addition to your jewelry business? Or have you done it before? What was your experience like?

Yes, I just began drop shipping earlier this year after researching the model. I sell on ebay and Amazon currently and make on average $1800 profit per month, both stores combined -total sales at $6480 last month with around 20 listings on each site. It's just a hobby for me at the moment, as I have a few other things going on.

The way to make drop shipping work is to sell high value items. Your profit margins depend entirely on your niche, the wholesale rate of your supplier and your markup rate. I'm at almost 30% profit margins with very little effort other than customer service and figuring out which products to list for maximum profit.

 

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[BKMoney]

You're describing a different business model that is not drop shipping. Many people that choose to drop ship do so as a starting point BECAUSE they don't have start-up cash or space to purchase and/or house inventory.

As far as your comment about investing time and money to develop someone else's brand? What the what? Business is business and money is money. Passion helps, but you don't have to be passionate about a product to be successful. You just need to be smart and creative.

If I want to sell brand name Cell Phones & Wireless Accessories, whether I decide to dropship or buy inventory --it's still not my brand. Regardless of my passion, people are still going to place orders because they want that phone or that bluetooth.

Even if you create your own brand there is no guarantee when or if your product will sell, so you're out the money indefinitely. Drop shipping is an economical way to break into eCommerce, get your feet wet and find out if it's profitable for you. It definitely doesn't hurt to try after thorough research and sourcing.

All that said, I make and sell my own jewelry, so I understand and appreciate the power of branding. That doesn't diminish the drop shipping business model and how it can work if you know what you're doing.

I understand where are you coming from. Dropshipping can work if you want to make SOME money online. But if you want to build a fastlane business with the potential to make millions, developing your own product/brand and taking it to the market is the best way to go. So I can't agree with the business is business comment. When I start a new business I always look for 1. Indefinite growth potential and 2. Control. Dropshipping lacks both. It's a myth that creating your own product requires tens of thousands of dollars as I started my first product with less than $1000 5 years ago.

 

[ToniLene]

Another thing to add is that alot of suppliers don't giver resellers

I understand where are you coming from. Dropshipping can work if you want to make SOME money online. But if you want to build a fastlane business with the potential to make millions, developing your own product/brand and taking it to the market is the best way to go. So I can't agree with the business is business comment. When I start a new business I always look for 1. Indefinite growth potential and 2. Control. Dropshipping lacks both. It's a myth that creating your own product requires tens of thousands of dollars as I started my first product with less than $1000 5 years ago.

Oh I agree, it's not a Fastlane business, but I never claimed it to be. Dropshipping is a legitimate means to an end, lol. We all have to start somewhere, right?