Start a Dropshipping Company in the UK

Dropshipping is an online shop model that, in recent years, has become popular all around the world. Knowing how easy it is to set up corporations in the British country, one could expect that many entrepreneurs established these kinds of businesses here. Due to this, in this article, I will explain the most important details and aspects about how to start a dropshipping company in the UK.

What is Dropshipping? Advantages and Disadvantages

Dropshipping is an exclusively online shopping model in which a company (usually individual or of a small size) sells some articles that, in reality, they do not have in stock. The manufacturer or wholesaler, who does not have any relation with the seller, will send directly the product to the client’s house. This archetype is common everywhere, so it does also apply to the UK.

Advantages of Dropshipping

This type of business grants its owner some advantages in comparison to other kinds of shops. Firstly, they do not require a big investment for setting them up. Because the enterprise does not keep any stock, you will not need warehouses. An internet connection, a PC and an eCommerce software will be enough. In addition, if you create versions of the webpage in other languages, you will be able to access almost any market in the world.

Disadvantages of Dropshipping

Nonetheless, the dropshipping tactic also comes with certain drawbacks. The main one is the non-existent control capacity that the shop has over the supply chain. Not only you cannot check if the product that the manufacturer sends complies with some minimum quality standards. If the wholesaler is in China, for example, the delivery times will be excessively long. To avoid this last thing, you could only contact with producers from the continent where you will sell the objects. Though, in Europe, this would mean an increase in the company’s expenditures. This would lead to a price increase and, possibly, a loss of profitability of the business.

Another disadvantage is the competence in the dropshipping environment. For these reasons, it would be a good idea to conduct a market study. In it, you could analyse the sale of which products is not covered. It is also necessary to design an attractive business image and a webpage that meets the SEO requisites and whose navigation is as easy as possible.

Start a Dropshipping Company in the UK: Elements to Consider

Most Suitable Business Structure to Start a Dropshipping Company in the UK

There exists several suitable business structures for a company that does dropshipping (all of which you can find in this article), and selecting one or the others will depend on the size of the enterprise or the employees that will work in it, among other factors. However, the most practical choice would be to operate as a sole trader or to set up a limited company. Both of them allow you to form a corporation with just one partner, yourself.

You should consider the differences between these two. On one hand, the formation process of a business as a sole trader is much quicker and easier. On the other, limited companies count with limited liability, while sole traders have full liability.

Taxes

Every company must register and declare VAT they collect if their annual income is superior to 90 000 GBP.

Moreover, limited companies will have to pay Corporation Tax. On the other hand, sole traders must do the same but with Income Tax. Each one has different rates which depend on the money a company earns during a 12-month period.

At last, you should take into consideration that you may need to pay tariffs, especially if the value of the product is superior to 135 GBP. For this reason and depending on what you sell, it might result more profitable to choose British manufacturers.

Intellectual Property and Consumer Protection Laws

When doing dropshipping, you might break the intellectual property protection laws. If the wholesaler produces counterfeit objects, the legal liability will fall under the shop that sold the article, even if they did not participate in its fabrication. Similarly, the retailer will also be responsible of guaranteeing that the materials and construction of the products they sell cannot harm customers.

For the previous aspects, it is essential to conduct an analysis of the producer and the product you want to sell. It is also appropriate to have a product liability insurance. It may cover property damages and personal injuries.