What is dropshipping?
Dropshipping is a business model within e-commerce, where the online store is operated without the owner needing to handle products or maintain their own inventory. The store is only responsible for marketing and selling the product, and in some cases customer service. When the online store receives an order, the order and shipping details are transferred to an online store supplier. This can be either a manufacturer, wholesaler, another retailer, or a specialized warehouse, which then ships the products directly to the customer.
What are the advantages and disadvantages of dropshipping?
Advantages:
- Simpler and more cost-effective
Dropshipping does not require as much capital from the owner, because you do not need to pay for purchasing and storing goods, staff to handle the goods, or the rent and maintenance of warehouses and any showroom/store.
- Flexibility
Dropshipping can be managed from any location with an internet connection, providing increased flexibility for the owner. In addition, it is easily scalable since the owner does not need to have the resources to increase production.
Disadvantages:
- Low profit margin
Due to the type of products, high competition, and the fact that you have to pay a supplier, the profit margin is usually quite low per product sold. This means you need to sell products in high volumes to be profitable.
- Limited control
Many of the product suppliers are based in countries where production capabilities and costs are low, such as China. Since the goods are handled by a third party, the store owner has limited control over product quality, storage, inventory management, and shipping.
- Poor reputation
Combined with its growing popularity and the presence of non-serious players in the market, dropshipping has gained a bad reputation for long delivery times, unexpected import fees, high return costs, products being of lower quality than expected, and unclear contact information/poor customer service.
Dropshipping in Norway – regulations and considerations
Are you interested in running dropshipping in Norway, targeting Norwegian customers? Then there are some rules and considerations you need to take into account related to tax, VAT and customs. For more information about this, we recommend checking with the Norwegian Tax Administration and Norwegian Customs.
Summary
To sum up, dropshipping is a way of running a store where the owner does not manage inventory, and instead uses a third party to produce and handle the products. Dropshipping has grown in popularity because it is a more efficient and low-barrier way to run a store, but it also comes with drawbacks such as low profit margins, limited control over the products, and a poor customer experience. To run dropshipping in Norway, you must take into account VAT, customs duties, and taxes. Do you want to know how we work with SEO in practice? We have written a detailed SEO guide on our working methodology
