Dropshipping is currently on everyone’s lips because there are already numerous online marketers who have been using the online business model for years and have made millions. Meanwhile, more and more people are becoming interested in this supposedly profitable business model.
Dropshipping with Chinese retailers such as Aliexpress in particular has helped the business model to become very popular. Thanks to numerous apps and software, the technical implementation is really child’s play.
But how realistic is it really to earn money with dropshipping in Germany or Austria? We have been operating the business model ourselves for 2 years and provide an open and transparent insight into the subject.
What is dropshipping? Definition & Explanation
Briefly to describe what dropshipping actually is. Dropshipping is the English term for short-distance business. One shortens the way of the product lets it simply send directly to the customer. Basically, you’re just a digital middleman, connecting customers with production. The following graphic illustrates the whole thing visually.
The idea behind it is correspondingly simple. Instead of building up an entire production, intermediate storage and shipping chain, the short-haul business is chosen. In this case, all you have to do is set up an online store and bring customers to it through online marketing.
The bottom line is that you save time, money and effort. One simply processes the payment and order data and forwards them to the manufacturer.
All you need is:
- Notebook / PC
- Internet connection
- Know How
These 3 things are necessary to run a successful e-commerce store based on the dropshipping model. The barrier to entry is therefore very low.
Instruction from A-Z
Dropshipping is a relatively simple process. Basically, it’s just about creating an online store, offering products, generating traffic and then sending the orders to the manufacturers. However, there are a few essential points that you have to consider and also execute cleanly to have success with it. Here are the most important steps in the absolute short version.
Register a trade
Before doing business it is necessary to register a company. In both Germany and Austria, sole proprietorships are by far the most suitable. You can start these at a fairly low cost. In addition, there is the corresponding trade that must be registered. This falls under the free trades and is referred to as a commercial trade. With upcoming larger sales it makes sense to apply for a UID number. This is also free of charge and must be applied for from €30,000 annual turnover.
Branding
The next crucial point is to think about the
branding
branding. Because in the long term, you won’t succeed with a generic store. Accordingly, the first thing to do is to think strategically about the competition, target group, USPs and positioning. But also
Then you should
Brand Elements
like
Brand Name
, Logo,
Tagline
and more.
By the way, here are more e-commerce logo inspirations: https://www.designrush.com/best-designs/logo/e-commerce-retail
Dropshipping marketplace / store / sales platform
The first thing to do after the basic legal requirements are clarified is to choose the marketplace or sales platform. This serves more or less as a virtual store in which customers can store. Here are the most popular and relevant platforms which have proven themselves in practice over the years.
Shopify Dropshipping – The #1 Variant
For almost all dropshipping variants, Shopify is by far the best choice. This e-commerce platform has risen to the top in recent years, and not without reason. The selection of professional and mostly free themes is ingenious and the high functionality combined with ease of use clearly speak for Shopify.
If you take a closer look at the topic, you will notice that almost all major dropshippers work with Shopify. The company has of course recognized this and offers practical features and integration options in this regard. There are also numerous apps in the Shopify App Store, such as Dropified, which support or facilitate the process.
Dropshipping with Wocommerce / WordPress
Woocommerce is the e-commerce solution for WordPress and in the general e-commerce field it is one of the most popular solutions. A large part of all online stores worldwide rely on WordPress with Woocommerce. In the past, this was not suitable for dropshipping at all, but now there are more plugins and integrations that make the process easier. At Shopify there are plugins like Dropified which makes importing products especially easy. The counterpart for Woocomerce is Alidropship. It simplifies the whole process and enables easy dropshipping via WordPress with Woocommerce.
Dropshipping Amazon
Basically, the classic Amazon FBA program is also a type of dropshipping. After all, the product is shipped directly from the warehouse to the customer. However, there are decisive differences which bring their own advantages and disadvantages. One should be aware of these or weigh them up.
Ebay Dropshipping
Basically, besides Amazon, you can also use Ebay for dropshipping. Ebay is one of the largest e-commerce platforms in the world, along with Amazon, and offers countless products. Amazon now has more volume than E-Bay and is usually the better solution. However, Ebay can also make sense as a secondary platform.
Find, Import & List Products
After the store is built and the tracking codes are successfully installed, it is necessary to import products into the store. In most cases, the products are sourced from wholesalers in China. Below is a listing of the most popular retailers and suppliers. These offer millions of products ranging from electronics and furniture to clothing and jewelry at the manufacturer’s price.
AliExpress Dropshipping
The most popular platform is AliExpress, also called Chinese Amazon. Here you can find most of the products. The choice is huge and the possibilities endless. However, when
choosing the products
pay attention to certain things. Not all products meet the quality expectations of the western population. Often products feel cheap and are poorly made. Therefore, it is recommended to either pay attention to the reviews or to order the product on a test basis.
With the help of the applications like Dropified, the products can be directly integrated into the respective Shopify store with little effort. This is easy to implement even with little technical understanding.
POD
There is also the possibility of dropshipping with print on demand items. Specifically, these are products that are printed and shipped directly when ordered. The previously created designs and print patterns are simply uploaded to certain platforms like Printful. Then, using the application, you reconnect the Shopify store to the POD provider (e.g. Printful).
SECRET TIP: The best mockups for POD products can be made with PlaceIt. The software allows to calculate the raw PNG files of the designs on lifestyle photos & video of models. The results are so professional that as a client you can’t tell the difference between mockup or real photo / video. Incredibly convenient for POD dropshippers of all kinds.
Other suppliers
There are of course also numerous other suppliers from whom you can purchase products but more about that later. AliExpress and Printful are among the most popular solutions and are great for getting started. However, other providers sometimes lack ready-made integration solutions, which makes dropshipping with Shopify more difficult.
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SECRET TIP: Use Dropshipspy to find successful products from other manufacturers or dropshippers and copy them. Because most dropshippers are CopyCats themselves and if the product works for someone else and you figure it out early you can still get a piece of the pie.
Marketing
After the store is up and running and all products have been successfully imported and listed, only the customers are missing. This requires skill in the field of online marketing. There are numerous tutorials and guidance on YouTube on how best to promote your dropshipping store.
Here is an overview of the most popular variants:
Facebook’s Paid Ads
Facebook is one of the world’s largest advertising platforms and is a great place to sell products and services. Facebook Paids allow advertisers (dropshippers) to position ads in the Feed, Messenger or Market Place. However, feed placements are best.
The advantage: Facebook has built up a huge database over the years and knows more about you than your mother. No kidding.
Accordingly, advertisements can be placed accurately. One can select targeted interests such as fitness, yoga, fashion and travel and place targeted ads.
Instagram Ads
The same goes for Instagram Ads, as they are also controlled via Facebook. Thus, you can run both FB and IG ads in Facebook Ads Manager. On top of that, on Instagram you can place not only feed ads but also story ads. These are currently particularly cost-effective and are suitable for a wide range of products in the low price segment.
In addition, Instagram gives you the opportunity to specifically access a younger target group and market other products accordingly.
Google Ads
Google Adwords is mostly underestimated and often neglected possibility to direct potential customers to the store. Google Ads make sense insofar as you can target certain keywords that are entered on Google & Co. Thus, the “purchase intent” of the potential customer is already given from the ground up and the conversion rates of such campaigns are correspondingly high. Especially Google Shopping Ads as shown below are currently particularly well suited to advertise and test different products.
Especially with classic or quickly saturated dropshipping products, it makes sense to test Google Ads, because most exploit the “winning product” primarily on Facebook. Google therefore offers another way to successfully sell a product over a longer period of time.
SEO
SEO short for search engine optimization is another way to bring customers to your own webstore. However, very few dropshippers rely on SEO, because it is a lot of work and also takes a long time. However, anyone who believes in the
online business model
If you do not have the opportunity, you can of course outsource it with an SEO agency.
Find Winner Now With DropshipSpy
Advantages
Low barrier to entry
The skin aspect is the low entry barrier. Anyone can get a fully functional online store up and running in a matter of hours. This is because Shopify, in combination with numerous applications, offers an incredibly simple system with which you can easily run e-commerce.
The integration of products via Oberlo, Dropified or POD services such as Printful works extremely well and is very easy to implement from a technical perspective.
By now, you really don’t need to have any technical knowledge to get a dropshipping store ready to go. Anyone with a laptop and a stable internet connection, as well as a credit card, can theoretically do dropshipping with Shopify.
Hardly any startup costs
In addition to the low technical requirements, little start-up capital is needed to get started with dropshipping. Specifically, all you need is $15 for a domain and $29 for your first month with Shopify. All other costs are optional like Paid Themes, Applications, Desings and so on.
Only for the advertising you should initially take at least 300-500 € in hand to see the first results. This is necessary and anything else would also be unrealistic. You won’t get far with a 100€ advertising budget and you can’t start a serious business with so little money. But with a few hundred euros, the fun can start.
Thus, even a student or someone with little startup capital can start their own dropshipping business. The barrier to entry, both from a technical and financial perspective, is low.
No logistics
The fundamental purpose for dropshipping is outsourced logistics. You don’t need warehouses and you don’t have to worry about shipping. This is a great point because as an entrepreneur you want to focus on your core competencies and not get bogged down with time-consuming activities for which you need little know-how.
Such tasks should be handed over and outsourced as early as possible. This is exactly the case with dropshipping. The entire production, warehousing and shipping chain is completely handed over and you can concentrate fully on marketing and market research.
Flexibility
This point appeals especially to the younger generation, including many Millennials. Flexibility is one of the most important points of this generation and in some cases even stands above aspects such as income and reputation.
Dropshipping is just like affiliate marketing or other possibilities a business model which you can control all over the world from your notebook (if you have internet). You are not bound by time or space and can arrange everything freely. This is also the reason why many successful online marketers travel frequently, change their residence regularly and can then work when they want.
This can also result in many tax advantages if you move your primary residence abroad but that is another topic which we will cover in a separate article.
Case Study
Michael König and his partner Alexander Pecka have proven it: Shopify Dropshipping is not dead. On the contrary, the two Viennese are now turning over over €500,000 / month. Incredible when you consider that many already claim dropshipping with Shopify and Aliexpress only works in the US. Or the really big dropshippers all come from the USA. This is definitely not true, because there are also numerous dropshippers in Austria, Germany and Switzerland who write incredible numbers.
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Recommendation: Course
If you want to start dropshipping, it is definitely recommended to buy a course. The time and money you save by avoiding many mistakes are definitely worth it. We definitely recommend buying a German course, as the legal situation is different here than in the USA. Our specific recommendation falls on the BRANDED DROPSHIPPING ACADEMY.
The knowledge of professionals with years of experience in German-speaking countries accelerates your own success curve enormously. Just like in any other field, you should be willing to invest in knowledge before you get started. This saves a lot of time, money and, among other things, frustration. However, if you are interested in building a successful business with dropshipping then the investment is definitely worth it.
Wholesalers, Traders, Suppliers & Manufacturers
There are many dealers and suppliers from whom you can purchase products and then resell them. This point is more important than you think. Because the right trader can drive or even damage the entire business. By choosing the right manufacturer or supplier, you can increase product quality, reduce delivery times and lower product costs.
Therefore, you should deal with this issue very well and also choose the right dealer with certainty.
Here is an overview of the most important ones:
AliExpress
AliExpress is the Chinese equivalent of Amazon and a platform on which hundreds of thousands of items are offered and sold. It is not only the platform with the largest selection but is also best suited for integration with Shopify due to its numerous plugins.
The offer ranges from electronics and toys to clothing and technology. You can find almost everything and the prices are mostly very good so that you still have a good margin when reselling.
DH Gate
DH Gate is another huge Chinese platform where you can find numerous products suitable for dropshipping. The selection for electronics items is particularly large here. Although the company has been on the market for over 15 years, many still do not know it. Definitely an insider tip.
SHEIN
Shein is one of the largest platforms for clothing and fashion. The offer ranges from children’s clothing to jackets and street style. Shein is therefore very suitable for fashion stores. It is important here to always pay attention to the right sizes and to order samples. Because the Chinese have a completely different idea of fashion and style. Even if you have found very good pieces you should always make a test order!
BIG BUY
BIG BUY is a Spanish wholesaler of goods of all kinds. This can be very interesting especially for Europeans. This is not just a retailer, but a company that offers numerous other services for dropshippers, such as help with connecting various sales channels.
Printful (Print on Demand)
Printful is one of the best known and most popular providers of Print On Demand products. They now offer a wide range of products (t-shirts, hoodies, coffee mugs, etc) and have very good customer support. In the meantime, there is also a production facility in Europe, which can shorten the worldwide delivery time.
Custom Cat (Print on Demand)
Custom Cat is among the largest suppliers of Print On Demand products. The offer for the products to be printed is enormous and you can also get them for a comparatively very reasonable price. However, Custom Cat becomes chargeable above a certain volume. Nevertheless, it’s worth it because the prices and selection are top.
Taxes
This topic is completely new territory for many tax consultants. Often we and many of our colleagues were referred and given the statement, “I can’t give you any specific information on that. I have to get more information first.” You don’t feel very well taken care of, especially when you consider that you are paying the tax consultant precisely for his knowledge.
Theoretically, it looks like the turnover or sales tax would have to be paid separately in each country. This means that for each country to which we sell, we must also correctly charge and pay sales tax. If you run a store from Austria and send the goods from China to the customer in Germany, you have to pay sales tax in Germany.
Practically, many (although this is not correct) do not do it, because it would be an incredible bureaucratic effort. In addition, some contracts with Chinese manufacturers stipulate that they act as sellers in case of doubt. But that’s a huge legal gray area and definitely not a water-tight solution.
For sales to the USA, you can simply pay the sales tax in your own country. Of course, this only applies if the manufacturer is located in China, the store is operated from the EU and the customer is from the USA.
In addition, in Austria and Germany you have to pay an import sales tax as soon as the product costs more than 22€. The purchase price in China is used for this purpose and not the final sales price.
Risk factors
In addition to the disadvantages, there are also some serious risk factors that are beyond our control and can also have a negative impact. Here is an overview of the most important dropshipping risk factors.
Customs
Customs can open, search and examine all packages without having to declare it. This can massively delay the delivery time. Especially in the European area (EU) there are often problems with customs. If the value of the goods was declared incorrectly, an extra fee must also be paid by the customer. This is especially the case for products in the higher price range.
PayPal and Stripe
The two most popular payment providers, PayPal and Stripe, take advantage of their monopoly position and can refuse payments, withhold money, and accept refunds without reasons (even if the goods have already been successfully delivered). The horror stories are endless and you can find enough of them on the Internet. To avoid this, you should follow all the guidelines from the beginning, submit all the information about the business and try to keep the refund rate as low as possible.
Liability
In the end, as a dropshipper, you are liable for all risks associated with the product. If certain dyes are not CE certified this can lead to big problems. Especially in the area of health, this can be very critical.
Many products from China are counterfeit or violate many laws related to trademark law. In the end, even as a reseller, you are liable for it again. Numerous large stores have already been warned because their operators were too careless and did not check the products with regard to trademark rights.
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Disadvantages
However, many disadvantages also arise from the dropshipping business model with Aliexpress or other manufacturers. Often these are concealed and not addressed.
Of course, more courses and coaching sessions can be sold if you only mention the positive sides and do not talk badly about them. But we want maximum transparency and therefore also reveal the downsides of dropshipping.
These should definitely be considered before starting dropshipping and choosing this business model. Of course, this applies to business models of all kinds. One should always be aware of both sides.
Delivery times
The main disadvantage is the long delivery times that occur when the products are manufactured and shipped by the manufacturer only after receipt of the order. Especially providers from China like AliExpress need a comparatively long time to ship the products. As a rule, delivery times are 2-3 weeks.
This is of course a big disadvantage when you compare other online stores and their shipping times. For example, Amazon delivers within just a few days. For Prime Members within 48h. Since by now almost all people who shop online are used to these shipping times, 2-3 weeks will not be tolerated. As a result, requests for refunds, letters of complaint, bad reviews, and negative defamation are common.
The problem also exists with print-on-demand providers. Although most of these are based in Europe or the USA, it can take up to 14 days for production, shipping and delivery. This is also too long for many customers and results in the same consequences.
Only a few Chinese manufacturers have intermediate warehouses in the USA and can therefore keep shipping times short.
Quality
Another often neglected point is the quality of the product. We Europeans are of course used to completely different quality standards and have high expectations of the products we buy. In rare cases, errors occur in production and we can easily exchange the product.
This is not the case with dropshipping products imported from China. Chinese manufacturers are increasingly focusing on quantity rather than quality. They assume that a larger percentage of products will not work or will break quickly.
However, as we are the middleman, we have to be prepared to invest more time in customer support and more money for refunds than for high quality products.
Especially with electronics, caution is advised. Many electronic items from China are not even fully functional or fail after a few weeks and months. This also damages the relationship with customers.
Hijacker
The number of dropshippers and people who know AliExpress has multiplied in recent months and years. In concrete terms, this means that as soon as a product sells successfully on Facebook or Instagram, there is immediate competition. The so-called hijackers scour Facebook and other media for successful campaigns and other online stores and launch the product in their own store.
This can be incredibly annoying, but you are not protected from it, because anyone can import products from China and sell them here as long as no trademark law is violated. However, hijacking is also very present in other business models such as Amazon FBA. It is an unpleasant side effect of business models that have low barriers to entry.
Dependency
A huge disadvantage is the constant dependence on its manufacturer. On the one hand, it has advantages if you do not have to take care of the orders yourself, but at the same time it makes you dependent. Dependence in business is always a risk factor and can also be a serious disadvantage in the long run. Having to constantly rely on people you don’t know and, conversely, aren’t dependent on you is a big problem.
Many Chinese manufacturers are extremely unreliable in the long run and also do not adhere to contracts, if you can conclude any at all. This is because they are simply not legally attackable due to the great distance and barrier. In addition, the basic trust is relatively low in people you don’t know.
Sustainability
Dropshipping is a very good business model for learning many aspects of e-commerce relatively quickly. But in the long run, it’s not a sustainable business model. Especially in light of the above, it is difficult to build a sustainable business.
Specifically, this is because you don’t really have a USP. The products can be copied by any other supplier at any time (except, of course, for custom print-on-demand products, which can be trademarked). All products on AliExpress, DH Gate, Shine and more. are not protected and can or will be distributed by other online stores in the long run.
Secondly, the largely poor quality and long delivery times are a major problem in retaining customers in the long term. A business is only good as long as the customers buy. But if you don’t manage to retain customers and build up a pool of regular customers, it will be difficult. Constantly acquiring new customers because old customers are falling away is not a sustainable business model.
Branding & Brand Building
The third point concerns branding. This point also goes hand in hand with that of sustainability. It’s relatively hard to bring good branding to a dropshipping store. This is still possible to a certain extent (e.g. with POD products where you can print the logo) but is also limited. Brand building is the most profitable way to make money in the long run. This is because customers already have such a high level of confidence in the brand, based on previous purchases or the purchases of others, that they are much more willing to buy.
High competition
Dropshipping is becoming more and more popular and the competition is increasing every day. This not only increases the risk for hijackers but also makes it increasingly difficult to find cost-effective advertising opportunities. As the number of advertisers on Facebook has tripled in recent years, the costs have also increased. Here is an excerpt from Google’s statistics showing how quickly interest in dropshipping has grown in recent years.
Time required
Another point that many people do not realize is the high amount of time that goes along with the creation and support of a dropshipping store. This is not a disadvantage at first, but it can become a problem later on. This is not a problem with English stores, as customer support and other things can be outsourced very easily. Fiverr, for example, is very suitable for this. A platform where you can find cheap VAs from the Philippines and other low-wage countries.
In German-speaking countries it is a bit more difficult to find competent employees at a reasonable price. Especially when it comes to simple tasks like customer support or forwarding orders. Of course, any legitimate business requires time, but dropshipping is not an automated business that takes care of itself as many people make it out to be.
Dropshipping in the DACH region
Dropshipping has become increasingly popular in recent years in the DACH region, i.e. in Germany, Austria and Switzerland. But there are some differences compared to the USA, UK and other countries where many dropshippers come from that should be taken into consideration.
Germany
In Germany you have to pay sales tax in the amount of 19% if you exceed the annual turnover of €17,500 in the first year and or if you exceed €50,000 in the following year. The profit is then subject to another 15% corporation tax and 15% trade tax. Except for partnerships which are paid with the income tax.
Austria
The sales tax in Austria is the highest in the DACH region and is 20%. This must be paid from a turnover of 35,000€ per year. The resulting profit must be taxed again at 25% corporate income tax but without trade tax. Except for partnerships, where income tax is due directly.
Switzerland
In Switzerland, there are some differences, especially from a tax point of view. From Switzerland, one only pays sales tax from 100,000 francs. This is currently 7%. Thus, not only the turnover limit is higher but also the subsequent tax to be paid is significantly lower.
Experience
Our experience with dropshipping has been very mixed. On the one hand, with POD Anbieter, we were able to creatively build our own clothing brand in a very good niche and also market it successfully. With the help of the right influencers and a targeted Facebook and Instagram ad campaign, we were able to achieve good results within a short time. Sales were growing fast and margins were high enough that profit was relatively good on the bottom line.
On the other hand, we constantly had problems with delivery times as well as product quality. Many customers complained by e-mail, which meant an incredibly high effort in terms of customer support. That was a real shame, because it robbed us of a lot of motivation until we finally sold the store.
In retrospect, we should have just spent more time with our supplier or built a better relationship with them. Because most of them are very good to negotiate with, and this allows you to reduce prices and delivery times. In addition, customizations and adjustments are possible. That was one of the biggest learnings in this area.
Summary
You should definitely not always be blinded by other people’s quick successes and look at the dropshipping business model objectively. It’s definitely not the holy grail of the “I make my living with the notebook lifestyle”.
Rather, e is a business model that has many pitfalls and also brings problems with it. These should be compared with the advantages and only then decide whether dropshipping really makes sense.
Especially in Austria and Germany, customers are used to high standards and running a successful dropshipping store requires a lot of time, money and know-how. You should really know all the aspects and prepare for them before rushing in unprepared.
Nevertheless, dropshipping can also earn a lot of money and only with a notebook and stable Internet connection. The startup risk is extremely low and you learn many things about e-commerce and online marketing as well as basic entrepreneurial aspects.
