Dropshipping: drop shipments in the EU

Online shopping is popular all over Europe, especially in times of Corona. Many online retailers are aware of this.

However, not all online traders have their own warehouse. Therefore, the products are delivered to the customer by another company.

This is called dropshipping.

But what exactly is dropshipping? What should I be cautious about? And is dropshipping legal?

Summary: Dropshipping (drop shipment)

  • Dropshipping is also referred to as drop shipment or direct dispatch.
  • In a case of drop shipment, the online shop you place the order with only takes care of the acceptance of the order and the invoicing. However, the delivery of the goods is carried out by the manufacturer or wholesaler.
  • Dropshipping is legal and therefore subject to the same regulations as shopping in any other online shop. It is irrelevant whether the trader is located in another EU country or whether he or she focuses his or her business activities on the German market.
  • Drop shipments can lead to long delivery times, high return costs, delivery problems and additional costs. Especially if the supplier is located in a country outside the EU.

Dropshipping: What is it?

The principle of dropshipping is as follows:

You order from an online retailer. However, you do not receive the goods from the retailer himself, but directly from the manufacturer or wholesaler. At first sight this might not be recognisable for you. Only after the package arrives and the adress of the sender does not correspond to the seller’s address you might discover this.

The shop where you placed the order only takes care of order acceptance and invoicing. It avoids the areas of logistics and warehousing.

Thus, an online shop skips a link in the supply chain through dropshipping.

The online retailer does not come into contact with the goods. As a result, he cannot check the quality of the goods.

Graphic: How dropshiping works
Customers can hardly or not at all tell whether an online shop is doing dropshipping.

Example

You buy shoes from an online retailer. The retailer does not have an own warehouse and forwards the order to its supplier.

The supplier then takes care of the packaging and the shipment to you.

Dropshipping: The advantages and disadvantages for consumers

Advantages

Disadvantages (risks)

Dropshipping is legal

Additional costs (customs)

Customers have the same rights as in a "normal" online shop

Possibly low product quality

Often lower prices

The goods/products do not comply with EU standards

A more varied range of products is available

Price / performance not in proportion

You can get a good deal

Difficulties in making contact in case of questions or problems

 

Customers cannot see whether it is dropshipping (no labelling obligation)

 

Some shops / websites go offline after a short time and are then no longer accessible.

 

Supply shortages, long delivery times and even non-delivery

What problems can arise with dropshipping?

  • Long delivery times: Depending on the country from which the goods are being shipped and the shipping route, long delivery times are to be expected. Container freight by sea in particular can take a long time.
  • Supply shortages: Although placing an order is possible, it may be that the goods are already sold out at the actual supplier. The money will nevertheless be debited immediately.
  • Additional costs: Previously, the import of shipments with an order value of up to 22 euros from a third country was exempt from VAT. This exemption limit no longer applies. For all goods imports into the EU, the import sales tax is due from the first euro. From a total value of 151 euros, additional customs costs apply.
  • Dubious dropshippers: As in every industry, there are black sheep when it comes to dropshipping. These advertise, for example, brand goods but deliver fakes or something completely different or inferior. In addition, the goods may not be delivered at all or not delivered on time.
  • High return costs: The return costs, for example in the case of a withdrawal, can quickly exceed the value of the goods. Especially if the goods have to be sent to a country outside the EU at your expense.

Right of withdrawal: Can I return my order in the event of drop shipments?

Yes. The 14-day right of withdrawal applies to dropshipping. This right applies in all EU member states when you place an order online.

This means: You have to inform the seller that you want to withdraw within 14 days of receiving the items without having to give any reason. You then have to return the goods within 14 days after you declared the withdrawal.

The problem: The trader does not have to provide a domestic return address. It is therefore possible that you will be asked to send the goods back to the supplier, i.e. outside Europe. Depending on where the supplier is located, this can be very costly. Especially if you have to pay the return costs according to the contract. It is in fact legitimate to impose the return costs on you.

However, the dealer must inform you of this before you make the purchase. Therefore, take a look at the general terms and conditions (T&Cs) before ordering. Or ask if you have any doubts. If you paid in advance, it can happen in practice that you have the right to a return, but the amount is not reimbursed or is only reimbursed slowly. This can be avoided by considering the payment method as an important criterion when selecting the retailer.

For example: purchase on account or payment by credit card. In the worst-case scenario, you can try to get the money back via chargeback. However, a chargeback must be requested within a certain time frame

Overview: When can I revoke a contract?
Overview: When can I revoke a contract?

Important

The trader must inform you if the supplier is located in a non-EU country and what costs this may cause for you.

If you are surprised by extra costs upon delivery, you can refuse to accept the package and demand a refund from the trader.

Warranty for defective goods: What rights do I have?

If an item is faulty, you can request a replacement (exchange) or repair (legal guarantee) from the dealer throughout the EU for two years.

In some countries, the warranty periods are even longer. In Germany, the so-called reversal of the burden of proof lies with the seller in the first six months (from January 2022 it is even 12 months).

This means: If a defect (for example a crack in the material) occurs within six months, the law assumes that the damage was already existent when the goods were handed over.

If the seller claims that this was not the case, he is obliged to prove this.

After six months (or 12 months from 2022), the buyer must prove that the goods were already defective when they were received (reversal of burden of proof).

Simply withdrawing from the contract and demanding a refund of the purchase price is not possible under German law.

This is only possible if the seller has clearly refused to repair or replace the goods beforehand.

It is then called a contract termination.

This is different in France: The situation there is that if you do not receive a reply to your complaint within one month, you can terminate the contract and claim your money back.

In addition, the burden of proof lies with the seller for two years.

Do I have to accept a damaged package?

You can refuse acceptance if you can already see from the outside that the goods have been damaged when they were transported.

Take pictures of the damage and document the damage on the waybill. This way you can prove that the goods arrived damaged.

Then ask the deliverer for a copy of the waybill and demand the return of the goods.

If the damage is only visible after unpacking, you should contact the online retailer immediately and - as described above - make use of the legal guarantee.

What can I do if the dropshipping order doesn't arrive?

Contact the online trader immediately if the goods have not arrived by the agreed delivery time.

In this case, you can request a replacement delivery (set a delivery time) or ask for the money back.

If the online trader does not respond within a reasonable period of time and you have paid by credit card, you can arrange a chargeback at your bank. Payments by direct debit can also be reversed.

Some payment service providers also offer buyer protection.

A postman carries a parcel in his hands.
In the case of drop shipments, there may be delivery bottlenecks, long delivery times or non-deliveries.

Tips for a successful dropshipping purchase

  • Take a careful look: Dropshipping is not always easy to identify, as there is no legal obligation for the seller to specifically indicate that he uses the business model of drop shipments.
  • Price comparison: Compare the prices of competitors before buying. If the offer is too good to be true, be careful.
  • For branded products, go to the original brands page and compare the prices. In this way you can assess whether the price is realistic.
  • Take your time when ordering: Online traders often put their customers under artificial pressure in order to influence their purchase decision. Example: "Only a few items available".
  • Don't be fooled by supposed discount promotions. These often run permanently.
  • Customer reviews: Read through customer reviews and do a short Internet research on the dealer: Name of the seller or the online shop + "Rating" or "Experience".
  • Be suspicious if a product has only positive reviews.
  • Check the dealer information: Look at the contact details of the online dealer in the imprint or in the terms and conditions.Are these complete? You can check the address using online map services. If the shop is located in a residential building in the city center, this could be an indication that the seller does not have his own warehouse and that it is dropshipping.
  • Take a look at the legal notice and check whether the seller is registered in an official commercial register.
  • Terms of contract:  Read the terms and conditions. This may help you find out which country the return has to be made to. Furthermore, the place of jurisdiction stated in the terms and conditions often shows where the supplier is based. Do a search with CTRL + F and search for keywords such as return, costs, transport costs.
  • If long delivery times are stated, this can also be an indication of dropshipping.
  • If a page was created using Shopify, Wix, BigCommerce, or any other online store creation service, you can assume that it is a dropshipping site. Often there is a reference to one of these providers in the footer.
  • Do not pay in advance: If the purchase on account is not possible, we recommend paying by credit card, direct debit or through a payment provider that offers buyer protection.


Result:

Ultimately, it is up to you to decide whether you want to order from one of these online shops or not.

Because: dropshipping is legal. And if the price is good and the goods are okay, then you can strike a bargain with drop shipments.

However, find out in advance about the additional costs that may arise from dropshipping delivery in order to avoid unpleasant surprises.

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Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Innovation Council and Small and Medium-sized Enterprises Executive Agency (EISMEA). Neither the European Union nor the granting authority can be held responsible for them.