What Is Dropshipping?

The term describes direct shipment from the supplier to the end customer. The goods take the short route, while the sales contract runs through the shop.

The shop runs the website or the marketplace listing, sets the price, takes the payment and deals with the customer. The supplier holds the stock, packs and ships. That can be a wholesaler or a manufacturer, inside or outside the EU.

Dropshipping differs from affiliate marketing in one point that changes a lot in legal terms. An affiliate refers buyers to someone else's shop and earns a commission. A dropshipper sells in their own name, concludes the sales contract and so carries the duties of a seller. Compared with e-commerce from one's own warehouse, only the logistics differ.

The process has five steps. The shop adds the supplier's products, data and images to its catalogue. A customer orders and pays in the shop. The shop passes the order to the supplier, often automatically through an integration, and pays the purchase price. The supplier ships the goods and reports the tracking number. The shop forwards it to the customer and handles questions, complaints and returns.

The margin is the selling price minus the purchase price and every cost incurred per order: shipping, payment fees, shop platform or marketplace fees, advertising and the share of refunds and returns. Because the shop does not fund a warehouse, it needs less capital to start than with its own stock. In exchange it buys one unit at a time and misses out on the lower unit prices of bulk buying. Any other shop can buy the same products from the same supplier, so offers often differ only in price and advertising. That is why advertising cost per order often decides whether any margin is left.

Legally, a dropshipper is a trader and a seller. The duties EU law places on the seller stay with them even when the supplier ships the goods.

Delivery time: under Article 18 of the Consumer Rights Directive 2011/83/EU, the trader must deliver without undue delay and no later than 30 days after the contract is concluded, unless agreed otherwise. If they still fail to deliver within an additional period, the consumer is entitled to terminate the contract. Before the contract, the trader must state, among other things, their identity, address and delivery date (Article 6).

Returns: the consumer can withdraw from a distance contract within 14 days without giving a reason (Article 9). The trader must reimburse all payments, including delivery costs, no later than 14 days after the withdrawal (Article 13). The goods go back to the trader or to a person the trader has authorised (Article 14).

Guarantee: under Article 10 of the Sale of Goods Directive (EU) 2019/771, the seller is liable for any lack of conformity that exists at delivery and becomes apparent within two years. Member States may set longer periods. The shop can seek redress from its supplier under national law (Article 18).

Product safety and liability: the General Product Safety Regulation (EU) 2023/988 has applied since 13 December 2024. Anyone selling online must show in the offer the manufacturer with postal and electronic address, the responsible person if the manufacturer is outside the EU, a picture of the product and the warnings and safety information (Article 19). Damage caused by defective products falls under the Product Liability Directive 85/374/EEC. Under it, anyone who imports a product into the Community or puts their name or trade mark on it is liable as a producer, and, where the producer cannot be identified, so is each supplier who does not tell the injured person within a reasonable time who the producer is or who supplied them with the product (Article 3). For products placed on the market after 9 December 2026, Directive (EU) 2024/2853 applies. Where the manufacturer is outside the EU, it names as liable the importer, the authorised representative and, if there is neither, the fulfilment service provider (Article 8). What role a shop plays in a specific case is a question for legal advice, not for this entry.

• Test suppliers with trial orders before launch: delivery time, packaging, condition of the goods.
• State in the offer the delivery time the supplier actually meets, not the shortest possible one.
• Obtain the information required by Article 19 of the product safety regulation from the supplier before a product goes live.
• Agree in writing with the supplier on the return address, deadlines and who bears the costs.
• Calculate the margin per order with every cost included, advertising and return rate among them.
• Write your own product descriptions instead of copying the supplier's text, which other shops use as well.

• Sending customers with complaints to the supplier, even though their contract is with the shop.
• Promising a delivery time the supplier does not meet.
• Selling products whose manufacturer and safety information are unknown.
• Selling third-party goods under your own brand without knowing that this makes you liable as a manufacturer.
• Calculating profit as selling price minus purchase price and forgetting advertising, fees and refunds.
• Charging the customer for return shipping without having told them beforehand (Article 14).