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Is DropShipping Legal? Dropship Requirements

Is Dropshipping Legal?

If so, what are dropshipping legal requirements and what will wholesale dropshippers require to work with me?

As discussed in Module 3, it's important for model 1 store builders (learn about the store models we teach here) to be prepared when they reach out to manufacturers & distributors that wholesale, to request a reseller account (aka "dealer account").

There are a handful of things you can do to look much more legit and professional to suppliers, increasing your chances that they'll be willing to set you up with a dealer account.

Broad Spectrum of Scenarios

Every supplier is different. On one end of the spectrum, you've got the manufacturers of "household name" type brands that are sold at your local department stores (Sony, Samsung, Nike, L'Oreal, Pampers, etc.). On the other end of the spectrum, you've got "ma & pa shops" you've never heard of that manufacture a much less known brand of products. Obviously, most suppliers will fall somewhere in the middle.

The type and extent of preparation you'll want to do before reaching out to the supplier largely depends on where you think they fall in this spectrum. If you're trying to get set up as a reseller for a major corporation that manufactures a well-known brand name, you might have to do quite a bit to impress them.

HINT: Sometimes you'll be surprised, though, we were able to set up a reseller account with Singer Sewing Co. for a sewing machines store we built several years back without much effort at all! We simply filled out their online dealer application and followed up with a phone call the next day, only to find out we were already set up and good-to-go!

On the other hand, if you're trying to set up a reseller account with an unknown brand whose website says "Yes, we dropship!" and has a dealer application readily available to fill in or download, you probably don't need to do any preparation (besides having a business entity that you can list on the application). Just fill out the application, and follow up a couple of business days later if you haven't heard back yet!

The point I'm trying to make is this: don't do any more than you have to do in order to secure the supplier account.

What can be done to impress potential suppliers?

Below is a list of several tasks you may want to consider doing. Very, very rarely will you need to do all of them (or more than just 2-3 of them). I'd say that most suppliers fall on the easy, "don't-need-to-do-much" end of the spectrum.

I'll start with the two things that everyone should do before reaching out to suppliers for model 1 store, then end with three optional tasks that you'll only want to consider if you're trying to land a dealer account with an extremely picky supplier.

Task #1. Register a DBA or Business Entity *Strongly Recommended*

Getting a business entity is much easier than most people expect it to be. In fact, in most states you can get a business entity (and the accompanying documents & certificate) without ever leaving the comfort of your own home!

You can start an online business without a business entity, because every US citizen is technically a "sole proprietor", but the liability coverage that you get from an official business entity is well worth the minimal effort & cost. Having a business entity also greatly increases your chances of true wholesalers being open to consider working with you.

Read this article to learn everything you'd want to know about your options when it comes to business entities.

Task #2. Register a Domain Name *Strongly Recommended*

  • Almost all suppliers will expect you to have a domain name (you are, after all, an online store!)
  • Even if they don't ask you what it is over the phone, it's almost always requested on the dealer application
  • We recommend registering your domain name a domain at Name Cheap

This is covered in section 3.2 of Module 3 of our free training, and that's where we provide the actual steps to get this done.

Task #3 (Optional). Get a Toll-Free Number *Strongly Recommended*

  • Having a toll-free number to use on dealer applications makes you look much more professional and legitimate
  • It will separate you from the dime-a-dozen upstarts on eBay, Etsy & the like (mainly those who operate as sole proprietors)
  • You'll most likely be getting a toll-free number when your store is completed anyway, so you're just getting it a little earlier
  • We use and recommend Phone.com, and you can get a discount here

If you end up creating a placeholder site (covered below) you can post this toll-free number prominently on that's site's header.

Task #4 (Optional). Create an Affiliate Product "Placeholder" Site *Rarely Necessary*

It's rarely necessary to do so, but if a supplier you're really wanting to work with demands that you have a store up & running before they will set you up with an account, you can create a "placeholder" store with affiliate products from retailers in your niche.

You start by signing up for affiliate programs run by retailers in your niche (or just Amazon), and then you load their products onto your website (using the domain name we registered above). This gives anyone who visits your store - before you actually go live as a dropship store - an impressive little web store to cruise through!

What's the point?

Well, to someone quickly skimming your site it'll look like a standard little e-commerce store, which is much more impressive than a "coming soon" Name Cheap "parked" page (which it what you should be seeing now when you visit the domain you registered in Task #2 above in a web browser).

This gives you much more confidence to provide your domain name on a supplier's dealer application or to mention your domain name to someone you end up speaking with at their company. Use this article to learn how to build out a full blown affiliate product store using WordPress.

WARNING: Do NOT add the products that are made by the manufacturer you're aiming to set up an account with to your placeholder site. You do not have their permission to do so, and many suppliers will be very unhappy with you if you do. Only add products available to you via affiliate programs that are made by other manufacturers.

Task #5 (Optional). Create a Simple Corporate Site for Your Business *Rarely Necessary*

A corporate site is like the online "headquarters" of your business entity, and generally would be based on your official business name (not your store's name).

This is different from the "placeholder site" (covered in section #4 above). A "placeholder" site is built on the domain name you're eventually going to use for your e-commerce store & focuses on advertising products within that specific niche, whereas a corporate site is built on a domain name that matches your business name & focuses on your company (i.e. HermansenBrothers.com for our Hermansen Brothers Inc business entity).

If you deem this necessary to impress a wholesale supplier and likely land a dealer account with them, this guide will walk you through the steps of creating a simple corporate website for your business.

I'm Totally Prepared to Contact Wholesale Suppliers, Now What?

Once you've done everything you're going to do to prepare to reach out to wholesale dropship suppliers, return to Module 3 to learn how to proceed.