--- description: Dropshipping allows SMEs in the UK to sell products almost immediately without committing to bulk orders upfront. Learn how it works and how to set it up. image: https://gdm-localsites-assets-gfprod.imgix.net/images/software_advice/og_logo-55146305bbe7b450bea05c18e9be9c9a.png title: Dropshipping: What is it and how can UK SMEs start using it? --- # What is dropshipping and how can UK SMEs start using it? Canonical: https://www.softwareadvice.co.uk/blog/3027/what-is-dropshipping-how-uk-smes-use-it Published on 17/08/2022 | Written by David Jani. ![What is dropshipping and how can UK SMEs start using it?](https://images.ctfassets.net/63bmaubptoky/PGPDVhqe7rW4XRcJameOSx-LaEGOgHbTICmsNtIC5ZI/ee10f971f77c5f99a0cdf357ea2e4d97/Dropshipping-UK-SoftwareAdvice-Header.png) > As a new business or a smaller online retailer, the upfront costs and difficulties sourcing, managing, and storing bulk product inventory can make launching your eCommerce store harder in an ecosystem dominated by big companies. However, there is a way to simplify these issues; the answer is dropshipping. ----- ## Article Content As a new business or a smaller online retailer, the upfront costs and difficulties sourcing, managing, and storing bulk product inventory can make launching your eCommerce store harder in an ecosystem dominated by big companies. However, there is a way to simplify these issues; the answer is dropshipping.In this articleWhat is dropshipping and how does it work?How to find a dropshipping supplier in the UKHow much does it cost to start a dropshipping business in the UK?Where can a UK SME start dropshipping?How to choose what to sell via dropshippingKeeping on top of market competitionUsing dropshipping can be advantageous to smaller businesses, not least as it helps cut down on the necessity of warehousing space. Instead of buying stock in bulk, it allows SMEs to sell an item on an online store that is then fulfilled directly by the stock supplier. Find out below how dropshipping works as a concept. We will then look at the main points business owners need to know before starting dropshipping in the UK. What is dropshipping and how does it work?Dropshipping is a method of selling products to customers online where the seller does not actually hold the item in its own stock inventory. Instead, when a customer makes a purchase, the retailer orders the item directly from the manufacturer or via a dedicated dropshipping supplier. It is then the supplier that fulfils the rest of the order.This allows businesses that don’t have extensive storage facilities or the budget to buy bulk products to join the market and sell products from day one of operations. This is highly useful, especially for smaller businesses and those who want to explore new product ranges without investing a lot of money upfront in logistics and large amounts of inventory.For example, a retailer might list a product on their website for £75. When a customer buys the product, a seller contacts a dropshipping supplier, paying a wholesale price of £60 for the unit. As the rest of the fulfilment is taken care of by the dropshipping supplier or manufacturer, this means the business makes £15 from the sale before other operating costs are taken into account.How to find a dropshipping supplier in the UKThe use of dropshipping has been growing steadily globally since 2020 and is forecast to expand further over the coming years. As a result, there are many options for dropshipping suppliers in the UK and internationally to choose from.These include niche wholesalers, which can be selected if your dropshipping business focuses more on specific products like clothes, electronics, or gifts.To find the most appropriate UK dropshipping service, businesses can browse directories to view and assess potential suppliers. Many dropshipping platforms offer this search feature to help users find potential wholesalers.How to pick the best dropshipping suppliers for the UKThe first and most important decision a company can make when it starts dropshipping is its choice of supplier.Some of the critical features for UK SMEs to consider when selecting a dropshipping supplier include:Reliability in order fulfilmentNational and international shipping availabilityCustomer service provisionsThe cost of a subscription and possible expensesAvailable product catalogueOrder processing timesWhether they manage returns for you or notHow much does it cost to start a dropshipping business in the UK?Dropshipping can allow businesses with much lower budgets than their more prominent and established competitors to join the market and fulfil orders successfully. While this reduces the barriers to entry into the eCommerce market, there are still some essential upfront costs to consider when starting from scratch. These include expenses for:A web domainAn eCommerce shopfrontA basic dropshipping subscription packageSamples of the products you wish to sellOnline marketing platform and advertising; for example, on services like Google, Facebook, or InstagramA subscription cost to a dropshipping service varies. However, it is often possible to try out vendors with free trials that allow a period of time or a set number of orders to be fulfilled without needing to have an ongoing service subscription.What laws and regulations should UK dropsellers take into account?Dropselling is perfectly lawful as a practice. However, to remain legally compliant, SMEs must remember to comply with a few essential laws and regulatory norms.These include regulation codes such as the following:Online and distance selling rulesCompetition and consumer rulesData protection rulesIt is also vital to remain compliant with relevant taxes when selling products via a business in the UK, such as:Income taxVATCustoms dutyWhere can a UK SME start dropshipping? Most sales made via dropselling are done online through an eCommerce storefront. Whilst it is possible to buy or sell the products from almost anywhere nationally or internationally, if you’re UK-based there is an additional point to consider when importing or exporting goods with your dropship supplier.VAT must be paid where the products are being delivered. This might be a vital point to remember if you plan on shipping to or from the EU. Since Brexit, the United Kingdom is no longer part of the European single market. As a result, customs and import VAT must be considered when trading with EU customers or suppliers.For example, if your dropshipping supplier isn’t based on the UK mainland, your British-based customers may be on the line to pay customs duties on items imported into the country. The same applies to your EU customers if you ship from Britain to Europe.  How to choose what to sell via dropshippingThe decision of what to sell ultimately depends on the type of business you are operating. Nevertheless, dropshipping allows merchants to offer products in many niches.As always, you should make sure that you carefully research any products you do choose to sell before offering them for sale. Ideally, this will be an item that you have background knowledge or experience in using or handling, especially if it is a more specialised good; for example, a medical or manufacturing product.This will ensure that you market them correctly so that customers understand what they’re buying. It will also help you manage considerations such as pricing and who your target market might be.Keeping on top of market competitionCompetition is a significant reality of dropshipping. Therefore, SMEs taking the plunge into this market need to have a good idea of what the competition is up to.Even the best dropshipping companies in the UK face the big issue of staying competitive, and market analysis and keeping track of rival brands is vital. Competition tracking software can help provide a clearer picture of where the market is moving and what your fiercest competitors are doing.This works by collecting data from competitors via data mining and web monitoring to give you the necessary business intelligence. That way you’ll always know who’s offering what in your market and how well you stack up against them before you offer new products.Looking for dropshipping software? Check out our catalogue. NOTE: This article is intended to inform our readers about business-related concerns in the UK. It is in no way intended to provide legal advice or to endorse a specific course of action. For advice on your specific situation, consult your legal counsel. ## About the author ### David Jani David is a Content Analyst for the UK, providing key insights into tech, software and business trends for SMEs. Cardiff University graduate. 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