The United Arab Emirates (UAE) is one of the world’s largest e-commerce markets. According to market analysis, the UAE e-commerce market recorded revenue of US$8.5 billion in 2021. As new markets emerge, these numbers will continue to grow over the years. Since UAE continues to be a leading business and e-commerce destination in the region and is still one of the most digital-friendly countries, starting a dropshipping business in the UAE can seem like an ideal investment.
However, before you start dropshipping in UAE, there are several things you need to know. Continue reading and learn more about dropshipping and how to start your business.
What is Dropshipping?
Dropshipping is an online business model that allows traders or suppliers to ship their products directly from a third party to the buyers. In dropshipping, the third party can be a giant retailer, wholesaler, or manufacturer.
A dropshipping supplier can source products at a good value from third parties and ship to buyers at a profit. In this business model, the wholesaler or retailer from where the products are obtained is responsible for the products’ logistics and shipping.
The dropshipper is only responsible for finding the best products. Since a dropshipper does not have to buy or store products or have a physical shop, you can start it with little to no capital.
If you want to start dropshipping in UAE, you can import or export products to buyers. Since imports and exports in the UAE are regulated by the Department of Economic Development (DED), you must learn the requirements and the trade licences you need to start your business.
Is Dropshipping Legal in UAE?
Dropshipping is legal in the UAE. However, before starting the business, there are several things that you must consider. First, get to know the mission or purpose of your business. Secondly, you have to determine where you will do your business.
While you can start a dropshipping business in the UAE and obtain full ownership, where you start the business will affect how much money you need to kick off. Like any other business in the UAE, you have to register your dropshipping business.
You will need a visa and a trading or commercial licence to have a legal dropshipping business in the UAE. Once you meet all regulations, you can start marketing and selling products to consumers in the UAE.
How to Start a Dropshipping Business in UAE
There are several steps you need to know before dropshipping in the UAE. To ensure UAE remains the centre of all e-commerce activities, the DED outlines and updates several laws that all players in the e-commerce industry have to follow.
Talk to the right professionals and get help to start a business in the UAE. To avoid inconveniences when launching your dropshipping brands and ensure success, here is what you need to know about dropshipping in UAE.
1. Obtain a Trade Licence
According to the DED, you must get a trading licence before starting a dropshipping business in the UAE. Since the new Federal Commercial Companies Laws allow foreigners to obtain 100& ownership of their business, your shares are not limited, and you can register and run the business as a sole proprietor.
To get a trade licence for your dropshipping business, visit the DED website, register your business and get a licence. Follow the steps on the website and submit all the details and documents required.
These details include your trade name, project details, email address, and more. Once you submit all the details, you will have to pay a licensing fee of $4,000 or more.
Without a correct trading licence, you can pay anything from $1,500 to $15,000 in fines. Remember, you may also have to set up a bank account. Once you pay the licensing fee, the department will process the licence and send it electronically within two to three weeks.
Use a cost calculator to determine how much the licence can cost you so that you can easily budget for it.
2. Choose Your Niche
Once you register your business, the next step is to determine the products you want to sell. To ensure success and have a ready market, it may be best to sell highly on-demand products or unique products that will attract more attention.
Remember, since the e-commerce business is booming in the UAE, there’s a lot of completion. Therefore, to have a competitive advantage, your business has to stand out. For example, you can choose to import something unique to your country or other countries.
Since such items are rare in the UAE, you may have a good market. Before importing or selling any products in the UAE, do some market research and determine what will make your business stand out.
3. Choose a Supplier
Now that you know what to sell, next is finding the best dropshipping suppliers or manufacturers with quality products at the best price. It would help if you were very keen on where you get the products. Check online marketplaces and directories for suppliers that best suit your needs.
Since the supplier you choose will influence your buyer’s habits, choose a supplier that will provide quality products. Remember, customers value quality, quick delivery, and good customer service.
Therefore, to stay in business and make good profits, avoid any mistakes, especially regarding product quality and delivery times. Note that as a dropshipper, you can have several dropshipping suppliers in UAE and suppliers from different countries.
4. Create Your Store
Since a dropshipping business is entirely online, you must build a website or use a dropshipping platform. If you know how to build a website and can handle online marketing, you can cut the platform fees and build a website. However, you need to work with SEO experts and have a well-optimized website to remain visible.
Additionally, since online marketing can be challenging, you may consider hiring export markets, which will also cost you more. To avoid this, it may be best to work with a dropshipping platform.
Some platforms offer free services for startup dropshipping companies and discounted rates, which can help you save money. Choose a plan that suits your budget and offers the services you need.
Use other social media platforms for marketing your business and establishing social networks. Dropshipping platforms can help you set up a good profile and access their networks, where you can market your products and get customers.
Types of Dropshipping Business
You can choose to venture into several types of dropshipping businesses. Here are some of the standard dropshipping provisions.
Product creation allows a dropshipper to bundle up different products and sell them as a single product. This arrangement requires the seller to think critically about the best products to bundle up and which market to sell.
This type of business can allow you to create unique products with little competition. However, since you have to ship several products, consider bundling up products from a single source to save money.
This is the most common form of dropshipping. With product reselling, a dropshipper finds products from different sources and sells them on the dropshipping platform or website.
Product reselling is ideal for dropshippers who are experts in their demographic and are also good at marketing. However, since you have to pay for the products upfront, you need some good capital to become a reseller.
A print-on-demand option can be an ideal dropshipping business if you want to work with branded products such as printed mugs or t-shirts with images or texts. This type of business allows creators to upload images or tests to a dropshipper.
When a customer orders a branded product, the dropshipper can print the image and ship it. Since several branded products are sold, and the industry is very competitive, you need to have good marketing skills.
Also, you should never compromise on the quality of the prints.
This provides dropshipping services to retailers who have no online presence. The dropshipper acts as a middle man between the retailer and their customers and promotes their products.
Once a dropshipper makes a sale, the retailer can ship the product directly to the customer. A business extension is different from reselling because the dropshipper doesn’t have to buy the products and will have a closer relationship with the supplier.
Advantages of Dropshipping
Dropshipping is becoming very popular in the UAE. This may be due to the booming e-commerce business and the rising number of internet users in the region. Here are some of the advantages of dropshipping in the UAE.
UAE Has a Thriving Economy
The e-commerce industry in the UAE is rapidly growing. Additionally, the region is very internet friendly and has over 9.94 million internet users. As more people continue buying and ordering products online, you can expect the industry to thrive.
If you are ready to navigate the registration process and budget for applicable tax, you can benefit from the UAE’s thriving economy and run a successful business.
It Doesn’t Require Much Capital
Dropshipping is mainly an online business. Depending on the dropshipping business you choose to start, you may not need an office, store, or warehouse.
Once you pay for the licence, a website, or dropshipping platform costs, you can start marketing and selling products immediately.
Since you do not have to manage the products, handle shipping, or any other logistics, you will not need any finances to manage the business. Additionally, you can run the business from any location across the globe.
Dropshipping Allows Product Variety
Dropshippers don’t need to have an inventory. This allows them to sell various products with no limitations. Once you set up your business, you can sell shoes, clothes, jewellery, skin care products, and more.
This also allows customers to buy what they need in one place. As a middleman, you will not be confined to a specific niche or have a warehouse. All you need is to identify the right market for the products and sell them.
No Logistics and Shipping
Dropshippers do not handle shipping, distribution storage, or product management. Since you do not have to invest much money to start the business, you can generate much profit.
The money you make will depend on your marketing efforts and how you generally manage the business. You can have a thriving business if you have good and reliable suppliers and excellent advertising skills.
Disadvantages of Dropshipping in UAE
Though dropshipping in this region has so many benefits, there are some setbacks that one can encounter. Here are some of these cons.
The Industry is Very Competitive
An almost zero startup capital also means more competition. Since anyone paying for the licence can start a dropshipping business, you can expect the market to be swollen with several dropshippers.
To ensure success, do thorough market research and choose to sell unique products or a niche that isn’t highly saturated.
Zero Control Over the Supply Chain
Though not handling storage or shipping minimizes your costs, you will have no control over delivery times or conditions of delivery. However, since a customer orders a product from your website or platform, you remain the face of the experience.
This means that zero delays in delivery, poor packing, low-quality products, and more can make your business look bad. If a customer is unhappy with the experience, their negative reviews can ruin your reputation, and you will lose business.
Slim Profit Margins
Profit margins in dropshipping are lower than in traditional e-commerce. This is because dropshippers do not buy products in bulk.
To cover this margin, you need to be very good at advertising and work with suppliers that make customer satisfaction their priority. Remember, to make good money, work with reliable suppliers.
Use This Guide to Start Dropshipping in UAE
Now that you know how to start dropshipping in UAE, the next step is choosing the right business consultant. Working with the right consultant can make the process easier for you. With several free zones to choose from, the right consultant can help you make the right decisions.
At DUQE, we will help you realize your dream and ensure you get the licence you need to begin your business. Contact us today and get help in setting up your dropshipping business.