Is Dropshipping Illegal? | 5 Important Legal Facts You Need To Know To Protect Your Business In 2024

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Dropshipping is not illegal because it is a legitimate and popular order fulfillment business model used in many countries. However, dropshippers need to observe certain rules and policies to avoid getting into legal issues or other concerns. According to the Shopify Help Center, dropshipping laws and regulations “depend on the region where your store is located and the regions where you sell.”

For example, you may have to file for an LLC or corporation with the secretary of state, obtain a sales tax ID, get business insurance, and observe copyright laws. Your online store also needs to have a terms and conditions page to set clear expectations with your customers as they use your service and purchase your products.

Today, the dropshipping industry continues to grow across the world. A report by Oberlo indicates that experts expect the global market forecast for dropshipping to hit $301.11 billion in 2024. It is also worth noting that dropshipping is not a get-rich-quick scheme. It takes time and research to succeed. You’ll have to stay up-to-date with the best practices and the latest market changes to grow your company and avoid legal hassles.

In this feature, we’ll discuss 5 important facts to help protect your dropshipping business, along with the pros, cons, and risks of the business model. We also tell you why we think lead generation is a more stable, sustainable, and profitable online business model than dropshipping.

Dropshipping Pros and Cons

Pros

A legal business model with a growing market size

Easy to establish from scratch

Low overhead costs and minimal risks

Faster way to conduct product and market testing

No need to maintain physical inventory

Scalability and an opportunity to diversify your income

Cons

Competitive market and easy to duplicate

Low-profit margins

Increasing costs of paid advertising

Little to no control over product quality and branding

Not sustainable long term

The possibilities of defective products and delayed shipping

Does Dropshipping Have A High Success Rate?

Dropshipping does not have a high success rate with only about 10% to 20% of businesses achieving success in the first year. With its low overhead costs and low barrier to entry, the industry has become competitive and saturated. Also, numerous new businesses are entering the market every day by copying successful dropshipping models. They duplicate winning products in various niches and even offer them at lower prices to attract buyers and gain competitive advantage. Moreover, the rising costs of paid ads can make dropshipping more challenging.

According to BlueCart, dropshippers make a profit of 20% to 30% from each sale, which translates to $1,000 to $5,000 per month. Entrepreneurs aiming to generate continuous profit need to stay updated with industry trends and become better marketers.

To increase your chances of success, you should also develop digital business skills such as:

✅ basic website design
✅ content creation (copywriting, graphic design, video editing)
✅ customer service
✅ online product and market research
✅ social media advertising

Is Dropshipping High-Risk?

Dropshipping is not high risk because it is an easy business to start and the industry continues to grow. According to Precedence Research, the global market size is expected to reach $1,921.24 billion in 2032.

However, there are some ‘gray areas’ you need to be aware of to protect yourself legally. Case in point, you need to work with legitimate dropshipping suppliers that sell quality products and can efficiently handle your order fulfillment needs. Your dropshipping business heavily relies on the performance of your chosen third-party providers. Make sure you’re not supporting counterfeit products and prohibited items. That way, you can avoid legal risks that may lead to fines, penalties, or your store’s suspension on dropshipping platforms such as Amazon or Shopify.

Conclusion: Why Local Lead Generation Is A Better Online Business Model Than Dropshipping In 2024

Dropshipping is a legal online business model but I personally prefer local lead generation. As someone who has created 6-figure businesses with Amazon FBA, Shopify dropshipping & affiliate marketing, I say lead generation is more scalable and profitable above them all.
 
With dropshipping, you are technically a middleman making money as customers purchase your suppliers’ goods. While finding winning products can boost your profits, the market is extremely competitive with many dropshippers riding on the same trend.

In comparison, you won’t have to sell any products or experience fierce competition daily with lead gen. Your work involves building a business site from scratch and then boosting its search engine presence so it attracts organic traffic. Once your site achieves good online ranking, you own a digital real estate property you can offer for rent. Local entrepreneurs would be more than willing to pay you each month as you deliver leads for their businesses.

conclusion-lead-gen-maps

To illustrate, I earn $2,000 each month from my Grand Rapids tree care website. I spent 10 hours creating this site back in 2015 and spent about $500. It has since achieved top ranking on Google and continues to enjoy prime position over the years with little maintenance work on my end. Plus building and scaling multiple sites is always possible. So today, I make around $52,000 each month from owning several sites that I rent out to local businesses.

Lead generation is the best online business in 2024 since it’s not as competitive or saturated as the dropshipping industry. For anyone interested, get in touch with us and check out our  lead generation coaching program . We’ll teach you our repeatable 3-step process so you can start earning passive income in no time.

Ippei Kanehara

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Ippei Kanehara

Founder/CEO

$52K per month providing lead generation services to small businesses

Ippei.com is for digital hustlers, industry leaders and online business owners.

His #1 online business recommendation in 2024, is to build your own lead generation business.