Dropshipping in the UAE – explained
Want to get selling in the world of e-commerce but are lacking in inventory and capital? Dropshipping could be for you. In this article, we will explore everything you need to know about this simple and rewarding business model, including how it works, what you will need and how much it will cost. We will cover the following topics:
- Dropshipping in the UAE – market opportunity
- How dropshipping works
- How to start a dropshipping business in the UAE
- Do I need a licence to start a dropshipping business in the UAE?
- Cost of starting a dropshipping business in the UAE
- Is dropshipping legal in the UAE?
- Why choose SPC Free Zone?
Dropshipping in the UAE – market opportunity
It’s no secret that the e-commerce market has exploded in the UAE in the past few years. Combining an unrivalled location, unparalleled infrastructure and a whole host of tax incentives for burgeoning businesses, it’s little wonder why the region is becoming a destination of choice for dropshipping. Those looking to set up a dropshipping business are poised to capture the UAE’s many market opportunities, such as:
- A digital-first nation
The UAE is one of the most digital-friendly countries in the world. Almost 100% of the population is online and uses the internet for browsing, shopping and social media. What’s more, according to reports published by EZDubai and Euromonitor International, 75% of UAE consumers prefer e-commerce.
- A fast-growing e-commerce market
The pandemic accelerated e-commerce across the globe, and nowhere more so than in the UAE. The UAE e-commerce market is expected to grow to USD 8 billion by 2025. That’s a huge pool of captive customers for dropshipping businesses to tap into.
- A business-friendly eco-system
The UAE offers a string of tax incentives and tax holidays that can help dropshipping entrepreneurs increase their profit margins. Dropshipping businesses only need to worry about VAT. In the UAE, they are not subject to income tax, property tax or corporate taxes.
- Impressive logistics network
Boasting a strategic location between Asia and Europe, the UAE is the ideal base for conducting business between East and West. Home to the world’s busiest airport (Dubai International Airport), a highly efficient railway network and an array of highway interchanges, you can ensure products are delivered to customers on time, every time.
How dropshipping works
Dropshipping is a retail strategy that enables entrepreneurs to capitalise on the booming e-commerce market with little to no upfront investment. Essentially, a dropshipping business purchases products from a third-party supplier or wholesaler as customers make an order. The third-party supplier takes care of shipping and logistics, while the dropseller only needs to worry about sourcing products for the best value, attracting customers and driving the highest profit margins.
The process can be broken down into the following simple steps:
Step 1: The shopper places an order on your dropshipping website
Step 2: You process the order and forward it to your supplier
Step 3: Your supplier receives the order
Step 4: Your supplier ships the order
Step 5: Your customer receives the products
Let’s dive into a few of the advantages of starting up a dropshipping business.
- Low barriers to entry
You don’t need business experience or capital to get going.
- No warehouse or office costs
The wholesaler takes care of inventory and you can run the business from anywhere.
- Scalable and flexible business model
Infrastructure costs don’t accelerate as you grow and you can adjust your strategy as you go.
- More marketing spend
Without soaring infrastructure costs, you can allocate more budget to attracting new customers, in turn growing your business.
How to start a dropshipping business in the UAE
Setting up a dropshipping business in the UAE is easier than you think, providing you’ve jumped through the right hoops. We’ve broken down the process of starting a dropshipping business in the UAE into four simple steps:
Step 1: Decide what you will sell
Pick your niche. To drive the biggest profit margins and ensure greater business success, sell unique products that target a specific demographic. This will require extensive research, but spending a little more time at this stage will pay off in the end. Explore the competition and work out what your customers are looking for. After all, if they can find it in a shopping mall, why would they come to you?
Step 2: Select your sources
Spend time researching wholesalers that offer the best value products. Making savings here can drive higher margins. You don’t need to limit yourself to one supplier either, as many dropshipping businesses work with multiple suppliers. As well as seeking out value, you should also make sure your suppliers are reliable. They are ultimately responsible for inventory and shipping, and if these are found lacking your reputation and customer base will suffer.
Step 3: Choose where to sell your products
When it comes to selling, you have two options: online and social media. There are a wide variety of e-commerce platforms available, such as Shopify and Alibaba. However, it’s important to choose one that aligns with your goals. How comprehensive are the platform’s capabilities? How much visibility will your platform get? Is the platform user-friendly? These are all questions that you should be asking throughout the process.
Step 4: Address legal requirements
To launch your business, you’ll need to settle up a few legal issues, such as business licences and taxes. You should also ensure that your suppliers meet specific criteria to ensure you avoid common issues, such as counterfeit.
There’s no need to do it all alone, though. Our friendly business advisors can help you navigate setting up a dropshipping business in SPC Free Zone to ensure a seamless start to success.
Do I need a licence to start a dropshipping business in the UAE?
Yes, all dropshipping businesses in the UAE require an e-trader licence.
Cost of starting a dropshipping business in the UAE
The cost of starting a dropshipping business in the UAE starts from AED 5,750. However, there are numerous considerations you will need to take into account when starting your dropshipping business, such as visa requirements and office space.
At SPC Free Zone, you can start a dropshipping business in the UAE for as little as AED 5,750. This setup package includes coworking spaces with no visa. If you wish to add visas, the price rises to AED 9,250.
Is dropshipping legal in the UAE?
Yes, dropshipping is legal in the UAE but according to Article 6 of 2011, you will need to obtain a trade licence to set up your business legally. Without this, you will be liable for financial (and administrative) penalties under Article 335 of the Commercial Companies Law (CCL).
Why chose SPC Free Zone?
SPC Free Zone offers quick and flexible business setup in the UAE. Located in the heart of Sharjah with immigration services onsite, entrepreneurs can receive their e-commerce license UAE in just two hours. Choose from over 1,500 business activities with up to 20 visas under one trade licence. Expand your business with competitive incentives such as 100% foreign ownership with zero paid-up capital and a dual licence option that offers both mainland and free zone on the same licence. Build a business that thrives, with help from our business advisors.
Interested in starting and expanding your dropshipping business in the UAE? Get in touch with SPC Free Zone to find out more.
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