Are you thinking of setting up an online store? Dropshipping has become a common way for aspiring business owners to delve into the eCommerce space without having to deal with the demands of holding stock for their customers.

What Is Dropshipping?

Dropshipping is a business model which involves three main parties:

  1. The seller
  2. The manufacturer
  3. The customer

The key difference between a Dropshipping Arrangement and an ordinary eCommerce store is that the seller doesn’t physically hold or see the goods that their customers purchase through the seller’s online store.

Instead, the manufacturer directly ships the goods to the customer once they make an order with the Seller.

If you’re thinking of starting a dropshipping business, it’s important to get a Dropshipping Agreement in place.

What Is A Dropshipping Agreement?

A Dropshipping Agreement is a legally binding contract between a seller and manufacturer of goods. If you’re a seller who wants to engage a manufacturer to help support your business, you must get a Dropshipping Agreement drafted!

A Dropshipping Agreement is an important contract setting out the key terms of the arrangement between the seller and manufacturer, including their respective rights and responsibilities.

A Dropshipping Agreement is customisable and can be drafted on terms that protect the interests of the seller, the manufacturer and the customer.

What Should I Include In A Dropshipping Agreement?

If you’re looking to get a Dropshipping Agreement drafted, these are some of the main areas of your agreement you must consider.

Prices

If you’re a seller, you need to generate profit to have a successful business.

This is why the price of the goods you’re selling through your online store is an important consideration.

The wholesale price of the goods you’re purchasing from the manufacturer must be at a level low enough to allow you to generate profit.

Delivery Standards

As a seller in a Dropshipping Arrangement, you will have limited control over the supply chain, as you are not directly in control of when and how the goods are shipped.

Having strong terms regarding shipping, handling and delivery is essential to ensure customer satisfaction and limit the risk of things going wrong in the shipping process. It will also provide you with the option to take action against the manufacturer in the event that things do go wrong.

Defects Rectification

What happens if a customer is unsatisfied with a product?

If a customer wishes to return or exchange their product, there must be policies in place to cover this.

If a manufacturer doesn’t have a returns policy, the seller will be held responsible for replacing a defective product.

Dropshipping can be risky if an effective agreement is not in place between the Manufacturer and Seller. This risk is somewhat unique to dropshipping, compared to the usual online shop business set up. This is because if a seller manufactures their own goods or has a warehouse where they store their goods to be sold, they have the opportunity to personally check the goods for quality before they are shipped to their customers.

It’s always important to ensure a manufacturer either provides a warranty on their products or has a comprehensive Returns & Exchange policy to resolve customer complaints of defective products.

Need A Dropshipping Agreement?

Dropshipping is a complex arrangement and it’s important to get a Dropshipping Agreement drafted if you’re looking to start up this type of business. We can answer any questions you have about dropshipping and draft a dropshipping Agreement tailored to your business. If you’re ready to get started feel free to get in touch at team@sprintlaw.com.au or give us a call on 1800 730 617.

About Sprintlaw

Sprintlaw is a new type of law firm that operates completely online and on a fixed-fee basis. We’re on a mission to make quality legal services faster, simpler and more affordable for small business owners and entrepreneurs.

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