How to Start Shopify Dropshipping in UAE in 2024
Last Updated | February 27, 2024
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The United Arab Emirates remains one of the top business and eCommerce destinations in the world. This is because the region has experienced continuous growth in eCommerce over the past decade, especially related to Shopify dropshipping in the UAE. This is exactly why higher authorities are adopting various initiatives to further boost eCommerce development activities in the country.
The Department of Economic Development, UAE, recently updated certain laws like new regulations for the individuals and businesses willing to initiate dropshipping setups. Among them, the need to legally obtain licenses to operate a business in Dubai tops the list.
The introduction of license requirements has sparked a new debate in the country’s eCommerce industry because the regulations for trade licenses may vary for different online activities.
In light of several merchants wondering about the prospects of various online activities in the country, we will exclusively cover the future of this business model in UAE in this blog. We’ll also talk about the legal requirements for merchants to obtain trade licenses in the UAE.
What is Drop Shipping?
Dropshipping is a business model in which dropshippers sell retail items to buyers without ever having an inventory. They have a 3rd party vendor who directly ships the items to the buyer. These 3rd part vendors can be anyone from manufacturers to wholesalers and giant retailers.
What makes it so successful is the dropshippers’ ability to source products from the best vendors.
It is an attractive online business because it does not require any upfront investment. It’s just like taking a retail order and getting it delivered from the wholesaler directly while keeping your commission.
The wholesaler will be solely responsible for shipping and logistics of the inventory. Merchants, on the other hand, have the responsibility of finding the best value source for their products and earning profits.
What Is the Role of a Dropshipper?
Instead of being directly involved in the trading process, dropshippers work as middlemen in the online shopping world. They must manage online storefronts with an orderly variety of products, but unlike traditional merchants, they do not keep any inventory.
Instead, when a customer places an order, the merchant sends it to a third-party supplier, who then packages and ships the product directly to the customer.
How to Start Dropshipping in UAE?
Step #1 – Choose Your Business
Look for specialty items. You must ascertain the goods that the expats are willing to purchase. These might be regional specialties or even textiles, cuisine, handicrafts, or jewelry unique to the nation.
Step #2 – Legal Requirements
You need to obtain licenses and permits. Generally, you must get a trade license from the Department of Economic Development (DED) or the appropriate free zone authorities.
Additionally, if your annual turnover exceeds AED 375,000, you’ll need to register for Value Added Tax (VAT). However, the specific requirements may vary depending on your business structure and location.
Step #3 – Find Reliable Suppliers
It is important to find trustworthy suppliers in Dubai as they will take charge of transportation and product inventory.
Step #4 – Create a Website
Your online store serves as your virtual storefront, and its design and functionality play a crucial role in customer experience. Therefore, creating a user-friendly eCommerce platform is important. This step also involves mentioning a clear product description, high-quality visuals, and a secure checkout process to instill trust and encourage conversions.
Step #5 – Setup a Bank Account
Consider partnering with a bank that understands the intricacies of online businesses and can provide valuable financial guidance. You can also choose a business bank account with features geared to eCommerce merchants, such as online banking, secure payment gateways, and low transaction costs.
Step #6 – Set Your Pricing and Shipping Rates
Dropshippers should conduct competitor analysis to understand prevailing pricing trends and ensure their offerings. However, determining the product pricing involves factoring in your supplier costs, and the desired profit margin should be the focus point.
Step #7 – Market Your Online Store
Once your online store is ready and running, the next step is to attract potential customers. This is where digital marketing channels like social media marketing, search engine optimization (SEO), and pay-per-click (PPC) advertising take the lead.
Is a Trading License Necessary for Shopify Dropshipping in the UAE/Dubai?
According to Article 6 of 2011, any foreign company wishing to perform commercial activity in the UAE must get a trade license. Hence, it is necessary to get a license to establish a firm ground for your business. Or else you may be subjected to hefty financial and administrative penalties.
A similar case is the one with Shopify Dropshipping in the UAE. The region has a strict policy dictating all sorts of businesses involved in any commercial activities.
Do I Require a Dropshipping License in the UAE?
If you are looking to start Shopify Dropshipping in UAE, you probably should apply and obtain a valid trade license. Obtaining a license is significant whether you are located inside the country or not, what size of business you will run, or what products you will sell.
Cost of Starting a Dropshipping Business in the UAE
The United Arab Emirates offers a vibrant and supportive environment for aspiring entrepreneurs, particularly in eCommerce.
- Business License: The primary expense is acquiring a trade license. Depending on your chosen business structure and location, this can range from AED 5,750 for an e-trader license to AED 12,500 for a mainland license.
- Visa Fees (if applicable): If you’re not a citizen or resident, you might require a specific visa to operate your business. Visa fees can vary depending on the type and validity period.
- Website Development: Building a user-friendly eCommerce website can cost anywhere from AED 2,000 for a basic setup to AED 10,000 or more for a custom design with advanced features.
- Domain Name and Hosting: Securing a catchy domain name typically costs around AED 100 per year, while web hosting plans start from AED 50 per month.
- Marketing and Advertising: Keep a budget for search engine optimization (SEO), marketing activities like social media advertising, and influencer collaborations.
- Payment Gateway Fees: Secure payment gateways ensure smooth transactions and customer trust. Popular options like Stripe and PayPal charge transaction fees, usually a percentage of the sale amount.
- Bank Account Fees: Business bank accounts often incur monthly maintenance charges and transaction fees.
- Product Costs and Shipping: Your profit margin directly depends on the cost of products sourced from your suppliers and the shipping rates you negotiate.
The figures mentioned above are estimates, and the actual costs can vary based on your specific choices and business needs. Thoroughly research each aspect and create a realistic budget to ensure a smooth launch and sustainable operation of your business.
Pros of Dropshipping in the UAE for Locals
Dropshipping in itself is a promising and profit-making online activity. However, it becomes even more profitable if you are a local. Since you would have a better understanding of trends, traditions, economics, and buying preferences.
Psychology of Customers
In eCommerce, there’s a saying that each customer is unique, which is true to a certain extent. This is because there are general relatable characteristics of people belonging to one group or region.
Therefore, starting this business will lead to a better understanding of people’s psychology. Something highly beneficial to work on is sourcing better-valued and high-demand products, thus increasing your chances of profitability.
Local Shopping Trends
Apart from knowing psychology, there are higher chances of understanding better shopping trends and buyer preferences.
As we know, the key to success in the dropshipping business is your ability to source the right products at the best value.
In reality, sourcing the best value products isn’t the easiest task, especially if you don’t know the market preferences. In this regard, your market understanding and awareness of buyers’ preferences will be great.
Lastly, as a local UAE/Dubai resident, you will be better versed with the legal requirements, like a trade license. Most foreigners fail to understand the complexities of the legal requirement to carry out business in a foreign land.
On the other hand, as a local, you would have first-hand knowledge and access to all the legal issues, thus better positioned to create a legal business.
Why Do Dropshipping Companies In the UAE Fail?
One reason why most drop shippers fail is that they are promoting their stores and items on the wrong platform. Facebook Ads, Google Adwords, and Bing Ads are some of the most well-known ways to advertise your goods.
The fact that a UAE dropshipping company handles its stores poorly is another factor in its failure. This business model doesn’t end with the shipment of the customer’s item. Until they are pleased with the quality of your offerings, you will still need to stay in touch with them until they are fully satisfied.
Local suppliers are another reason why the companies fail to succeed. People are already paying a good amount to buy their favorite goods, so they expect quality assurance. Your business will suffer if your suppliers aren’t good at sourcing quality products.
Shopify Dropshipping in UAE FAQs
Is Dropshipping Allowed in the UAE?
Yes, dropshipping is allowed in the UAE. However, you must have a valid trade license to operate your business legally.
Is Shopify Allowed in UAE?
Yes, Shopify is allowed and is one of the most popular eCommerce platforms for dropshipping.
How Do I Start Dropshipping on Shopify in UAE?
Start with research to choose a profitable niche. Then, set up a Shopify store and choose a pricing plan. You can customize your store after that and register for a trade license.