Wholesale is an outdated business model in many ways. This is mainly because it requires a lot of overhead and lots of storage capacity. It can also cause major problems if stock doesn’t move quickly enough.
An efficient business model is gaining momentum. It aims to address all these issues while increasing profits and reducing waste.
Dropshipping is what it’s called.
Dropshipping is when a vendor fulfils an order on behalf of a customer, either directly or through a third party.
The supplier receives the sales order directly. He then fulfills the order and ships the product to the customer.
This prevents vendors from having to keep their own inventory.
Dropshipping has many great benefits, including:
- Lower overhead costs
- Easy business model testing
- Rapid scaling
- Entry requirements are low
- There are no brick-and-mortar locations.
The best thing about the business model is its flexibility. It can be used for any product or niche.
Dropshipping is a popular method that allows you to build your own online store.
You can leverage strong suppliers and flexible shipping partners to create a business with enough margin to make profit without having to carry any inventory.
How to Start Dropshipping in Canada (A Step by Step guide)
Dropshipping is easy to start in Canada. You don’t need any capital to test the model or make your first sale.
Remember, before we start, you must get to your first sale quickly. Don’t waste your time, attention, or money on items that don’t make you happy.
Here are some ways to get started.
Match Supply and Demand
The easy part of finding suppliers and setting up an eCommerce dropshipping store is done. But if you don’t have any customers to serve, the entire project will be a waste.
Dropshipping is extremely easy to get into and almost everyone has access to dropshippers advertising online. This means that there are two options: find untapped demand, better service, or supply a product that buyers might not know about.
You must first determine if buyers are being served poorly (best case), or not at all (no options for stores, few choices for colors or sizes).
You need to find an area that you believe you can win and make sales.
We won’t get into the details of how to do it as this is an individual topic. However, we want to hear from customers or users who are looking for blue hats to purchase in St. Johns and have trouble finding them.
Join the conversation in forums, Reddit and RedFlagDeals.
To get the real data you need about what people are searching, use tools like Google Keyword Planner, SEMRush, Ahrefs, and YouTube Keyword Planner to see search volume across Google and Amazon.
Once you have identified the unmet demand, you will need to locate a supplier. This section is.
You can also work with suppliers to keep abreast of their latest products.
Be aware that there may be others doing the same thing, but if you act quickly you might be able to seize your share of the market.
You can start small. For example, I will try to sell the new and innovative BBQ accessory for anyone with a cottage in Great Lakes.
Canada is small, but you might only want to concentrate on one small geographical area and direct your efforts there until you get traction.
This is a huge step, and there are many things going on. However, you must get the above right, and be sure that you can fit into both the demand and supply equation. Otherwise, all the effort that follows will be a waste.
Summary: Do not try to be all things to everyone. A 1000-item catalog is not helpful. Instead, focus on a targeted, targeted catalog that is based on as much data and testing (as possible).
To get started, I recommend keeping your catalog small and adding complementary products as you grow.
Do a Profit Margin Exercise
Once you have a good idea of what products you want to sell, it is time to determine the margins and profitability of those products.
This is where you will need to conduct a pricing exercise. It should be fairly straightforward.
Know the price of the product and the shipping cost, including the flat rate or the postal code/province based from your supplier.
Take a look at the market to get an idea of what your competitors are selling.
Look for complementary products if there aren’t any competitors.
This is where you’ll need to be resourceful – Take a look at the eBay.ca sold listings of your product or something similar.
Look at Kijiji.ca
To get an idea of the price you can sell your product, you will need to dig.
Once you have your store up and running, you will need to keep testing the pricing. You can increase or decrease the price as needed. However, you want to be certain that your products are financially sound before you start selling.
If you think you know the price the product will sell for, let’s say $19.99, and your supplier charges $11.99 to ship the product, then you have $8 or a 40% profit margin.
You will now need to spend $8 on marketing and overhead, and still have some money for yourself.
A margin of 40% on a product should be healthy. It should allow you to cover your expenses and still have some money if you sell decent volumes.
Although a 10% margin for a product costing $19.99 might not be enough to make a profit, a 10% margin for a product that is $799.99 could still be acceptable.
Margins can be small or large but the goal is to pay your expenses while still having money for yourself.
Before you move on, spend some time getting to know the numbers and becoming comfortable with your current position.
Although it’s nice to make sales, if your expenses are not paid on time, that defeats the point of having a dropshipping business.
Forecasting the sales of your product is more difficult. We recommend that you do some research and UNDERESTIMAT when forecasting how many you will sell.
This should give an idea of where you need to go.
It is highly recommended that you request samples from any suppliers you have identified.
Please note the shipping time.
Take a look at the packaging.
Verify the product’s quality.
It is important to test it and make sure it works as it was intended.
If you are serious about your business, most suppliers will ask you to pay for samples.
To find the right product for you, you may need to look at multiple suppliers.
Remember that unhappy customers will request a refund if the product is not good.
It is better to offer something of quality.
Get High Quality Product Photos
Your supplier might have photos ready for you, but there are two issues I’ve seen before.
The first is the poor quality of the images.
You can’t sell an eCommerce store if you don’t have pictures.
Second, it is possible that other smart people like you have also found the same supplier. They will use the photos provided by the supplier.
This is a simple step that will allow you to differentiate your store and position yourselves differently.
Professional pictures require creativity.
This DIY guide will help you get up and running in under 50 minutes.
Upwork is a great place to find someone to edit your photos after the fact.
Register a domain to create an eCommerce Store
Now that you have your products selected, your suppliers vetted and prices set, and your images in hand, it’s time to start setting up your eCommerce store.
Drag and drop web builders are very popular, and easy to use.
Take a look at Wix and Weebly.
Each platform makes buying a domain and setting up a website easy.
You can also install Gmail plugins. Once you have purchased your domain, it is easy to set up an email account for your store.
You have many options to build your online store, including platforms like Square or Shopify.
Shopify and BigCommerce are strong competitors in this space.
After you have set up your eCommerce website, create product pages, upload product images, and write high-quality descriptions for each product.
Your audience should be able to access as much information as possible.
This will allow you to answer questions in one email and ensure that the customer knows what the product is (sizes, colours, etc.). This may reduce the chance of returning the product.
Sidebar: Don’t spend a lot on a logo or the design of your website.
We are after perfection, not completion.
Squarespace Canada offers some stunning templates.
You can change your logo and design over time, even after your site gains traction.
If you need a logo, go to Fiverr. However, I recommend that you use a simple logo that your website builder can produce or a free creator.
Execute Your Marketing Strategy
This step and Step 1 are the most difficult parts of setting up your store and getting it running.
It’s easy to set up a store these days. However, if you don’t have anyone to help you sell anything, it won’t be possible.
It’s similar to hoping that you win the lottery by pushing a store online.
To attract visitors to your website, you need to have an active plan.
Create a solid marketing strategy – Before you launch your store, you need to generate buzz about it, build an organic following, and begin collecting emails.
This way, when you launch, you will have a solid foundation to build on.
Although this depends on many factors, the main point is that you should start marketing as soon as possible and before your store is live.
Once your site is live, share it with friends and ask them for more.
You can share your venture with any of the online communities that you are a part of.
Zero in on:
- Google Ads Paid
- Paid Facebook Ads/any other social media platform
- Social media platforms: Building an organic following
- SEO for organic traffic
Although you will need to spend money, you can take it slow and start small ($50) using Google or other social media platforms.
Keep testing, tweaking, and keep iterating until you get that sale.
Dropshipping from China into Canada
Aliexpress is a great choice for Canadian companies looking to work with Chinese suppliers.
This sister company to Chinese giant Alibaba makes dropshipping from China simple.
Canadian dropshippers have excellent product margins because many companies will sell goods at pennies per dollar.
You place an order with Aliexpress when a customer purchases an item from your shop. The seller then ships the item directly to your customer.
Vendors who sell more products are typically offered better rates. As you scale up, your margins will increase.
Dropshipping with a Chinese company may require you to pay customs.
Canada taxes on imports and exports, and certain products.
Although customs costs may sometimes fall on the buyer or seller, it is a good idea for a customer to know what they should expect.
Surprise charges are not something anyone likes, especially after purchasing an item.
Uncertainty about the process and the possible extra cost could result in a decrease in repeat sales.
It will be easier to communicate with customers if you are able to understand your product and any customs costs (if any).
It is advisable that you find a reliable Customs broker to help you navigate the complexities of customs.
The likelihood of penalties being imposed on a broker who is an expert in Customs regulations will be reduced.
The Canadian Border Services Agency has an extensive list of licensed and reputable Customs brokers to help you ensure that you are following Custom laws and get your product to your clients as quickly as possible.
You should note any customs charges that may be incurred upon delivery.
There are many benefits to being a China-based dropshipper.
- Access to thousands low-cost products
- There are many suppliers
- It is easier to customize products, as many Chinese suppliers offer greater variety of styles and colours.
- China does not have import restrictions or duties
- Scale easily
There are some downsides to using China’s suppliers. Canadian businesses should be aware of these:
- Delivery costs are high
- No quality assurance
- Canadian import restrictions for China
- Product mislabeling
- Longer waiting times
- It may not be possible to bundle items. Customers who buy more than one item will be sent individually.
- If your supplier isn’t fluent in English or French, communication problems may arise.
While you will need to weigh all aspects of a supplier, it is important to test the fulfillment process yourself before using China-based suppliers. This will give you a better idea of the supplier’s reliability and what the customer can expect.
Dropshippers don’t necessarily have to be located in China.
Canada has many options.
Instead of listing all Canadian dropshipping suppliers that you can find online, we will share some of our insights with you which may help you find the right supplier.
Start by searching for “Canadian dropshipping suppliers” and you will find a list of Canadian suppliers in a matter of minutes.
Most likely, all those opportunities have been exhausted.
Dropshipping has seen some of my greatest successes come from suppliers who are not offering dropshipping.
Dropshipping is not mentioned on their website. Others quickly scan these suppliers before moving on.
Dropshipping suppliers are not the only thing you should be looking for. Instead, start by searching for the best suppliers.
Google is your friend. Get creative. Search eBay.ca and Amazon.ca to find potential suppliers. Reach out directly to them for information.
If you haven’t found the right suppliers yet, it will take some extra effort to convince them to join your dropshipping program.
Do not let this discourage you.
This is a good thing to consider – nobody knows that they dropship and so no one uses the dropshipping supplier.
There will be many challenges.
- You might only make a modest margin until you get enough volume and are able to prove your worth. After that, you can try to negotiate a bigger margin.
- Although you may not be fully automated the way that some eCommerce stores integrate with dropshipping supplier’s platforms, it is possible to manage this unless your daily volume is very high. There are other ways to ‘automate.
Think outside the box.
You can likely predict the outcome of your store if you search for suppliers in the exact same place that everyone else is searching for suppliers.
Register your dropship business in Canada
Canadian citizens who want to avoid unnecessary problems when dropshipping in Canada should legalize their business.
Canada has three major business structures:
- Sole Proprietorship
For those just starting out in ecommerce, sole proprietorship is best. This option allows you to operate your business under your own name without the need for a business license. This allows you to apply for a Business number from the CRA (Canadian Revenue Agency), making it much easier to begin dropshipping.
You may wonder how to find a supplier for an online store. Many wholesalers will require that you have your business number and undergo legal procedures in order to cooperate with them.
Right! You don’t even need to use any of these tools if you decide to search suppliers for dropshipping on AliExpress. You can find trustworthy business partners and add their products to you store.
You can import Canadian customs-free products from your Canadian store as long as they are $20 or less in value. Finding such items is easy if you work with AliExpress suppliers.
However, customers should be aware that if the order exceeds $20 they may have to pay additional charges after delivery.
You can search for a supplier who stores the goods in the USA, and increase the limit. The US and Canada reached a deal in 2018. All products with a value less than $150 can now be imported to Canada from the United States without additional fees.
Canada’s dropshipping income taxes
Canada has one of the highest standards of living in the world. Its prosperity is dependent on its tax system.
If you are a Canadian citizen, and you decide to open an online business, you will need to pay income tax.
Canada has a progressive tax system. There are five tax brackets that correspond to your income. You pay more tax if you are in the higher bracket.
Let’s take a closer look at this. The 15% tax rate applies to incomes up to $47630 per annum. However, the tax rate for the next $47 629 is 20%. This means that for every dollar earned above $47,630 you will have to pay 5,5% more tax than the previous.
If your dropshipping business makes $84,000 annually, you will pay $7,145 (15%) tax on the first $47630 and $7.456 (20% for the rest of the $36,370).
These are the 2019 Canadian Income Tax Rates:
- 15% off your first $47,630
- 20% on incomes above $47,630. To $95,259
- 26% off the next $52,408 (upto $147,667)
- From $147,667 up to $210,371 29% is charged
- Also, 33% for incomes above $210,000.371.
Dropshipping in Canada: Sales Tax
Besides paying income taxes, Canadian entrepreneurs must pay sales taxes. These taxes should be collected and passed to the government. It’s Canadian customers that actually pay the most. These taxes can be included in the product price.
Dropshipping entrepreneurs might be intimidated by the complexity and intimidating nature of Canada’s sales tax system. It’s actually quite simple to see that this is not true.
Let’s now break it down!
Canada actually has two sales tax systems for businesses. You pay it to the federal government. The federal GST – goods and service tax – is the first. It is currently at 5%.
The second system is the provincial sales tax (PST). It is collected for local governments. It varies from 0% to 10% depending upon the province.
HST (harmonized sale tax) is another type of tax. Actually, HST is a combination of GST and PST. This tax is charged by the federal government on behalf of the province, and then the local government gets its share.
Canada is divided into 10 provinces and three territories. It all depends on where you live and what tax you collect. You can choose to collect GST only, GST plus PST or both.
Do drop-shipping to Canada require a business license?
After you have the address and name, the next step is business registration. This may include registering for multiple provinces. For information specific to your region, contact your Canada Business Network branch. You can search BizPal to find information about how to apply to a business license. You will find all the resources required by government in the results.