Have you ever considered starting your own dropshipping business in the UAE? We think it could be your next big entrepreneurial opportunity. UAE’s central location in the Middle East makes the country an ideal place for exporting to other countries in the continental region. Supplemented with its modern infrastructure and free trade zones, the UAE overcomes some of the major challenges associated with selling online using a dropshipping model.
The UAE’s e-commerce is booming, with online sales reaching over 3.9 billion US dollars in 2020, expected to surpass $9 billion by 2025.
Dropshipping, a business model where you sell products to customers without stocking the inventory yourself, offers a unique entrepreneurial opportunity in the UAE. If you’re thinking about starting a business in the United Arab Emirates (UAE), dropshipping could be a legitimate option.
In this guide, we’ll explore the fundamentals of dropshipping in the UAE, including its workings, various business models, and the pros and cons. We’ll also cover the steps involved in establishing your business and offer you tips to help along the way.
How Dropshipping in UAE Works
Dropshipping is an e-commerce business model whereby an online store owner purchases products directly from a wholesaler or manufacturer as orders are placed and from a separate location to the actual goods themselves. In this model, the dropshipping company sells its products without having to store an inventory of stock. The seller is essentially a distributor for the manufacturer and relies on their ability to drive traffic and conversions to sell items.
A dropshipping business is attractive due to its low barrier to entry, as it cuts out logistics and traditional supply chain steps. The order and shipment details are sent directly to the manufacturer and shipped from there to the customer. For you, the online merchant, this eliminates the need for storing stock, managing inventory, handling shipping and quality control.
Of course, this benefit comes at a cost. Because the manufacturer handles all of the logistics, you can expect to pay higher wholesale prices than usual, meaning that the margins on your products will be significantly reduced.
A dropshipping model is most lucrative when you can depend on your ability to drive a lot of traffic using either organic or paid channels and to convert that traffic into orders.
The Different Types of Dropshipping Business
Becoming a drop shipping business owner can be a very lucrative business in the UAE. To become a dropshipping business owner, you will need to have a dropshipping store, have a reliable dropshipping supplier, use digital marketing to sell online, and you’ll also require your drop shipping license. These will all be necessary when you decide to start a dropshipping business.
The most suitable business structure for a drop shipping venture in the UAE market depends on several key factors: the nature of your drop shipping business idea, the quality of products you offer, the reliability of your internet connection, and the level of service provided by your dropshipping suppliers.
While considering a dropshipping business model in UAE, you’ll want to think about what type of model you would like to use. Here are the most common dropshipping arrangements popular in 2022.
Product Reselling
Product reselling is one of the most common forms of dropshipping. Sellers find products from various sources and make them available for purchase on their website or market platform. This type of dropshipping is suitable for those who are great at marketing a product or are experts in their field or demographic. However, this may require more funds to get started, as you’ll have to pay for products upfront.
Business Extensions
Business extensions provide drop shipping services for retailers that don’t have an online presence. This model works as a middleman that promotes the retailer’s products. When the drop shipper makes a sale, they ask the retailer to ship the product to the customer.
This form of dropshipping may require more effort than product reselling because you must develop an intimate relationship with a specific retailer. You’ll have to know their products and services well. However, this model can prove lucrative due to the lack of competition.
Product Creation
This form of dropshipping takes a variety of products and bundles them into a single product for purchase. The seller then ships each of the bundled products to the customer upon purchase.
Product creation requires the seller to think critically about their new product. However, this allows for a unique market opportunity with little competition.
It is important to consider that because product creation involves shipping multiple products, creating a bundled product from a single manufacturer or wholesaler may result in items shipping at the same time.
Print-On-Demand
For those who prefer to work with items with text or images printed on them, such as t-shirts or mugs, a print-on-demand dropshipping model may suit your interests.
This type of dropshipping works with creators who upload their text or image to the drop shipper. When the product sells, the drop shipper prints the file on the product and ships it on behalf of the creator.
Because so many of these items are sold, it is a benefit to have stellar marketing skills.
The Advantages of Dropshipping in the UAE
Knowing the variety of ways to drop ship products should help formulate an idea for a business model. Below are the advantages of setting up your enterprise in dropshipping in UAE.
Dropshipping Costs are Low
The barrier to entry for dropshipping in the UAE is relatively low. Because you do not have to manage product development, storage solutions, and shipping costs, entrepreneurs can establish a dropshipping business with little capital.
Entrepreneurs Can Offer a Wide Range of Products
Dropshipping companies can sell several types of products for two reasons; they are not branded to a specific niche, and they don’t require warehousing.
Not having a brand allows entrepreneurs to work with a variety of product sources in different niches. As long as the marketing is available for each product, a drop shipping company can sell whatever they like.
This is supplemented by their freedom from warehousing limits. Because drop shippers don’t have to store their products before shipping, they have limitless potential for the types of products they choose to sell.
No Shipping and Logistics
A convenient benefit of dropshipping in the UAE is that the wholesaler or manufacturer handles shipping. You won’t have to work out distribution, quality management, storage, or shipping in your supply chain. This offers an added potential benefit of quicker shipping to your customer.
UAE Has a Thriving Economy
UAE is a particularly great country to start your dropshipping business because of its quickly growing e-commerce sales. The value of online sales rose more than 50% in 2020 to over 3.9 billion US dollars. Studies suggest this value will top $9 billion by 2025.
The Arab country’s demographics supplement its e-commerce sales. The population in UAE has adopted technology on a wide scale, with 99% of people actively using the internet. With the population unanimously browsing online, e-commerce sales will continue to rise.
Companies in the UAE benefit from several country-specific advantages. For those willing to go through the registration process, business owners deal with no income tax, property tax, or corporate tax. Keep these in mind when calculating your profits.
The Disadvantages of Dropshipping in the UAE
While the low cost of entry and simplified supply chains sound appealing to budding entrepreneurs, there are inevitable trade-offs involved. Consider these disadvantages when deciding how to build your dropshipping business in the UAE.
Slim Profit Margins
Where traditional e-commerce margins typically range from 30-40%, your profit margins will range between 15-20%. You’ll discover that this dip in profits comes from not buying products in bulk. While you don’t have to worry about the cost of storage and shipping, you’re also not earning as much.
When considering a dropshipping business, you’ll need high traffic to cover the costs of platform fees, advertising, SEO, and managing sales orders.
Highly Competitive
A low cost of entry means more competition. You’ll find that the most prominent markets are swollen with drop shippers fighting for the best deals. In many cases, companies with bigger budgets can offer lower prices. This makes it difficult for new dropshipping companies to enter the market.
For those considering a dropshipping model in UAE, keep this disadvantage in mind. Be sure to thoroughly examine the market and choose a niche that is not oversaturated.
No Control Over the Supply Chain
While not having to deal with storage and shipping allows you to keep your costs low, you’ll rarely get to handle the products you sell. This gives you less control over when and how your products arrive.
When a customer purchases a product from your platform, you provide the wholesaler or manufacturer with the shipping details. It’s now upon them to take your individual item and send it to the customer. They have to handle a single product instead of using their standard bulk procedure, and that could take a longer time than expected.
The wholesaler or manufacturer may also send a product of lower quality. Because the product does not go through quality control before going to the customer, the product may arrive less than acceptable. Your reputation is at stake, but in regard to product quality, it’s out of your control.
Challenging to Build a Brand
As far as scaling your business goes, dropshipping in the UAE is challenging to build a brand around. While you can develop a good relationship with wholesalers or retailers, customers rarely connect with the shipping process. If your customer finds a price that undercuts yours, they’ll have no issues buying from someone else.
If Your Supplier Goes Out of Business, So Do You
Of course, if your supplier doesn’t sell enough products to keep in business, you’ll have nothing to sell either. This is important to consider when choosing a product to sell. While selling a popular product may result in fierce competition, niching into a market that’s too narrow may result in no business at all.
Steps to Setting Up a Dropshipping Business in UAE
Keeping in mind the advantages and disadvantages, setting up a dropshipping business in the UAE is a manageable task. Here are some of the key steps to getting your company off the ground.
- Apply for a Business License in Dubai: This is a multi-step process that involves working with The Department of Economic Development in Dubai to register your business. For those foreign to the UAE, this may prove highly difficult without working with a business liaison.
a. Choose Your Business Activity: Determine the specific nature of your dropshipping business. This will help in identifying the right type of license and business activity as per the DED’s classifications.
b. Select a Legal Structure: Decide on the legal structure of your business (e.g., sole proprietorship, LLC, etc.). This decision will impact various aspects of your business, including liability and taxation.
c. Choose a Trade Name: Select a trade name for your business. The name should comply with the DED’s naming conventions and should not be already registered.
d. Apply for Initial Approval: Submit an application for initial approval to the DED. This step confirms that the Dubai government allows you to conduct your chosen business activity.
e. Draft and Sign the Memorandum of Association (MOA): If your business structure requires it, draft and sign an MOA. For certain legal structures, this document outlines the specifics of your business arrangement.
f. Lease a Business Location: While dropshipping businesses primarily operate online, the DED may require a physical address for your business. You might need to lease a space and provide a tenancy contract.
g. Submit the Required Documents: Gather and submit all required documents to the DED. This typically includes your passport copy, visa, NOC (No Objection Certificate) if you are on someone else’s sponsorship, and other relevant documents.
h. Pay the License Fee: Once your application is approved, you’ll need to pay the license fee to the DED. The cost can vary depending on the type of license and other factors.
i. Collect Your License: After payment, you can collect your dropshipping business license from the DED.
2. Choose Your Niche: The next step is to decide on what you want to sell. Use your industry expertise alongside market research to determine the best market to enter. Considering the information above, markets that are oversaturated will have a lot of competition, and markets that are too narrow may not provide enough business to stay afloat.
3. Choose Your Supplier: You’ll want to find the supplier that best suits your needs. You can find suppliers using online directories and online marketplaces. A good supplier will provide quality products at a reasonable price. Remember, you’ll want to work with wholesalers or manufacturers that produce quality products, or your customers will stop buying from you.
4. Create Your Store: You can either build your website or choose to use a dropshipping platform. If you can build your own website and handle your own marketing, you’ll cut the cost of platform fees. However, many platforms offer free services at the beginning of their memberships, and some offer discounted rates for new businesses.
Top 5 of the Best Dropshipping Suppliers in the UAE
When considering dropshipping suppliers for the UAE market, it’s important to compare the supplier’s available product range, pricing, shipping logistics, and reliability. Below are the top 5 dropshipping suppliers we recommend you use.
1. AliExpress
Pros:
- Vast Product Range: Offers a wide variety of products across numerous categories.
- No Minimum Order Requirements: Ideal for testing products without a significant initial investment.
- Easy Integration: Compatible with many dropshipping tools and platforms.
Cons:
- Longer Shipping Times: Shipping to the UAE can take longer, impacting customer satisfaction.
- Variable Product Quality: Quality can be inconsistent, necessitating careful supplier selection.
2. Alibaba
Pros:
- Wholesale Pricing: Competitive prices due to direct access to manufacturers.
- Customization Options: Ability to customize products and packaging.
Cons:
- Minimum Order Quantities: Often requires purchasing in bulk, which is not ideal for all dropshipping models.
- Complex Negotiations: Requires direct negotiation with suppliers, which can be challenging.
3. DHgate
Pros:
- Wide Selection of Products: Similar to AliExpress in the diversity of products.
- Buyer Protection Policies: Offers some level of transaction security and dispute resolution.
Cons:
- Quality Concerns: Like AliExpress, product quality can be inconsistent.
- Shipping Costs and Times: Shipping can be costly and slow.
4. Banggood
Pros:
- Focused Inventory: Offers a more curated product range, with a focus on electronics and gadgets.
- Competitive Pricing: Often provides good value for money.
Cons:
- Limited Product Categories: There is less variety compared to AliExpress and DHgate.
- Shipping Delays: Shipping times can be lengthy to the UAE.
5. Worldwide Brands
Pros:
- Verified Suppliers: All suppliers are thoroughly vetted and reliable.
- Good for Bulk Orders: Suitable for larger order quantities.
Cons:
- Membership Fee: Requires a one-time fee to access the supplier directory.
- Limited Direct Shipping Options: Not all suppliers may offer convenient shipping options to the UAE.
Fees and Other Information
| Brand | Alibaba | AliExpress | Dhgate | Banggood | Worldwide Brands |
| Marketplace Type | B2B | B2C | B2C | B2C | B2B |
| Typical buyers | Businesses | Consumers, resellers | Consumers, small businesses | Consumers, resellers | Small businesses, online retailers |
| Typical sellers | Manufacturers, wholesalers, trading companies, exporters | Retailers | Retailers, wholesalers | Retailers, manufacturers | Wholesalers, manufacturers |
| Fixed annual fee for sellers | Yes | No | No | No | No, but there is a one-time fee of USD 299, which will give you a lifetime membership. |
| Commission per sale for sellers | 0% (in most countries) | 5-8% | Varies, but competitive with the market | Varies, but competitive with the market | 0% |
Tips to Make Your UAE Dropshipping Business Successful
Now that you know how to start dropshipping in the UAE, you’ll want to position yourself in the best possible way for maximum profit. Below is helpful advice for you to consider to strengthen your business.
Ask Your Supplier These Important Questions
When choosing a supplier for your dropshipping business, there are several aspects to think about. When reviewing a supplier, consider asking them about the following:
- How do they handle returns or damaged products?
- How long does it take them to fulfil orders?
- How their customer support is?
- Do they insure orders or offer fraud protection?
Take note of any reviews they have online. Customer reviews reveal many truths about how a company works with people.
Dropshipping in UAE: High-maintenance Products
In several cases, products require extra expenses to store and ship. Companies can gain extra profits by drop shipping these items instead of paying for warehousing. These items include:
- Large products that cost more to store than their sales cover.
- Heavy products that have excessively high transportation costs.
- Fragile products that are vulnerable to being broken in an extensive supply chain.
- Valuable items that require more security than some warehouses can provide.
- Items with special conditions such as cold storage or light sensitivity.
While dropshipping makes up the value of saving the cost of storage and shipping, remember to work with products within your expertise for the highest success.
Work With a Business Consultant
While you may find it tempting to handle every step of starting your business to save costs, in reality, it may prove highly beneficial to hire a business consultant. Establishing a company in the UAE requires several steps, including working with Dubai officials. Work with an experienced business consultant to handle the technical, administrative, and financial aspects while you focus on marketing.
Choosing the Right Business Consultant
When you’re ready to start dropshipping in the UAE, working with the right business consultant can influence the success of your business. Virtuzone offers expert advice on setting up in both the UAE free zones and mainland areas. With many free zones to choose from, a knowledgeable consultant can guide you in making the right choice for you.
Contact us if you would like our assistance with starting your new venture.
