Checklist: How to Start a Drop Shipping Ecommerce Business in Canada

So you’ve decided that drop shipping will be part of your Canadian online store, but how do you make it happen?

Dropshipping is no longer the clumsy, unreliable fulfillment option it used to be. It’s a method of fulfillment used by both small and large businesses because it’s easy, cost-effective and versatile. As a business model, it can be permanent, temporary, or hybridized.

How do I start drop shipping in Canada?

You have four basic options:

  1. Choose eCommerce software that facilitates dropshipping.
  2. Use a dropshipping app that integrates with your existing eCommerce software or information management platform (such as WordPress).
  3. Use a full drop shipping solution that provides everything from your website to suppliers.
  4. Find your own drop shippers and add their products manually.

How Does Drop Shipping Work?

In a nutshell, your customer orders from your online store, you pass the order along to your supplier, and they ship the order directly to your customer.  The difference between the supplier cost to you and the price you charge the customer, is your profit.

How Drop Shipping Works

Checklist: How to Start a Drop Shipping Business in Canada

This checklist is intended to be an overview for starting an eCommerce business in Canada with order fulfillment through dropshipping. We’ve referred you to other posts for more information when applicable.

_____ Pinpoint a niche. If you’re still looking for one, read:
10 Hot Product Niches to Sell Online in Canada
How to Choose the Best Products to Sell Online in Canada

_____ Choose a business name and register it.

_____ Figure out exactly what your business is offering to online shoppers and why it’s exceptional (also known as your Unique Selling Proposition). Define who your buyer is, and how you can reach and serve them online. This information is critical to your online business strategy, from pricing to marketing.

_____ Open a business bank account and PayPal account.

_____ Financial management is critical in order for your online store to be profitable. Get a budget in place right away and edit it as your company grows. Accounting software like TurboTax Canada will help you manage and track your finances.

_____ Begin the branding process by choosing a company colour scheme and have your logo designed.

_____ Research drop shippers and decide which ones will provide your products. Sign up for free trials when they’re available so you can test them out. You can use an all-in-one system like Wholesale2B, or choose an app that works with your eCommerce platform, like Canada’s Spocket or Alidropship. You can sign up with independent dropshippers but be aware that you’ll have to do more manually, such as inventory and order tracking. We’ve included a list of merchants and networks that work with Canadian businesses in our dropshipping guide.

_____ Choose an eCommerce platform that’s suitable for drop shipping. You can also opt to go the more manual route with your own website and use the host’s templates, install WordPress and a compatible drop shipping plugin, or hire someone to build the site for you. We use and recommend Green Geeks’ Canadian servers for domain registration and hosting.

_____ Price your products. Make sure you do some research to determine supply & demand and the prices your competitors are charging. You don’t have to compete on price alone, but you do have to be competitive. Factor in all costs associated with selling the product, from shipping to marketing.

_____ Whether you process payments through your eCommerce platform, a payment gateway or an in-house solution, familiarize yourself with PCI security standards so you’re in compliance with customer data protection laws.

_____ Hire a website designer or learn how to design the site yourself. Ecommerce platforms will have templates made specifically for people who aren’t tech experts. If you use a dropshipping app, building your product pages will be a breeze. Some platforms can also provide or recommend design services for their specific platform.

_____ Bring in a copywriter for sales pages and product descriptions if you don’t have the time or expertise to do it yourself. I recommend writing your own product descriptions based on information provided by the product supplier. It allows you to customize descriptions to your specific audience and it’s better for Search Engine Optimization (SEO).

_____ Obtain high-quality photos of the products you’re selling. These may be available from the dropshipper or manufacturer. You must have permission to use product images.

_____ Content is crucial to attract customers to your website and for organic search engine optimization. It will also establish your level of expertise and reflect the quality of your product or service.

_____ Outline your Privacy Policy and Terms of Service (TOS) so they can be posted on your website. Your privacy policy should be fully transparent, informing shoppers of how information is stored or used and data breach procedures. Consider adding privacy certifications to further reassure Canadians through a third party, such as the Better Business Bureau.

_____ There are two main categories of security for online stores, security for customers (secure transactions, privacy, etc.) and security for your website (hacking, fraud, and so on). There are relevant Canadian laws that we need to consider too.

_____ Decide what your shipping rates will be. You can charge the actual amount, a flat rate, or offer free shipping (with or without a minimum purchase). Flat rate overages and free shipping will be absorbed by your company, unless the dropshippers you choose provide free shipping. Notify customers that items are shipped direct from your supplier and may take longer to arrive. Ask your supplier about shipper brokerage fees, customs fees or taxes that customers may have to pay the carrier when their order arrives.

_____ Test your entire ordering and fulfillment process by placing orders yourself.

_____ Begin your marketing strategy by opening social media accounts, selecting newsletter software (such as Constant Contact), outlining sales funnels (many use ClickFunnels), and so on. You’ll need data and competitive intelligence to ensure you’re maximizing sales, which can be easily obtained and manged through popular tools like SEMrush.

Frequently Asked Questions

  • Are there specific Canadian laws that apply to drop shipping?
    The Canadian Office of Consumer Affairs offers an Internet Sales Contract Harmonization Template in Electronic Commerce, which covers contract formation, cancellation rights, credit card charge-backs and information provision for all types of online stores.
  • Do I need a business license for drop shipping in Canada?
    Once you know the name and address, the first step for many is business registration, which may include registering in multiple provinces. Contact your local branch of the Canada Business Network for information specific to your province. To find out how to apply for a business license, search for information specific to your province using BizPal. The results will include the government resources you need.
  • How do taxes work for drop shipping in Canada?
    Tax information and reporting requirements for online sales are available on the Government of Canada CRA website.
  • Do I have to charge Canadian sales tax on orders being shipped directly to customers in other countries?
    Drop shippers are your suppliers, just like any other supplier you have. You’re making the sale as a merchant who is located in Canada, so Canadian taxes are applied to Canadian purchases. If you have a Canadian-friendly eCommerce platform, the taxes will be automatically calculated at the point of sale. If not, we recommend consulting with an accountant.

??? Is there anything else we can help you with as you start drop shipping in Canada?  Please ask questions in the comments below.

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2 Responses to "Checklist: How to Start a Drop Shipping Ecommerce Business in Canada"

  1. Anna  September 15, 2019

    Should a new ecommerce store that is not generating money yet get insurance ( liability etc.) and if so what is recommended?

    Reply
    • Melody McKinnon  September 15, 2019

      Business insurance for an online business is similar to offline business insurance, but the focus and amount of coverage may differ. For example, an eCommerce business will need to focus more on shipping-related insurance coverage. You’ll also need to consider insurance related to cyber security. Liability insurance is recommended for a home-based business in Canada. Most insurance companies are familiar with eCommerce, so it’s just a matter of contacting them to see what they have to offer.

      Reply

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