Dropshipping is a flexible business model with low risk and high growth potential. It's no wonder that its popularity has almost exploded worldwide. But how exactly is dropshipping done, and can it be done profitably in Finland?
In the article, we explore these matters and discuss the opportunities that dropshipping currently offers in both the Finnish and international markets. At the end, you will also find a few tips on how to establish a profitable dropshipping business, i.e., an online store without inventory.
What is dropshipping?
Dropshipping means running an online store without having your own inventory or making large initial investments. In the dropshipping model, products are purchased from the entrepreneur's online store but are shipped directly from the supplier's/manufacturer's warehouse to the customer.
A dropshipping entrepreneur acts as a kind of intermediary between the manufacturer/supplier and the customer. And because sales are not limited by the company's own limited inventory situation, dropshipping, when done correctly, has a very high profit potential.
Like any business, dropshipping naturally involves risks as well.
A dropshipping entrepreneur bears the responsibility for any potential mishaps by the manufacturer/supplier, such as quality defects, long delivery times, lost products, etc. However, the entrepreneur can effectively minimize this risk by, among other things, choosing reliable suppliers who have proven to deliver quality products and marketing to the right target groups.
Dropshipping in Finland – is it worth it?
Just like in international markets, dropshipping can also be a highly profitable business in Finland when done correctly.
Dropshipping also has several advantages compared to traditional e-commerce operations. In the dropshipping model, the entrepreneur does not invest in products, which usually becomes the largest expense when establishing an online store. It is also often difficult for a smaller company to acquire the large initial capital required for purchasing products and storage space.
A dropshipping entrepreneur also does not need to worry about the delivery of goods themselves, as it is handled by the manufacturer/supplier. Order reporting can also be automated, allowing products to be delivered from the supplier's/manufacturer's warehouse directly to the customer without the entrepreneur's intervention.
For a dropshipping entrepreneur, there is therefore more time for marketing and business development as well as scaling. Often, the entrepreneur also has the opportunity to start delivering products themselves, which leaves more margin. In dropshipping, it is also much faster and easier to respond to changing demand because there is no physical inventory.
Dropshipping offers flexibility that a regular online store and business do not have.
However, a dropshipping online store can also generate really nice revenue for many years. We say this assuming that the entrepreneur has taken the time to understand the target market and target audience, and adapts to changes in these when necessary.
Taxation of Dropshipping Income in Finland
In Finland, dropshipping activities are taxed in the same way as other business activities, meaning that income after expenses is taxable income.
Ultimately, the taxation of dropshipping income is determined by the form of the company. Therefore, establishing a dropshipping online store requires the existence of a company, and most commonly, a limited liability company is chosen due to tax and other benefits. Of course, it is also possible to conduct the business profitably through a sole proprietorship.
If an entrepreneur engages in dropshipping in the Finnish market, they must consider the threshold for VAT-liable business, which is €15,000 per year, and if necessary, register for VAT. In international markets, the taxation of the respective countries remains to be considered, where an accounting firm can assist.
Of course, a dropshipping entrepreneur must be aware of the current laws and regulations regarding taxes and, for example, data protection. The Tax Administration has written about the taxation of dropshipping income here.
If goods arrive in Finland from abroad, as they usually do, the entrepreneur must inform the customer in advance of any possible additional costs. These costs include, for example, taxes on packages coming from outside the EU and customs duties.
Amazon dropshipping or dropshipping on the Shopify platform?
If an entrepreneur wants to start dropshipping in Finland or abroad, one of the most important decisions to make is the sales channel to be used.
However, it is advisable to immediately exclude large marketplaces like Amazon and Ebay from the options, as they simply have too much competition and too few ways to stand out from the competition. It is not possible to do any significant branding and customization of the online store, making differentiation and marketing considerably more difficult.
On these large platforms, it is also difficult to build one's own brand and maintain customer relationships.
For example, AliExpress offers customizable dropshipping e-commerce, but in that case, the entrepreneur is tied to one supplier, and changing the supplier in potential problem situations or scaling desires may not be easily possible.
Additionally, the online store costs even more per month than a self-managed Shopify.
When comparing Amazon dropshipping and Shopify dropshipping, or dropshipping on another e-commerce platform like WordPress/WooCommerce, the latter options provide entrepreneurs with significantly better opportunities to achieve competitive advantage, a strong market position, and thereby a sustainable and profitable business.
Of all the e-commerce platforms, however, Shopify is the best choice for a dropshipping entrepreneur.
Shopify as a system is very user-friendly and quick to learn, making tasks such as adding products, modifying the store's appearance, and reviewing and exporting sales reports agile. However, what sets Shopify apart from other platforms are the critical features for a smooth dropshipping business, such as integrations between dropshipping suppliers and platforms, which allow the entrepreneur to manage inventory and orders automatically.
How to start dropshipping in Finland or internationally?
To start a dropshipping business, you first need an idea for a product or some sense of the direction and demand of the online store, after which you begin to determine whether the idea can form the basis of a profitable business. Only after the actual potential and competitive situation of the idea have been clarified, do you proceed to establish a dropshipping online store.
Here are our tips on how an entrepreneur can ensure a profitable dropshipping business from the start:
1. Carefully research the needs and markets
The first step in starting a profitable dropshipping business is market research.
The most important task of an entrepreneur is to understand demand and identify current, changing, and future trends, thereby determining what kinds of products might potentially be needed in the market.
Market research and trend analysis can be easily started using the Google Trends tool. Google Keyword Planner and, for example, Ahrefs or Semrush work well for determining internet search volumes and potential demand in specific target markets and regions. Entrepreneurs should also delve deeper into research by examining dropshipping statistics and browsing, for example, Amazon's best-selling products.
From various tools, an entrepreneur can find new ideas and get a sense of whether their own ideas and dropshipping operations could have the potential for success in the targeted market.
The success of a dropshipping business, like any other business, largely depends on demand, so it is not advisable to skip market research and jump directly into practical implementation.
However, the research process can be streamlined by knowing right from the start whether the entrepreneur intends to do dropshipping in the Finnish market, internationally, or both.
2. Analyze the competitive situation and find a market niche
The next step is to examine the competitive situation of the target market (or markets, if you have several) more closely and try to find a suitable niche for your company.
You can engage in dropshipping by offering something completely new and unique that still has demand, or by selecting already popular products for your online store that you believe will also be popular among your target audience. Ideally, these products should not have too much supply and too many providers in your target markets.
The latter can be a less risky business model because there is evidence of success from other markets. At this point, it is advisable to scrutinize the best-selling products on dropshipping platforms and major marketplaces and determine which of them might have good potential and yet have little or no supply in your target market.
However, remember the differences between target groups. A product that makes millions in China may not necessarily interest the fewer, quality-accustomed Finnish consumers.
3. Choose a niche for your business and narrow down your product range
When you have found a suitable market niche for your business where supply does not meet demand, you can define the niche of your dropshipping online store, i.e., the segment to which you limit your product collection.
Narrowing the product range is advisable because it allows the entrepreneur to stand out from large and mainstream operators, and effectively reach a smaller group of customers with a targeted marketing message.
Of course, you need to figure out what this message is and who you want to reach with it (who is your target audience and ideal customer).
Thus, marketing is also easier, and the dropshipping business can surpass large general stores in search engines more quickly and with less effort, build a recognizable brand among the target audience, and achieve a stronger position in the target markets.
In other words, by choosing a niche, an entrepreneur can achieve a significant competitive advantage.
However, the niche of an online store does not need to be too restrictive. It can just as well be broad, such as electronics, gifts, or pets, as it can be more specific, like phone cases, funny t-shirts, camping gear, or zero waste decor.
4. Find and select the right dropshipping partners
From selecting a dropshipping niche, we move on to the next phase, which is finding reliable manufacturers and suppliers, as well as choosing high-quality products.
Of course, it is advisable to choose only reliable suppliers and manufacturers as partners, with whom dropshipping in Finland is known to proceed smoothly. This means that the products are of high quality, order processing is swift, and the delivery process is seamless.
The risk with a disreputable dropshipping supplier is delivering poor quality or broken goods to the customer, long delivery times, and frequent customer returns, which naturally erode your company's customer satisfaction, cash flow, and reputation.
Good suppliers can be found by timely googling and researching the experiences of dropshipping entrepreneurs, for example, on the supplier's page in Shopify's own App Store.
You can also find the best international dropshipping suppliers at the moment and the most popular suppliers in Europe in the following articles, among others.
5. Build an online store and brand that speaks to the target audience
Background work is important if you want to succeed in dropshipping in Finland or any other country, but equally crucial is the implementation and branding of the dropshipping online store.
Specialization provides a significant advantage for the dropshipping business, but it does not eliminate the fact that there is and always will be competition, even if what is being sold is "something completely new."
If a dropshipping entrepreneur wants to be as quick and profitable as possible, the sales setup must be top-notch from day one. By setup, we mean a fast, technically flawless online store, all its content, and a brand that stands out from competitors and appeals to the right target audience.
By carefully planning and building an online store, a dropshipping entrepreneur ensures a more stable cash flow for themselves and faster growth for the business.
This is achieved by ensuring that the right, most potential customers are reached and that they are sent precisely the right image. Merely reaching the right people is not enough; they must still be convinced to buy with a diamond-like overall package and carefully polished details.
If the customer feels that something in the online store is off, whether it's a technical or visual issue, a content problem or conflict, or a strange feeling or "vibe" that the online store inadvertently conveys to the customer, the same or a similar product will be purchased elsewhere.
The online shopping experience is therefore crucial, as it ensures that the entrepreneur guarantees the customer who has made a purchase decision follows through, resulting in euros being credited to the company's account.
However, brand and e-commerce are their own domains, and each involves so much that they should be addressed separately, unless you purchase expert assistance. A do-it-yourself man or woman can benefit from our Shopify e-commerce setup guide or this article on branding for your dropshipping business.
Also remember to choose a relevant and clear domain for your online store, one that is easy for customers to remember and provides you with an SEO advantage by closely relating to the subject area.
Start a profitable dropshipping business faster with Growly
With these tools, starting dropshipping and setting up an online store should be a somewhat clearer process. However, it is a process that will take time, especially when it comes to actually implementing an efficient online store.
Establishing a dropshipping online store involves more than just that, such as determining the product range, creating and updating high-quality product descriptions and images, pricing, and selecting and defining payment methods that are favorable to the customer.
After completion, the online store must of course also be search engine optimized and the company marketed in search engines and in social media channels favored by the target group.
Remember that when creating an online store, it's not advisable to take shortcuts, because in the end, a good or poor implementation will determine how well or poorly (or very well or very poorly) sales will occur and how quickly and significantly the business will grow.
In addition to thorough background work, our most important tip for starting a dropshipping business is to invest in a high-quality online store.
Digitoimisto Growly can help you get started not only with a seamlessly functioning online store but also with creating a beautiful, pre-branded package, allowing you to dive straight into sales and marketing. And if you need help with the latter as well, we assist in that too, focusing on genuine, measurable results and the sustainable growth of your dropshipping business.
Feel free to contact us through the form below, and let's discuss the implementation of your online store and how to start your company's growth journey in a relaxed meeting.
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