What Is A Dropshipping Agreement?

Are you considering launching an online store? Dropshipping has become a popular method for budding entrepreneurs to enter the eCommerce arena in New Zealand without the need to manage inventory for their customers.

What Is Dropshipping?

Dropshipping is a business model which involves three main parties:

1. The retailer
2. The supplier
3. The customer

The key distinction between a Dropshipping Arrangement and a traditional eCommerce store is that the retailer does not physically possess or handle the goods that their customers order through the retailer’s online platform.

Instead, the supplier directly dispatches the goods to the customer once an order is placed with the retailer.

If you’re contemplating starting a dropshipping business in New Zealand, it’s crucial to have a Dropshipping Agreement in place.

What Is A Dropshipping Agreement?

A Dropshipping Agreement is a legally binding contract between a retailer and a supplier of goods. If you’re a retailer looking to collaborate with a supplier to support your business, you must have a Dropshipping Agreement drafted!

This agreement is vital as it outlines the key terms of the partnership between the retailer and supplier, including their respective rights and obligations.

A Dropshipping Agreement is adaptable and can be tailored to safeguard the interests of the retailer, the supplier, and the customer.

What Should I Include In A Dropshipping Agreement?

When seeking to have a Dropshipping Agreement prepared, these are some of the principal components you should consider:

Pricing

As a retailer, generating profit is essential for a successful business.

Therefore, the cost of the goods you sell through your online store is a critical factor.

The wholesale cost of the goods you acquire from the supplier must be competitive enough to enable you to make a profit.

Delivery Standards

In a Dropshipping Arrangement, as a retailer, you will have limited influence over the supply chain since you do not directly manage the dispatch and delivery of goods.

Establishing robust terms regarding shipping, handling, and delivery is crucial to ensure customer satisfaction and mitigate the risk of complications during the shipping process. It also provides you with recourse against the supplier should issues arise.

Defects Rectification

What if a customer is dissatisfied with a product?

There must be clear policies for returns or exchanges.

Without a returns policy from the supplier, the retailer will be accountable for replacing defective products.

Dropshipping can be fraught with risk if an effective agreement is not established between the Supplier and Retailer. This risk is somewhat unique to dropshipping, as opposed to traditional online stores where the retailer can personally inspect goods for quality before dispatch.

It’s always important to ensure a supplier either offers a warranty on their products or has a comprehensive Returns & Exchange policy to address customer complaints regarding defective products.

Legal Considerations For New eCommerce Stores

Stepping into the eCommerce domain can be daunting. Sprintlaw lawyer Regie Anne has discussed here about legal considerations you need to be aware of as a new eCommerce store owner in New Zealand, from choosing the right business structure to understanding the necessary privacy policies.

If you’re considering adopting a dropshipping model, it’s beneficial to review these considerations for some foundational knowledge before taking the plunge.

Need A Dropshipping Agreement?

Dropshipping is a nuanced arrangement, and it’s imperative to have a Dropshipping Agreement drafted if you’re planning to embark on this type of business in New Zealand. We can address any queries you have about dropshipping and create a Dropshipping Agreement tailored to your business needs. If you’re ready to get started, feel free to get in touch at [email protected] or give us a call on 0800 002 184.

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