Dropshipping in the UAE - The Ultimate Guide to Setting up Your Drop Shipping Business

Dropshipping in the UAE - The Ultimate Guide to Setting up Your Drop Shipping Business

October 31, 2022

Dropshipping in the UAE - The Ultimate Guide to Setting up Your Drop Shipping Business

Dropshipping in the UAE - The Ultimate Guide to Setting up Your Drop Shipping Business

There are many reasons why people want to start their own businesses. Some want independence, others want the flexibility of being their own boss or an additional income opportunity, and some just want a change of pace. Regardless of what your reason is for wanting to start your own business, you can do it with dropshipping!
The drop-shipping business model is very popular in the UAE due to the abundance of warehousing facilities with direct transportation options, straightforward company formation procedures, zero per cent corporate and personal income tax rates, and a welcoming business environment.  Moreover, online shopping has grown exponentially in the UAE over the past few years, showing potential for future growth.

If you are an entrepreneur looking to start a drop shipping business in the UAE, this post will help you better understand the industry and the requirements to operate successfully in this region. In this article, we cover the following topics:

  • What is dropshipping?
  • How does drop shipping work?
  • The benefits of starting a dropshipping business
  • Opportunities in the UAE
  • Steps to setting up a successful dropshipping business in the UAE
  • Some commonly asked questions about drop shipping in the UAE

What is dropshipping?

Dropshipping is a business model where an individual or company doesn’t own the product they are selling. Instead, they sell products that have been shipped to them by a third-party supplier.
Dropshipping is a retail fulfilment strategy in which online merchants rely on manufacturers or wholesalers to ship products directly to customers rather than maintain inventory of their own. Dropshipping isn't just for small businesses and entrepreneurs anymore. Some of the biggest companies are starting to adopt this strategy as well, with some of the most successful adopting it as their primary business model.

How Does the Dropshipping Business Model Work?

If you decide to venture into drop shipping, here’s how it works:

  •  A customer first places an order with the retailer, which is your business.
  • Next, the manufacturer or wholesaler, who is the dropshipping supplier, receives the order. This order is sent to the dropshipping vendor automatically or through a pre-agreed order process, depending on how the business model is set up.
  • After that, they package and deliver the goods to the customer.
  • Finally, you, the retailer, pay the dropshipping partner for the service, and then you bill the customer.

The benefits of starting a dropshipping business

  • Low investment required 

Dropshipping is an excellent option for entrepreneurs who want to start a business with little capital. You don't have to buy inventory upfront, and you can start selling right away with minimal overhead. 
 

  • Additional income opportunity

You can start a dropshipping business even if you are employed elsewhere in the UAE, as it requires you just to manage a great digital storefront, which you can do outside of your regular work hours. This offers you an add-on earning opportunity in the UAE, provided you have a valid drop shipping business license.

  • Highly scalable business model  


With drop shipping, businesses can reach a wider market without investing in inventory. A drop shipping business primarily has to focus on website design, customer acquisition, and marketing. 

  • Easy to start

With the installation of a dropshipping platform, popular eCommerce platforms like WooCommerce, Shopify, and Wix can easily be modified for dropshipping. You can start selling online merchandise almost immediately, at very low risk.

Opportunities in the UAE for Dropshipping

According to Kearney, the UAE's e-commerce market will grow from US$10 billion in 2021 to US$17 billion in 2025. This, of course, spells a great future for the drop shipping businesses in the UAE too.
Key findings in Pattern’s UAE Shopper Report 2022 conducted by Pattern - the global eCommerce acceleration platform - have a lot of good news for UAE drop shipping businesses. The report suggests that online spending in the UAE will rise substantially in 2022 and that almost half of UAE online shoppers want fast delivery, The report also notes that Amazon is one of the strongest drop shipping platforms in the UAE and it is important for all vendors to be on Amazon or Noon to increase their exposure and market share. Amazon.ae; specifically, is a platform where consumer brands must build a strong presence if they want to grow their sales in the Middle East. 

Here are some points that might persuade you in favour of starting a drop shipping business in the UAE: 

  • A major e-commerce hub

The UAE is growing as a major e-commerce hub for the African, Gulf, Middle Eastern, and South American markets. According to a report by Visa, the world's leader in digital payments, the UAE represents the biggest annual spend per online shopper at $1,648 in the wider Middle East, North Africa, and South Asia (MENASA) region. Hence, the UAE has been successful in attracting many international brands to set up shop here.

  • Customers are interested in new brands

An important finding in Pattern’s UAE Shopper Report 2022 was that in 2021, a sizable portion of customers made cross-border purchases. This demonstrates that by extending their product lines to include items that aren't currently available locally, local retailers and marketplace vendors could increase their sales.

  • Ease of selling to consumers in the UAE


Ecommerce is booming in the UAE, with a growth of more than 100% every year. The UAE boasts an increasingly internet-connected population as well as an increasingly digital economy, making it an excellent place to start a dropshipping business. You can reach customers in Dubai, Abu Dhabi, and other emirates in the UAE with ease. 

  • Young population with high purchasing power

The UAE has a high percentage of digital native millennials who are comfortable with technology. This young, tech-savvy population drives the demand for online purchasing.
 

  • Strategic Shipping Systems

Dropshipping could be the ideal solution for some hard-to-reach areas that are outside of your profitable markets. The further you are from your warehouse or fulfilment centres, the higher your shipping fees and costs will be. Given the high cost of shipping to such a remote location, it would be profitable to build a drop shipping business in the UAE where there are many options plenty of affordable warehousing options.

Steps to Setting up a Successful Dropshipping Business in the UAE

 

  1. Choose the perfect niche for your business

In drop shipping, the niche market you choose determines your success. It is not advisable to enter a crowded or saturated market, as it is with any other business. Use tools like Google's Keyword Planner and Trending feature to find the right location.

  1. Obtain a commercial license

You need a valid eCommerce license to start a drop shipping business in the UAE legally. Specify your business activity while applying for the license.

  1. Choose a trusted supplier

A drop shipping company's success is dependent on its relationships with its suppliers. When selecting a supplier, consider its response time, ability to meet demand in a timely manner, and product cost-effectiveness.

  1. Build your company's website

You can use a robust e-commerce platform like Shopify, BigCommerce,  or 3dCart to build your online shop.

  1. Analyze, optimize and manage your orders

To grow your business, you will need to track and collect metrics such as website traffic analysis and social media conversion data. This knowledge can be used to improve marketing and increase product sales.


Starting a Dropshipping Business in the UAE: FAQs for Beginners


  • What is the cost of starting a dropshipping business in the UAE?

The cost of starting a dropshipping business in the UAE depends on several factors like the business incense you choose. However, if you want an e-commerce website with multiple products and marketing channels, then it may cost up to AED 200,000.

  • Is dropshipping legal in the UAE?


Dropshipping is legal in UAE, but there are some restrictions. For example, dropshipping of alcohol and tobacco products is prohibited.

  • What are some great dropshipping business ideas in the UAE?


Choosing the right niche and understanding your market or geography is important to succeeding in this low-risk drop shipping business. Get inspired by niches like Misbah beads, ethnical festival merchandise, ethnic food, and ethnic attire for the various expat communities in the UAE.

  • Do I need to register a business entity in the UAE to dropship?

Absolutely, yes! Thankfully, there are plenty of cost-efficient business licensing authorities in the UAE. One is the UAQ Free Trade Zone’s drop shipping license which you can easily acquire with easy-to-pay instalments of 786 AED.

  • What are some great dropshipping business ideas in the UAE?

Amazon.ae and Noon.ae are the most popular platforms to drop ship and offer great potential for product discovery.  Alternatively, you may use an e-commerce store-building platform like Shopify to sell your products directly to consumers.
 

  • Does Amazon dropshipping work in the UAE?


All commercial activities in the United Arab Emirates and Dubai that entail drop shipping must be registered and have a trade or eCommerce license. This rule applies to Amazon or Shopify drop shipping in the UAE too.

  • Does Shopify work in the UAE?


Without a doubt! Shopify is a dependable eCommerce platform all over the world, including in the UAE. After you have obtained a business license to drop ship on Shopify, you can start selling your products. For the uninitiated, there are plenty of courses on Udemy and YouTube that teach you how to build a Shopify dropshipping business from scratch. 

  • Amazon FBA vs. Dropshipping vs. Affiliate marketing: Which is the best option?

If you have a small business budget, consider dropshipping and affiliate marketing or just affiliate marketing. The cost of creating a website is typically all that is required for both. Choosing FBA is a good idea if you sell your own products. The storage and delivery of your products to customers will then be handled by Amazon.
If you only want to sell other people's products, dropshipping and affiliate marketing are both good options. 


  • Which payment gateways are available in the UAE?

If you are planning to start dropshipping in the UAE, the following payment gateways would be reliable options: Tap (which operates in the Middle East only), PayPal, BlueSnap, and PayTabs. 
 

  • How should you promote your drop shipping business in the UAE?

Facebook Ads, Google Adwords, and Bing Ads are the best options to reach out to the UAE audience.
 

  • Why should you partner with a logistics company to handle your distribution network?

Logistics firms will handle everything from warehousing to packing to shipping. They can serve as a one-stop shop for all of your distribution needs, allowing you to concentrate on the more important aspects of your business. As a result, your products will be delivered to your customers in the shortest time possible.

  • Is VAT applicable for drop shopping businesses in the UAE?

You must pay 5% VAT on the merchandise that you sell if you open an online store based in the UAE. This is a huge advantage for entrepreneurs looking to start a business in the UAE, as the amount you have paid as VAT on the products you sell through your online store can be used to balance VAT on other business expenses like office supplies and employee wages.
 

  • How can you get a UAE license for drop shipping?

A valid UAE business license is required for any company to operate in the country. To apply for a UAE dropshipping license, you need to have a registered company in the UAE and pay an annual fee. 


  • Is it possible to dropship to other countries from the UAE?


With a registered dropshipping business in UAE, you would be able to drop ship products across the world. 

  • How much does a dropshipping license in the UAE cost?

With a UAQ Free Trade Zone license, launching a dropshipping firm in the UAE can be really cheap as one can pay in convenient instalments of AED 786.
 
 
 
 

What are the advantages of choosing the Umm Al Quwain Free Trade Zone(UAQ FTZ) for your dropshipping business? 

 

UAQ FTZ offers a cost-effective eCommerce license and flexible warehousing solutions, which are the backbone of a drop shipping business. As the free zone is located strategically on the national highway, it offers great connectivity.
 
The Free Zone provides value for money as compared to similar setups in Dubai as you get optimal service and facilities at affordable rates. The Free Zone also offers assistance with opening a merchant account and a bank account, which are important steps in setting up your business in the UAE.   

UAQ FTZ supports drop shipping businesses across many industry niches, including shoes, handbags, and wallets trading; sportswear trading; perfumes trading; watches trading; kidswear trading; and pet accessories.
 

Start your own online business and begin dropshipping today with the UAQ Free Trade Zone!

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