Dropshipping is a business model where an online retailer sells products without physically stocking them. Instead, the retailer partners with suppliers who handle inventory and shipping. When a customer places an order, the retailer forwards the details to the supplier, who then ships the product directly to the customer. The retailer earns a profit by marking up the price from the supplier’s cost. This model eliminates the need for inventory management and allows retailers to focus on marketing and customer service.
The business activities that fall under Drop Shipping are:
E-Commerce (4790.00): This encompasses retail sale activities conducted through various channels, including mail-order houses, the Internet, door-to-door sales, and vending machines. Dropshipping is a particular method within the broader e-commerce landscape. In dropshipping, the online retailer operates an e-commerce store where customers can browse and purchase products. However, instead of stocking and shipping the products themselves, the retailer leverages the dropshipping model by partnering with suppliers who handle inventory management and shipping directly to customers. This allows e-commerce businesses to offer a wide range of products without the need for storing inventory or managing the logistics of order fulfilment.
- Third-party Approval (POST): After obtaining a license from Meydan Free Zone, it’s necessary to obtain third-party approval from the Public Health Department (Dubai Municipality) / Roads and Transport Authority (RTA).
- Filing of Economic Substance Return: Business activity 4790.00 is exempt from this requirement.
- Anti-Money Laundering Compliance: Business activity 4790.00 is exempt from this requirement.
Retail sale via mail order houses or via the Internet (4791.00): This encompasses the retail sale activities where buyers make their purchases based on advertisements, catalogues, website information, or other advertising means. In this class, customers place their orders by mail, phone, or over the Internet, typically using special means provided by a website. The products purchased can be either digitally downloaded or physically delivered to the customer.
Within this activity, dropshipping is a method employed by retailers to fulfil orders. Rather than stocking and shipping the products themselves, retailers partner with suppliers who handle inventory management and shipping directly to customers. When a customer places an order through mail or online, the retailer forwards the order details to the supplier, who then fulfils the order by shipping the product to the customer. This allows retailers in the mail order or internet retail space to offer a wide range of products without the need for inventory storage or fulfilment logistics. The activity also includes direct sales via television, radio, telephone, and internet retail auctions.
- Third-party Approval: No third-party approvals are required for this business activity.
- Filing of Economic Substance Return: Business activity 4791.00 is exempt from this requirement.
- Anti-Money Laundering Compliance: Business activity 4791.00 is exempt from this requirement.
Other retail sale not in stores, stalls or markets (4799.00): This encompasses retail sale activities that occur in ways not included in previous activities. It includes various forms of retail sales, such as direct sales or door-to-door sales conducted by salespersons, sales through vending machines, and more. It also includes the direct selling of fuel (such as heating oil or firewood) delivered directly to the customer’s premises. In the context of dropshipping, this activity can encompass activities such as direct sales made by salespersons who take orders from customers and forward them to suppliers for fulfilment. It can also involve sales facilitated through vending machines or other unconventional channels where the retailer doesn’t physically handle or stock the products.
Additionally, this class includes the activities of non-store auctions, where retail sales are conducted through auction formats but not in physical store locations. It also encompasses retail sales conducted by non-store commission agents, where agents facilitate the sale of products on behalf of the retailer.
It’s important to note that this class excludes the delivery of products by traditional brick-and-mortar stores.
- Third-party Approval: No third-party approvals are required for this business activity.
- Filing of Economic Substance Return: Business activity 4799.00 is exempt from this requirement.
- Anti-Money Laundering Compliance: Business activity 4799.00 is exempt from this requirement.
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