All You Need to Know About Dropshipping in Saudi Arabia 2023

The Internet can be a true money-making opportunity, but it’s hard to find the right business. 

CNNB Solutions, in the “MENA e-commerce Report“, said that 73% of consumers in the MENA region have been shopping online since the pandemic. With the increasing number of online stores and businesses being created.

Why not get a slice of the pie by starting your own business in dropshipping in Saudi Arabia?

If you’re thinking of it, let us tell you the important things you have to know before getting started.

What Is Dropshipping?

Dropshipping (also called direct shipping) is a supply chain management approach where the reseller(s) offers and markets items that are in the supplier’s inventory from any location in the world.

The reseller forwards the order and pays the supplier as soon as the buyer submits the purchase order, and the supplier will undertake all of the packings (labeled with the retailer’s brand) and shipping straight to the client. In this technique, the merchants use their suppliers’ inventories as AliExpress.

How Dropshipping Works?

Here’s a brief overview of how dropshipping operates:

1. Choose your products: The first step in dropshipping is to choose the products you want to sell in your online store. You can select products from a supplier or a manufacturer, depending on your niche and target audience.
2. Set up your online store: Once you have selected your products, the next step is to set up your online store. You can use an e-commerce platform like Zid, the leading e-commerce platform in KSA, to create your online store.
3. Find a supplier: You will need to find a reliable supplier who can provide you with quality products at competitive prices. You can find suppliers on platforms like 4 Streams or Stockzones.
4. List the products: After finding a supplier, you will need to list the products on your online store. You can use product descriptions and images provided by the supplier to create product listings.
5. Customers place orders: When a customer places an order on your online store, you will receive the order details, including the customer’s name, address, and payment information.
6. Fulfill orders: Once a customer places an order, you will need to forward the order details to your supplier, who will then ship the product directly to the customer.
7. Payment: You will receive payment from the customer for the product, minus your profit margin. You will then pay the supplier for the product and keep the difference as your profit.
8. Customer support: As the store owner or retailer, you are responsible for providing customer support, handling returns and refunds, and addressing any issues that arise during the shipping process.

Overall, dropshipping is a convenient way to start an online store without investing in inventory or handling product fulfillment. However, it’s important to find reliable suppliers and provide suitable customer service to ensure the success of your business.

After we got to know what is meant by dropshipping and how it works, let’s figure out its advantages.

What are the Benefits of Dropshipping?

There are many benefits of dropshipping, which is why it has become a popular business model for entrepreneurs. Here are some of the key advantages of dropshipping in Saudi Arabia:

1. It doesn’t need a huge capital to start, because the reseller won’t need to buy goods, or possess inventory beforehand. 
2. The project is easy to launch; once you follow the steps to create an online store, you can start working.
3. It’s all about flexibility as you can operate your store anywhere in the world, as long as you have a laptop with an Internet line.
4. Since the stock is kept at the suppliers’ warehouse, and these can be in an unlimited quantity, your product collection can be much larger, to reach a wider segment of consumers.
5. Drop shipping also eliminates duplication of effort, since only one warehouse will handle, pack, pack, and ship the merchandise. This can reduce inventory management and total logistics costs which in turn reduce the consumer price or increase profit margins for the entire chain.

Which Country Is Best for Dropshipping?

With a rapidly growing e-commerce market and a large population of tech-savvy consumers, Saudi Arabia presents a great opportunity for dropshipping businesses for these reasons:

• The low startup costs and minimal financial risks involved. As a dropshipper, you don’t need to worry about holding inventory or managing a warehouse, which means you can start your business with very little upfront investment. 
• The cost of setting up an online store in Saudi Arabia is relatively low, which makes it an attractive option for entrepreneurs.
• The ease of access to a wide range of products from suppliers all around the world. 
• The growth of international shipping and logistics services that makes it easier than ever to source products from overseas and have them delivered to customers in Saudi Arabia. This means you can offer a diverse range of products to your customers without having to worry about storage or shipping costs.

Overall, Saudi Arabia can be a great country for dropshipping businesses, with its growing e-commerce market, tech-savvy consumers, and low startup costs. 

What Are the Disadvantages of Dropshipping?

While dropshipping offers several benefits, there are also some disadvantages that you should be aware of. 

Here are some of the drawbacks of dropshipping:

• Un Availability of Products

A product may not be in the supplier’s stock at the time of ordering (Out of stock). The product could be sold to other retailers, or manufactured with lower quantity, and therefore the buyer will have to wait longer for their product. 

This may lead to a bottleneck or order cancellation, which would entail financial losses and damage to the retailer’s brand.

• The Firece Competition

 The intense competition in several product lines. Therefore, the price can be a sensitive factor to the consumer. Thus, promotions and discounts will be more frequent, and the profit margin may vary (high or low) depending on the costs.

• Shipping-related Issues

 Delivery delays generated by the lack of capacity of the supplier or the transporter, malfunctions, and losses, at this point of the chain, can occur.

The reseller will receive the complaint from the buyer and must deal with it quickly to satisfy the needs of the affected consumer.

4. Tax and Legal Risks

Tax differences between the points of exit of the goods, and legislation on product importation (if the supplier is an overseas company). It is important to meet the expectations of consumers in order to avoid problems with lawsuits and complaints to consumer protection agencies, issues that can be resolved in a friendly way, and even the loss of customer loyalty.

When talking about the advantages and disadvantages of drop shipping, some people often ask this question:

Is Dropshipping Halal? 

Dropshipping involves selling goods that you don’t have, then forwarding the order to the supplier, who will transport the cargo to the buyer. 

Some people think it is Haram, based on the Hadeeth where the Prophet SAW said: “Do not sell what you don’t have.” (Sunnan Al-Nasa’I no.4613). In this situation, the seller wasn’t sure of the market and goods availability.

Alternatively, when the product is available, with a known supplier, and ready for shipping, you can resort to another Hadeeth, “Whoever pays in advance the price of a thing to be delivered later, should pay it for a specified measure at specified weight for a specified period.” (Saheeh al-Bukhari no. 2240).

This hadeeth serves as an implicit approval, under specified criteria, of selling a thing that is not in your possession. That is to say, Dropshipping falls under Salam Contract (i.e. forward sale contract) in Islamic jurisprudence.

Moreover, there is another solution (Fatwa) that indicates that the retailer should be the manufacturer’s agent for an agreed commission.

Are You Wondering Is It Illegal to Dropship?

We have answered the Halalness of dropshipping. Additionally, dropshipping is legal e-commerce, as long as you are not selling products that are illegal in the country of origin or country of destination.

Criteria to Practice Dropshipping Business in Saudi Arabia

To complete our clarification on how to start a dropshipping project in Saudi Arabia, we must make it clear that for this type of business to be legal, the Kingdom of Saudi Arabia has set some criteria as follows:

• The reseller must open an account in a Saudi bank in the name of the company (the online store).
• Create an account with a shipping company, to ensure product delivery and consumer’s rights.
• Obtain a business license for the shop.
• The sold products must not be subject to copyright.
• It is not permissible to display goods differ from the advertised specifications.
• The e-store shall not promote Haram or illegal products.
• The reseller must pay the fees on the due date.

What Is Trade Licence in Saudi Arabia?

Trade license in Saudi Arabia (also known as a Commercial Registration) is a legal document that allows a business to operate within the country. It is issued by the Saudi Arabian Ministry of Commerce and Investment (MCI) and is mandatory for all businesses, regardless of their size or type.

To obtain a Trade License in Saudi Arabia, a company must first register with the MCI and provide the necessary documentation, which may include:

• Company registration documents, such as the Memorandum of Association and Articles of Association.
• A copy of the company’s commercial lease agreement or property ownership documents.
• A valid business plan.
• Proof of financial solvency.
• A copy of the owner’s ID card or passport.
• A certificate of compliance with Shariah law, in case the company is involved in Islamic finance.

Once the MCI has reviewed and approved the documents, a Trade License will be issued. The license will indicate the type of business activity that the company is authorized to undertake and any restrictions or conditions that may apply.

It’s important to note that Trade Licenses must be renewed annually, and failure to do so can result in fines or even the closure of the business. Therefore, it’s crucial for businesses in Saudi Arabia to ensure that their Trade Licenses are always up-to-date and compliant with the country’s regulations.

How to Acquire a Trade License for Dropshipping in Saudi Arabia?

The first requirement to launch an online store in Saudi Arabia is to obtain a commercial license, or rather acquire an online commercial registry. 

You can achieve this by following a few steps approved by the Saudi government to regulate the work of online stores and to protect consumer rights.

In order to facilitate the procedures for those requesting to practice e-commerce, the Kingdom of Saudi Arabia allows them to obtain commercial registration online, within 180 seconds only, without the need to visit any government administration, as the following:

• Go to the website of the Saudi Ministry of Commerce and Investment to obtain the commercial registration online.
• Sign in to the site.
• Go to the procedure and choose your store trade name.
• Register the commercial information to be recorded.
• Confirm the information.

Through the SADAD system, pay the Commercial Register and Chamber of Commerce membership fees in a unified invoice.

Having completed the above steps, you can obtain your commercial register, accompanied by your membership number in the Chamber of Commerce.

Remember, without these two documents, you cannot launch the store; the process will only take a few minutes, while you are at home. In line with the Saudi government services, you may also cancel this license at your convenience on the same website.

Can I Dropship Without a License?

As mentioned above, in KSA, to start a dropshipping business, you MUST obtain a commercial registry. In many countries, you must in addition get a Tax ID.

After we have discussed the advantages and disadvantages of dropshipping and the most important procedures required to practice it, let’s learn how to start this business through zid, the leading Saudi platform in the field of e-commerce.

How to Start Dropshipping With Zid?

You can start dropshipping on the Zid platform simply and easily through these steps:

1. Create an account: The first step is to sign up for a zid account as a seller from here. You will need to provide your personal and business information, such as your name, address, and tax ID.
2. Choose the package that suits the nature and size of your business from here.
3. From the App Store, connect to the 4 Streams or Stockzones, the leading platforms for dropshipping services in Saudi Arabi and provides:

• A huge selection of the best-selling products in the local market without paying the value of any product
• Shipping products directly to customers.
• The ability to choose the shipping company that the customer wants to deal with.
• Ease of use as the platform is built according to the latest and most advanced technologies.

Read More The Key B2B E-commerce Advantages and Disadvantages

Important Tips for Profit from Dropshipping

Most of those who started dropshipping did not make a profit from the first day or first product, but they invested a lot of time and effort until they reached a fruitful result.

If you want to succeed in this field, you need to study and learn it well before starting.

The basics you should learn at the beginning of your business are:

1. Logistics

If you sell one product in one country, there is no problem. However, more products and more countries mean higher risk. You don’t have to take all your logistics on your own, but you’d better deal with a Third Party Logistics (3PL). It would be preferable to appoint a person with management experience to occupy the post of Demand Manager.

2. Products Life Cycle

As a startup, you need to focus on two points; what to sell? How to sell it? To do so, you must learn about product design, packaging, delivery, product research, and anything related to the product, regarding the market and targeted segment.

3. The Display Strategy

Which includes how to reach your audience, business identity, the platform on which you display the products, Landing Page, and targeted social media.

4. Marketing

It means how a visitor can be turned into a client, how to market by mail, free marketing, buzz marketing, or marketing with influencers.

As a rule, those who pay more in marketing attract more audience and thus earn more. But it must be a wise investment.

5. Employ an Accountant

A well-organized ledger increases your confidence in the project, reduces your loss, and increases your ability to predict market demand. The accountant regulates the balance sheet, the financial statements, and auditing.

You do not need to be a genius expert with all these things. It is sufficient to start with the basics. Big companies start by studying the feasibility, the business plan, and the business identity, and then launch the project, after 1-2 years. 

6. Establish a Great Customer Service

A happy customer is a client who finds a level of customer service exactly as they expect from a professional merchant, such as:

• Upload tracking no.
• Answering customer questions.
• Respond to disagreements that may arise from time to time.

A Final Word

Dropshipping is a legal business that you are free to engage in either full-time or part-time. Take your time and don’t hasten the matter when you first start, which is something we highly advise.

As many coaches and YouTubers promise, you won’t be able to gather millions of dollars. Yet, if you follow the recommendation in this article, you may easily earn a comfortable income.