With #workingfromhome trending more than ever, now’s the time to start your own online business. UK’s ecommerce is booming and has been forecasted to have the highest online shopping rate in Europe by 2021 with 93% of the UK’s internet users making purchases online.
That’s an audience you don’t want to miss out on. In this guide, I’ll go over the main steps of starting an online store with print-on-demand dropshipping. To help you set up as quickly and smoothly as possible, I’ll also explain a few key factors about taxes within the UK.
To set your business up for success, first, you need to find your niche. Your future customers will come to your store with a certain need or problem in mind, and your job is to provide them with products that solve it.
To find out what people need help with, there are few leads you can follow:
Online forums—a quick digging around Reddit is a great start. Look for topics you’d like to build your store around and see what the most frequent questions are. Say you want to establish your business in the dog apparel category. A quick search for “dog apparel” shows these questions: “Where can I find Arsenal dog apparel (collars, jerseys, vests, etc.)?” “Does anyone know where to get tiny blank t-shirts/apparel for cats?” From here, you can narrow down your business idea from dog apparel to dog shirts or dog clothing for sports fans. Don’t close that tab yet—in these search results you’ll also find potential brainstorming gems for your “Aha!” moment, such as:
Idea to narrow down your business idea for cozy and warm winter-wear for dogs. Source: RedditGood reading material to get familiar with the ongoing trends of dog fashion. Source: Reddit
SEO (Search Engine Optimization) keywords—in ecommerce you’ll have to get familiar with SEO sooner or later (I suggest sooner). A keyword research will help you find the most searched for products. From there, you can sift through niche ideas and find products with the least amount of sellers. If you want to learn how to do keyword research, here’s our beginner’s guide to SEO.
Competitor stores—take notes on your competition. What are they doing good? What are they lacking? What can you do better? Learn from their mistakes and build an online store that solves customers’ problems better than your rivals.
Figure out dropshipping tax requirements in the UK
Disclaimer: This does not constitute professional tax advice. We strongly advise consulting a tax specialist to find out your specific obligations.
UK residents have to register their dropshipping business. Your options are:
Sole trader
Partnership
Limited company
Limited liability partnership
Most dropshippers in the UK go with sole trader because of the fast setup and easy operation. If you’d like to explore the other 3 options, check out the UK government’s official blog for business owners.
After your business is up and running, you’ll have to pay 2 main taxes:
Income tax
VAT (Value Added Tax)
Income tax
The UK has a progressive tax system, meaning your income tax depends on how much you make. The income is divided into 4 parts known as bands. Tax is deducted according to these bands. The bands are:
Personal allowance: income up to £12,500 isn’t taxed at all
Basic rate: £12,500–£50,000 is taxed at 20%
Higher rate: £50,001– £150,000 is taxed at 40%
Additional rate: income over £150,000 is taxed at 45%
Say, you make £70,000 a year with your dropshipping business.
Example of the UK’s income tax bands
You pay no taxes for the £12,500 of your whole income—this is your personal allowance. Moving on to the basic rate, you then have to pay 20% of the £37,500(£7,500 in taxes). And finally, the higher rate which is 40% for the rest £20,000 (£8,000). In total, you have to pay £15,500 in income tax.
VAT (Value Added Tax)
Since the UK is no longer a European Union member state, changes in taxing are due. For now, the taxation remains the same as in the rest of the EU, but as of January 1st, 2021, different rules apply when it comes to VAT.
When dropshipping in the UK, your VAT is 20%. You add this to your retail price. Say you’re selling canvas prints in the UK for £19. Your VAT for this product is £3.8, making your final canvas price £22.8. If you’re planning on selling only to UK shoppers, then you’re good to go from here.
In the EU, VAT rules and rates differ per country. If you want to sell products to customers in the EU, first get acquainted with these requirements to make sure your store runs smoothly.
Don’t be intimidated—I’ve got good news. There’s a revenue threshold for each country before you can be charged with a sales tax. In the UK, that amount is £85,000, in Spain—€35,000. Here’s a full list of VAT thresholds for sales in the European Union.
Setting up your online store
Once you’ve come up with your market niche and got the hold of managing taxes, it’s time to work on your online shop.
First, you’ll need to decide on your platform. There are three options you can go with:
Ecommerce platform—the most popular choices among UK merchants are Shopify, Big Cartel, and EKM
Online marketplace—most visited in the UK being Amazon, followed by Gumtree
Self-hosted online store
To help you make your choice, let’s look at the main pros and cons of each option.
Ecommerce platforms
An ecommerce platform is a software that helps business owners build their online store. Ecommerce platforms have changed the game by allowing business owners to create sleek and functional store websites with little to no web development skill requirements.
Pros
Easy setup—with most ecommerce platforms, your store can be ready in an hour or less.
Design templates—most ecommerce platforms come with a selection of both free and paid templates.
No hosting or server hassle—taking care of servers and making sure your store runs smoothly is the platform’s responsibility.
Higher security—ecommerce platforms take it upon themselves to protect your store against data breaches, phishing, and other security issues.
Abundance of apps, features, and plugins—these will help you customize your store, connect with your customers, keep up with store statistics, and more.
Customer support—when in doubt, there’s always a customer support team to help you out with any issues or confusion.
Cons
Customization limits—while there’s an app for nearly every standard ecommerce need, ecommerce platforms have limitations for those looking to build a non-standard store.
Subscription fees—to ensure all those perks, ecommerce platforms often have to charge high monthly fees.
Difficulty switching to other platforms—changing between different ecommerce platforms and syncing all of your data and products can be a lengthy process.
Takeaway: Ecommerce platforms are great for beginners who want to manage their online store hands-on and avoid administering any tech-related details. However, they have monthly fees, customization limits, and it can be difficult to switch from one platform to another.
Online marketplaces
On ecommerce platforms, customers can shop within a single store without ever being aware of any other online shops hosted by the same platform. Online marketplaces, on the other hand, are like a shared space for online sellers where customers can easily find and compare similar stores.
Pros
Discoverability—like in a department store, you can browse around, compare products and prices, and make a purchase from multiple stores.
Credibility—potential customers might not be familiar with your brand, but they are with the online marketplace.
Fast and easy setup—there are no tech or web designing skills required to start a store on an online marketplace.
Security—same as with ecommerce platforms, online marketplaces take care of your store’s security for you.
Customer support—if there are issues with payments, setup, or anything else, there’s always customer support that you can turn to.
Cons
Commission fees—while marketplaces don’t charge a subscription fee, you’ll have to pay either a listing price for each product, a percentage of each sale, or often both.
Competition—competitors can steal a few customers from you by offering the same product at lower prices and shipping costs.
Brand haziness—since there are very limited customization options, the majority of stores on online marketplaces look alike. Some marketplaces offer premium customization with large banners, photos, and more. But as the word “premium” suggests, it’s for an extra charge.
Takeaway: Online marketplaces are a great place to jumpstart an online business and reach a large audience fast, but have high competition risk.
Self-hosted online store
Here, a business owner builds their website from scratch and hosts it on a server or a web hosting account. There are apps available that provide essential parts of an online store like the shopping cart, coupon systems, payments, and more.
Pros
Creative freedom—by hosting your own store, you can customize it any way you like. This gives you a better chance to stand out in the crowd.
More control—you’re in charge of everything. Store policies, design, features, updates, you name it.
Easy migration—if you ever decide to switch to an ecommerce platform or marketplace, the shift will be a lot easier than leaving a platform/marketplace.
Cons
Difficult setup—self-hosted stores are the most DIY option of the three. You’ll have to find a hosting provider and build your website (or hire someone to do it for you).
Heavy responsibility—you’ll have to take extra precautions to grant total security of your data as well as the personal info of your customers, especially payment details.
No centralized customer support—when something crashes, you’ll either have to fix it on your own or hire a developer.
Takeaway: Self-hosted online stores are best for business owners who know their way around coding and want full control over their online shop. However, this requires coding skills, managing security measures, and server costs.
To find the best option for your store, check out our integration comparison where you’ll find the best ecommerce platforms, online marketplaces, and open-source platforms for self-hosted stores.
Opening a store using print-on-demand dropshipping
A print-on-demand dropshipping supplier is responsible for your order fulfillment and shipping. This means you don’t need any printing equipment or product storage space, and can easily manage your business from the comfort of your home.
Since all products are made to order, the startup costs are minimal, lowering financial risks in case your store doesn’t succeed on the first go. POD dropshipping also offers you to add products to your store instantly, so it can be a quick option for a side income.
Dropshipping—a business model where the store owner hires a third-party supplier to handle order fulfillment and shipping, as well as the inventory storage.
Print-on-demand—a dropshipping model where the store owner creates a design which the supplier then prints (and often embroiders) on a variety of products.
Is print-on-demand dropshipping profitable in the UK?
There’s also growing demand in the global market for personalized gifts (an estimate of over $31 billion value by 2021). Print-on-demand can help businesses make a profit off this trend without calling for a big investment since there’s no need for large pre-orders of products.
Print-on-demand dropshipping supplier guide—how to choose your supplier
Printful has 1 fulfilment centre in Birmingham, UK, which ensures fast fulfilment and shipping for your UK-based shoppers. We also have other fulfilment centres and partner facilities all over the world for when you’re ready to expand to other markets.
Inkthreadable provides on-demand product printing services in the UK. It grants 1–3 day shipping within the UK and supplies its customers with products like t-shirts, leggings, beanies, home decor, and more.
Music Glue is a UK company helping musicians sell music, print-on-demand merch, and tickets. A great option for artists expanding their business to custom merch.
Contrado provides its customers with print-on-demand products as well as fabric printing for business owners looking to sell personally hand-made products as well.
As the name already suggests, this UK print-on-demand company specializes in printing and embroidering design onto clothing. This company has been announced as the UK’s leading supplier of ethical and sustainable clothing for custom branding.
Part of the Prodigi family, Kite prints and ships merch like apparel, home decor as well as provides photo printing.
Ready to sell!
Now that you’re all good to go and excited to start your business, there’s not a moment left to lose.
Chances are, you’re not the only one eyeing the UK market! Do yourself a favor by starting your business sooner rather than later, and establish your brand as a force to be reckoned with in your niche.
Una’s a Senior SEO Content Writer with a knack for SEO-friendly copywriting and building stunning landing pages. In her spare time, she's an avid reader and keeps close tabs on all things social media and mental health.
Una’s a Senior SEO Content Writer with a knack for SEO-friendly copywriting and building stunning landing pages. In her spare time, she's an avid reader and keeps close tabs on all things social media and mental health.
