How to Start an Online Business in Canada with Print-On-Demand Drop Shipping
Side hustles and working from home have gained a whole new value in 2020, making this the right time to start your online business. And one of the best markets to target is Canada, where ecommerce is booming—it ranked as 7th largest ecommerce market in the world in 2019 based on total market revenue, number of online shoppers, and other crucial metrics.
That’s a market 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 drop shipping. To help you set up as quickly and smoothly as possible, I’ll also explain a few key factors about taxes in Canada.
Starting an online business in Canada
Find your niche
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.
Here’s where you’ll find what your potential customers are looking for:
- Online forums—a quick dig 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 posts:
“I need a purple and pink striped dog sweater and I don’t know where to find one”
“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 sweaters.
Don’t close that tab yet—in these search results you’ll also find potential brainstorming gems for your “Aha!” moment, such as:
- 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 well? What are they doing wrong? What can you do better? Learn from their mistakes and build an online store that solves customers’ problems better than your rivals.
For a more detailed step-by-step, read our guide on finding your ecommerce niche.
Figure out Canadian drop shipping tax requirements
Disclaimer: This does not constitute professional tax advice. We strongly advise consulting a tax specialist to find out which specific obligations apply to you.
Canada residents have to register their drop shipping business for one of the provincial tax regimes. Your options are:
- Sole Proprietorship
We recommend sole proprietorship as it’s the easiest to set up and doesn’t require a business license. From there you need to apply for a Business Number from the Canadian Revenue Agency (CRA). Check out the official Canadian government’s website for a step-by-step guide through the registration process.
After your business is up and running, you’ll have to pay 2 main taxes:
- Income tax
- Sales tax
Canada has a progressive tax system, meaning your income tax depends on how much you make. The income is divided into 5 parts known as brackets, according to which taxes are then deducted. The brackets in 2020 are:
- Up to C$48,535: 15%
- C$48,536 to C$97,069: 20.50%
- C$97,070 to C$150,473: 26%
- C$150,474 to C$214,368: 29%
- C$214,369 and over: 33%
Keep in mind that there are also additional provincial/territorial tax rates that depend on where you live.
Say, you make C$50,000 a year with your drop shipping business.
You pay 15% in taxes (first bracket) for the C$48,535 (C$7280.25 in taxes). Then you move on to the second bracket and pay 20.5% for the rest C$1465 (C$300.33 in taxes). That’s a total of C$7580.58 in taxes + provincial/territorial tax based on your residence.
When selling products made in Canada or to Canadian customers, be sure to apply sales tax to your prices. The federal sales tax in Canada—this applies to all Canadian drop shipping businesses—is 5%. In addition, you also need to apply the provincial sales tax—this is based on your residence—which ranges from 0-10%.
Find out more about Canadian sales tax regulations.
Additional taxes for selling in the European Union (EU)—VAT (Value Added Tax)
Since Canada is not an EU member state, you also need to apply a VAT to your product prices if you plan on expanding to the European market.
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 VAT. For example, in Spain this threshold is €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—find out the most popular choices among Canadian merchants
- Online marketplace—most visited in Canada being Amazon, followed by eBay and Etsy
- Self-hosted online store
To help you make your choice, let’s look at the main pros and cons of each option.
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 skills.
- 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.
- An 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.
- 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.
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 products from different stores all in one place.
- Discoverability—just like in a department store, you can browse around, compare products and prices, and make a purchase from multiple stores.
- Credibility—potential customers rely on marketplaces to only partner with credible sellers. Therefore, as a new brand you are more likely to make a sale when selling items on established marketplaces.
- 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.
- 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 a similar 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, you’ll have to pay extra.
Self-hosted online store
In the case of self-hosted online stores, 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.
- 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 or a marketplace.
- 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.
- Server costs—this is the biggest expense of hosting your own online store. Be careful when picking out a hosting provider.
- No centralized customer support—when something crashes, you’ll either have to fix it on your own or hire a developer.
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 drop shipping
Print-on-demand (POD) drop shipping is a great way to start your own business.
A POD drop shipping 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 drop shipping also offers you to add products to your store instantly, so it can be a quick option for a side income.
Drop shipping—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 drop shipping model where the store owner creates a design which the supplier then prints (and often embroiders) on a variety of products.
Here’s a full recap of the main terms.
Trusted print-on-demand drop shipping suppliers in Canada
To finish your store setup, you now have to pick a print-on-demand supplier. To help you with that, we’ve created a list of top print-on-demand providers that will help you drop ship custom products in Canada.
Printful has just opened their fulfillment center in Canada. This grants faster shipping to Canadian customers and easier tax processing when selling products in Canada. For now in our Canada facility we fulfill wall art and hat embroidery orders, but we’re adding other products soon.
Printful also has 3 fulfillment centers in Europe, as well as 4 in North America. To meet the high production demand and speed up shipping in other parts of the world, Printful also has fully operating partner facilities in Australia and Japan.
With Printful, your online store will not only be able to drop ship products to Canadian customers, but also expand to other global markets with ease.
Print Geek is a Canada-based company located in Toronto. It grants 1–3 day shipping within Canada and supplies customers with custom products like apparel, stickers, and mugs.
Tee Hatch is a print-on-demand drop shipping company based in Canada that specializes in printing and embroidering apparel and accessories.
Based in Alberta, T-Print Canada is a print-on-demand service provider with products ranging from your classical tees to decor, mugs, and more.
Art of Where
Art Of Where specializes in locally-sourced product printing ranging from apparel and accessories to home decor and office stationery.
Ready to sell!
Now that you’re all set, there’s not a moment left to lose.
Chances are, you’re not the only one eyeing the Canada ecommerce 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.