Drop shipping companies
Drop shipping companies in the Netherlands
What are they and why are they worth considering for you?
Chances are you have already heard of the term “drop shipping”, as this type of retail business has enjoyed enormous growth worldwide since the start of the commercial internet era. What’s more, seeing as you’ve reached our website and this article in particular, we suspect that you either already have some experience with drop shipping companies and have operated (or currently are operating) one yourself, and that you’re now researching the possibility of opening a drop shipping company in Europe. Opening your new base in the Netherlands is an excellent opportunity, and we are more than happy to help you on your way to an optimal setup for your business.
What is a drop shipping company in the Netherlands exactly?
As mentioned earlier, the drop shipping business model has become a very popular way of doing business in the internet era. A drop shipping company in the Netherlands or elsewhere is a type of (online) retail business that offers products it does not have in stock itself. Instead, the retailer has one or more agreements with one or several suppliers. When a customer orders a product from the retailer in question, that retailer orders the product from the relevant supplier. The supplier then delivers the product straight to the customer, while the invoice is sent by the retailer. The customer pays the retailer and is never in contact with the supplier, while the retailer pays the supplier and is never in contact with the purchased product.
Advantages of a drop shipping company in general
Even if you, as a trading professional or entrepreneur, do not have extensive experience with drop shipping companies yet, you can probably deduce that the drop shipping business model boasts some considerable advantages, especially when compared to more traditional (brick-and-mortar) business models.
- Lower start-up costs
One of the major reasons behind the surging popularity of drop shipping companies and the drop shipping business model is the little up-front capital that is required to get started. You don’t need to invest in inventory, seeing as that’s not needed, and this will undoubtedly lead to lower rental costs, should you decide to still open a physical office or store. After all, without any inventory, you don’t need to pay for storage space, either.
- Considerably less inventory management
Less or even no need for storage space is not the only cost-saving result of setting up a drop shipping operation for which no inventory is needed. From a managerial point of view especially, having no inventory of your own and only having to manage one or more suppliers makes a considerable difference. There is basically no inventory management overhead as a result of time tracking, infrastructure management, or shipping logistics, just to give a few examples. All of this is taken care of by the suppliers, you just need to make sure that those accounts are managed efficiently.
- Virtually unlimited product offering.
For many traditional businesses, limits on space and especially capital also limit the size of their product offering. For a drop shipping business, that is barely the case. The lack of inventory storage (and all of the associated costs) makes it possible for drop shipping companies to offer virtually unlimited product selections, should you wish to do so.
- Easy scaling.
Another big upside of a drop shipping company is the relative ease with which such a business can be scaled. Scaling, which refers to you set the stage to enable and support growth in your business, is a known major challenge for the majority of new companies. That’s because it can be difficult at times to meet increased demand, for example, due to staffing issues, more complex inventory management, or a lack of access to necessary credit. Drop shipping companies barely have to deal with these challenges, as their growth is not so dependent on the size of a physical location or the number of available employees. Therefore, dealing with sudden higher demand is a lot easier for drop shipping companies.
- Ideal for seasonal businesses
This benefit is closely related to the previous point. The drop shipping business model makes it much easier to deal with sudden surges in demand, but the same goes for sudden drops in demand. Seeing as the fixed costs of a drop shipping business are relatively low, they tend to have a better adaptive capacity to deal with negative demand shocks, as well.
- Less costly to test new products
Drop shipping also provides you with considerably more flexibility in terms of product or market testing. Whether you want to set up an entirely new business or test a new product, the drop shipping business model gives you more room to experiment. You don’t need to invest a whole lot in an inventory of the product you want to test. Instead, you can make a small investment for testing purposes and if it works, you can decide to build on that. If it doesn’t, you will not have lost a chunk of money on inventory for an untested product that you now no longer need.
Leading technology
The Netherlands are at the forefront of the latest technology concerning product feeds, channel management and marketplaces.
Because of the single market tax rule, you can benefit from favourable tax rules that the Netherlands have above other EU countries. The single-market-tax-rule also makes sure you only pay and have to do your VAT and income taxes in one EU country.
The EU Marketplaces.
NL+ BE: BOL.com is the biggest marketplace for selling your products in Belgium and the Netherlands, with no connection or setup fee. You only pay a 9-15% commission + Vat per sale.
DE: Kaufland.de is Germany‘s biggest marketplace, there is no setup fee, has a monthly subscription fee of 49,90 and a commission of 8% + VAT per sale. With the same DE account, you can also sell in Slovenia (SK) and Czech (CZ)
RO: eMag.ro is the biggest marketplace in Romania and Bulgaria (BU), there is no setup or connection fee, and they charge a 13% commission plus VAT per sale. With the same account, you can also sell in Hungaria (HU) and Poland (PL)
UK+IE OnBuy is the platform to sell your product from the EU to the UK, Wales and Ireland, with no setup or connection fee. They charge you directly at the moment of sale the 13% commission (+VAT) and the 20% sales tax. So you do not have a file a separate UK tax declaration for your sales in the UK and Wales. (as they are no part anymore of the EU)
NO: Cdon.com is the marketplace for the Scandinavian countries with headquarters in Norway (NO), but also has full coverage of Denmark (DK), Sweden (SE) and Finland (FI) They charge you a 15% (+VAT) commission per sale.
FR: FNAC is France’s biggest marketplace, there is no setup fee. Monthly connection fee of 39,95(+VAT) and a commission of 6-16% (+VAT) per sale.
EU: A marketplace that covers the whole EU is Fruugo, with no setup costs or monthly fees and a commission of 6-17% (+VAT).
The above marketplaces are the biggest in their representing countries. The South of the EU and not mentioned countries are dominated by global marketplaces such as Amazon and eBay.
Internet connectivity.
The Netherlands currently have 10 connections with internet sea cables, connecting the Netherlands directly with the rest of the world. The main internet hub of Europe is the Amsterdam Internet Exchange AMS-IX which is one of the biggest internet hubs in the world. Connecting Amsterdam directly to Germany, France, Isreal, the United Kingdom and Cyprus.
Advantages of a drop shipping company in the Netherlands
So, the drop shipping business model boasts plenty of advantages for trading professionals and ambitious entrepreneurs. Now you might be wondering how to open a drop shipping company in the Netherlands and why you would open a drop shipping company in the Netherlands.? For centuries, the Dutch have been trading pioneers and the country has been a commercial hub, which is still reflected in today’s society. From a beneficial fiscal climate for corporations and a prime location at the heart of the European Union to a world-class infrastructure and a highly qualified labour force with one of the highest levels of English literacy in the world; setting up a drop shipping company in the Netherlands comes with a host of specific advantages that can make all the difference in the world for your business.
- The Netherlands is known worldwide as a preferred location for commercial companies and corporations, in part thanks to its favourable fiscal climate. Since the start of 2023, the Personal Income Tax rates vary between 36,93% and 49,50%, depending on the recorded income, while corporate tax rates sit between 19% and 25,8%. The lowest corporate tax rate is applied to companies that record profits of € 200.000 or less on annual basis. At the moment of writing in 2023, the dividend withholding tax in the Netherlands is 15%. On the condition that the fiscal structure for your drop shipping company in the Netherlands is created in a correct and responsible manner, shareholders and directors can enjoy practically unrivalled fiscal benefits in this country.
- As with most commercial activities, creating a company for your drop shipping business in the Netherlands is one of the most crucial steps when it comes to limiting your own liability. Setting up a limited liability company (BV) ensures that there is a legal distinction between your own assets and those that belong to the company. This is particularly important in situations where the company is having trouble meeting its financial obligations, as your limited liability protects your assets from being used to fulfil the company’s financial obligations. At the same time, it is important to know that a director of a limited liability drop shipping company in the Netherlands can still be held liable with his or her own assets in exceptional situations of irregularity, for example when the annual accounts are not filed on time or when there is proof of serious negligence.
- Another considerable advantage of setting up a drop shipping company in the Netherlands is that the start-up costs for a limited liability company are relatively low. A contribution of just € 0,01 is sufficient to fulfil the capital requirement, though it should be noted that not depositing any capital when founding your company does mean that you remain personally liable. The capital requirement is also not the only cost associated with founding a company, because notary costs and compliance fees also need to be taken into account, for example.
- While dividend pay-outs and salary payments (owners of at least 5% of shares in a company need to be paid at least € 51.000 per year by that company by law, including accompanying wage withholding taxes) are taxed according to varying rates, capital reserved for reinvestment is not taxed in the Netherlands. This can be very interesting for profitable drop shipping companies in the Netherlands and it’s also one of the reasons why holding company structures in the Netherlands are so sought after by companies from outside the European Union, including the United Kingdom, the United Arab Emirates, and the United States of America.
- The examples just above are not random. We mentioned those countries and territories specifically, because English is the official language in the UK and the US, while it’s the unofficial second language of the Emirates. Trading professionals, executives, and entrepreneurs from these territories are particularly attracted to the Netherlands, thanks to the country’s high level of English literacy. Even though it’s not an official language here, between 90% and 93% of all inhabitants speak English as a second language, which is amongst the highest percentages in the world for countries where English is not an official language.
- In addition to the previous point, the Netherlands also boasts a highly qualified workforce and stable economic development, despite recent macroeconomic shocks across the world. Setting up a drop shipping company in the Netherlands means enjoying a world-class infrastructure, premium international education, and a generally very high standard of living.
- To finish this list of advantages, we would also like to once more emphasise the Netherlands’ outstanding geographical location. Right in the heart of the European Union, a market with a GDP of € 14.5 trillion, boasting one of the biggest and busiest ports in the world (Rotterdam), one of the major airports in Europe (Schiphol), and an overall logistics infrastructure that can compete with the very best in the world.
Parcel Delivery
Being known as the gateway to the European market for e-commerce companies shipping from outside the EU, the Netherlands’ parcel delivery companies are an important factor also for global players. As such, effective logistics should be underestimated by neither domestic nor international e-commerce businesses. To put the importance of logistics on the success in other markets into perspective, 153 million parcels were sent cross-border from the Netherlands and 351 million parcels (of which, 240 million can be assigned to the B2C sector) were handled domestically.
The majority of webshop owners primarily look for cheap shipping and fast delivery. Especially the speed of the delivery became a business standard, as roughly 90% of shipped parcels in 2020 are already delivered the next day and that is also the standard Dutch customers expect from your business.
Channel management
At the forefront of channel management technology within Europe, you’ll find chanable with a single connection between your webshop and their platform you can sell on thousand of different market platforms and price comparison websites worldwide.
Store + Pick + Pack + Send.
Many international brands have chosen the Netherlands as their main warehouse in Europe. You will find many companies that have specialists themself in order fulfilment for webshops and dropshipping webshops.
They store the product of the webshops in their warehouse and with a single connection between your webshop, they can fulfil all incoming orders and pack them in boxes according to the instructions of you the client. Boxes printed with your company logo, inserting business cards, brochures or free samples together with an order, or inserting a handwritten thank you card. The Dutchies are at the forefront of fulfilling your client orders and guarantee a satisfying client experience when they receive your parcel.
The process is fully automatized and at the moment an order is fulfilled and sent out to the client for delivery the receiving client gets automatically an email with the track & trace. The order gets automatically marked as shipped within your webshop and shipping details get updated. You as a client get a weekly invoice for the storage of your products and all orders fulfilled.