09.04.2013 - Drop shipping and the relevant ATECO code

Drop shipping is a retail method in which a retailer sells goods without, in fact, having them in his stock.

Once the order is placed by the customer, the retailer passes it to the provider (the actual dropshipper), who ships the goods directly to the customer.

Therefore, the parts involved in the trade are three:

• the retailer
• the dropshipper
• the customer

Obviously, this particular retail method has both its advantages and drawbacks.

RETAILER

Advantages

• Is able to create a business activity without investing a large capital
• There is no need for stocks or workers
• The goods can be sold either personally or via internet, both on commercial websites and online auction sites

Drawbacks:

• Low profit level. After creating a mini business plan, it is necessary to establish profit margins. They must never be less than 20%. Keep in mind that for IT products the profit margin might be even lower
• Out of stock issue. It is advisable to cooperate with dropshippers who have an e-commerce system connected to their stock registers. In this way, every order is managed in the real time
• The great competition typical for online trade can lead to price cutting to such an extent that the business itself renders unprofitable
• Following the rules of the Consumer Code (Codice di Consumo) might entail ‘expensive consequences’ since a retailer is obliged to give the customer all the warrantees that are provided by the Code.

DROP SHIPPER

Advantages

• The expansion of the sales network
• Widespread commercial presence both on traditional and online markets

THE CUSTOMER

• The risk of customs charges being executed in case of the dropshipper’s stock being located out of the European Union Community
• Difficulties related to execution of warrantees, free dialogues or risks that the customer might undergo when facing additional costs of shipping in case of returns or repairs

ATECO CODE

As it has often been pointed out on the pages of this website, it is necessary to choose an adequate statistics code. At present, ISTAT (Italian National Institute of Statistics) groups together commercial activities based on retail sales (both via mail order and via internet), where the customer chooses the products on the basis of advertising material, such as catalogues, the information posted on the internet and with the use of Media. The goods are ordered by mail, by phone or via internet (usually through specific systems that have their referred indications on different websites). Depending on their features, the goods can be either downloaded directly from the internet or collected physically by the customer.

The code assigned to the drop shipping business activity is

47.91.10

47 stands for RETAIL TRADE

47.9 stands for RETAIL TRADE WITHOUT BUSINESS PREMISES

47.91 stands for RETAIL TRADE VIA MAIL ORDER AND VIA INTERNET

47.91.1 stands for RETAIL TRADE VIA INTERNET

Identifying your business activity code is only the first step. It is necessary then to proceed with appropriate administrative and social security implementations.