The4 Team

October 1, 2024

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How to Start a Dropshipping Business in Canada

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How to Start a Dropshipping Business in Canada

We all know that: Starting an eCommerce business is tough, especially in this digital era. But with dropshipping, you can build a profitable business without needing a large initial investment, inventory management, or shipping concerns. It’s quickly becoming an attractive option for entrepreneurs in Canada.

With the Canadian eCommerce market expected to reach over 40 billion USD by 2025, there's never been a better time to dive into dropshipping. Whether you're looking to make extra income or build a full-scale business, dropshipping allows you to tap into the massive consumer base without the usual risks of traditional retail. The best part? You can run everything from the comfort of your own home!

If you are looking for a blog post on how to start a dropshipping business in Canada, this blog post is for you. Let’s get started!

Benefits and Potential of Dropshipping in Canada

Dropshipping is an eCommerce business model that doesn’t require a physical inventory. It is a low-cost solution for entering online retail.

So, why choose Canada…?

Canada is such an attractive destination for you to start a dropshipping business. Here is why:

1. Strong Consumer Buying Power

Canada boasts a high GDP per capita of $52.1k, significantly higher than other popular eCommerce markets such as the UK. This high average income means Canadian consumers have more disposable income to spend on products, which is a huge advantage for dropshippers targeting this market. The average Canadian resident spends $1,746 annually on eCommerce, providing plenty of opportunities to capture a share of this growing market.

2. High Social Media Penetration

With 84.9% of the Canadian population actively using social media platforms like Facebook and Instagram, reaching potential customers through targeted ads becomes much easier. Social media marketing tools are an indispensable for any dropshipper, and with such a high penetration rate, Canada offers a strong opportunity to connect with a large and engaged audience.

3. Reliable Shipping Infrastructure

Canada’s shipping infrastructure is highly developed, providing fast and efficient shipping options for dropshipping businesses. In fact, delivery times for AliExpress packages shipped to Canada are often faster than shipments to the US. Additionally, dropshipping from Canadian suppliers allows for even faster shipping, reducing wait times to just a few days and enhancing customer satisfaction.

4. Large, Tech-Savvy Population

Canada has a population of around 38 million, with a significant portion actively participating in digital purchasing. This large population reduces the risk of ad fatigue and opens up room for scaling your business without saturating the market. The digital-savvy nature of the population also means they are more comfortable shopping online, which boosts conversion rates and customer loyalty.

5. Stable Economy and Low Competition

Compared to other eCommerce markets, Canada has relatively low competition, making it easier for new dropshippers to establish themselves. The stable Canadian economy, paired with lower competition levels, provides a fertile environment for growing a dropshipping business without being overshadowed by major players.

To sum up, here is some notable figures of this potential market for dropshippers:

Is Dropshipping Legal in Canada?

Yes, dropshipping is legal in Canada, but like any business, it must comply with the country’s regulations. As a dropshipper in Canada, you are required to follow a set of rules to ensure your business operates within the bounds of the law. Here's what you need to know:

1. Offer Legal Products

When dropshipping in Canada, you must ensure that all the products you sell comply with Canadian regulations. This means you cannot sell illegal, restricted, or dangerous items. For example, dropshipping age-restricted, copyrighted, or hazardous products can lead to legal trouble, so it’s crucial to research product categories thoroughly.

2. eCommerce Regulations

Canada has specific eCommerce laws that govern the online sale of goods. As a dropshipper, you must adhere to these policies, which include providing clear terms and conditions on your website, ensuring customer data privacy, and avoiding misleading or false product descriptions. It’s also essential to follow platform policies (Shopify, Amazon, etc.) for the marketplace you operate on.

3. Tax Obligations

As a dropshipping business owner in Canada, you are subject to tax obligations such as the Harmonized Sales Tax (HST) (in certain provinces) and Goods and Services Tax (GST). The GST is a 5% value-added tax applied nationwide, while the HST, which combines GST and provincial sales taxes, can range from 13% to 15% in provinces like Ontario, Nova Scotia, and New Brunswick.

You can check out the detailed Canada tax rates below:

Canadian Provinces	Available Tax	PST	GST	HST	Total Tax Rate	Notes:
Alberta	GST		5%		5%
British Columbia	GST + PST	7%	5%		12%	More info
Manitoba	GST + PST	7%	5%		12%	As of July 1, 2019 the PST rate was reduced from 8% to 7%.
New Brunswick	HST			15%	15%	As of July 1, 2016 the HST rate increased from 13% to 15%.
Newfoundland and Labrador	HST			15%	15%	As of July 1, 2016 the HST rate increased from 13% to 15%.
Northwest Territories	GST		5%		5%
Nova Scotia	HST			15%	15%
Nunavut	GST		5%		5%
Ontario	HST			13%	13%
Prince Edward Island	HST			15%	15%
Quebec	GST + *QST	9.975%	5%		14.975%
Saskatchewan	GST + PST	6%	5%		11%
Yukon	GST		5%		5%

To comply with tax laws, you’ll need to charge customers the correct tax rates based on their location and remit those taxes to the Canadian government regularly.

4. Business Registration

Whether you need to register your dropshipping business depends on where you are based and how you plan to operate. Canadian residents are typically required to register their business if they operate under a name other than their own or if they plan to scale the business. You can register as a:

Sole proprietorship,
Partnership,
or corporation, depending on your needs.

To help you understand clearly those business types, we have some blog posts here:

Non-Canadian residents may not need to register in Canada. Still, we highly recommend you seek professional advice from your accountant or legal expert to ensure local regulations and tax obligations’ compliance.

Get Started Canadian Business with Dropshipping- 5 quick steps

Step 1: Finding Your Dropshipping Niche

Identifying the right niche is critical for the success of your dropshipping business. Now, we will point out the basic criteria a profitable niche should meet:

Demand: You should choose products that are highly demanded in Canada. Use tools like Google Trends, Amazon Best Sellers, and eCommerce market reports to identify trending products.
Competition: Avoid oversaturated markets by choosing a niche with limited competition. For example, instead of generic phone cases, look for eco-friendly or customizable options that meet specific customer needs.
Profitability: Ensure that the products you select have a healthy profit margin. Aim for a 30-40% margin to cover your operational costs and still generate profit.

For Canadian customers, focus on products that cater to local preferences, such as winter apparel, home gym equipment, or eco-conscious products. This will help you stand out from international competitors.

Here's a breakdown of popular niches in Canada based on shopping behavior:

Clothing and Apparel: 46% of Canadian buyers shop in this niche. Consider dropshipping eco-friendly, athletic, or customizable clothing to meet specific demands.
Books, Movies, Music, and Games: 35% of shoppers buy entertainment items. Gaming accessories and collectible editions can attract hobbyists.
Consumer Electronics: 30% of shoppers purchase electronics, including smart devices and mobile accessories. Focus on trending, unique products.
Footwear: 29% of people buy shoes online. To target specific audiences, offer niche products like hiking boots or vegan shoes.
Cosmetics & Body Care: 26% buy beauty products, with rising interest in organic and eco-friendly items. Consider skincare sets or sustainable personal care.
Health Care Products: 19% of shoppers buy healthcare products. Popular choices include supplements and fitness gear.
Food & Drinks: 21% of Canadians shop for specialty foods and drinks. Offer organic or meal prep kits.
Hobby-Related Products: 17% buy arts, crafts, and pet items. Niche hobby products cater to passionate customers.
DIY, Garden, and Pet Products: 15% of shoppers buy DIY, garden, and pet supplies. Offer practical items like tools or pet grooming kits.
Sports & Outdoor Products: 12% buy sports gear and outdoor equipment. Focus on fitness or outdoor accessories.

Source: Statista

If you want more product insights, you can find the best product research tool for your dropshipping business here.

Step 2: Choosing Reliable Dropshipping Suppliers

One criterion for deciding the success of your dropshipping business is partnering with suppliers you can trust.

For Canadian businesses, using local or international suppliers with warehouses in Canada will ensure faster shipping times and satisfied customers. Some reliable options include:

Local Suppliers: Amazon Canada, Walmart Canada, and Wayfair have fast shipping options and extensive product catalogs.
International Suppliers: Platforms like AliExpress and CJDropshipping offer vast product selections and sometimes have Canadian warehouses for faster delivery.

When selecting suppliers, ask about shipping times, return policies, and quality control. It's also a good idea to order samples from potential suppliers to assess product quality before listing them in your store.

To give you the detailed insights, please check out these blogs:

Step 3: Setting Up Your eCommerce Dropshipping Store

Building a well-designed and functional online store is key to attracting customers and driving sales. Shopify is one of the best platforms for creating your store, offering a simple setup process, robust features, and seamless integration with payment gateways.

Here’s how to get started:

Choose an eCommerce Platform: Shopify is highly recommended for Canadian dropshippers. It’s user-friendly, scalable, and comes with a variety of tools to manage your store.

Shopify’s current promotion allows new users to create a store for three days free plus $1/month for the first month, making it a cost-effective solution.

Pick a Domain Name:

Select a memorable domain name that reflects your brand and niche. Make sure it’s easy to spell and resonates with your target audience.

Design Your Store with EComposer:

Use EComposer, Shopify’s top-rated drag-and-drop page builder, to create a stunning and functional layout.

Customize your store by incorporating high-quality images, clear calls to action, and detailed product descriptions. EComposer also offers extensions for conversion rate optimization (CRO), helping to enhance your store’s performance.

To help you customize your Shopify dropshipping store visually and high-converting, we are launching The4 Shopify store development service. Tap and read more here.

Configure Payment and Shipping: Shopify supports all major payment gateways like Visa, Mastercard, American Express, as well as digital wallets like Apple Pay and Google Pay.

This is essential for Canadian buyers, as 29% have completed purchases using digital wallets. Make sure to set up multiple shipping options to meet customer expectations.

Read more:

[10+] Best Payment Methods for your Shopify stores

Troubleshooting Shopify Payment Identity Verification

9+ Shopify CBD Payment Processors & Key Considerations

Top 5 High-Risk Payment Processors for Shopify

How to Test Shopify Credit Card Payments? 2 Easy Ways

Shopify Partial Payments: A Comprehensive Guide

Optimize for Mobile:

Ensure your dropshipping store is mobile-friendly since a significant portion of online traffic comes from mobile devices. A mobile-optimized store improves user experience and boosts sales.

Test User Experience: Conduct usability tests to identify and fix any issues. A seamless shopping experience will keep customers engaged and increase the likelihood of repeat purchases.

Step 4: Adding Winning Dropshipping Products

Once your store is set up, start importing products from your suppliers. Focus on products that meet Canadian demand and offer competitive prices. Use product research tools such as AutoDS or AliExpress Product Center to find trending items.

Optimize your product listings by:

Writing compelling product descriptions that highlight the benefits and features of the product.
Using high-quality images to make the product more appealing.
Setting competitive pricing that factors in shipping costs, taxes, and your desired profit margin.

Step 5: Marketing Your Canadian Dropshipping Store

After adding products, it’s time to drive traffic to your store. The most effective marketing strategies for dropshipping businesses include:

Facebook and Instagram Ads: These platforms allow precise targeting, helping you reach Canadian audiences based on demographics, interests, and behavior.
Search Engine Optimization (SEO): Optimize your product pages and blog content with keywords relevant to your niche to rank higher on Google and drive organic traffic.
Influencer Marketing: Collaborate with Canadian influencers to promote your products through social media. Influencers can help boost brand awareness and trust.
Email Marketing: Generate an email list and send out promotional emails to engage potential customers and encourage repeat business.

To boost your marketing efforts, consider using EcomRise, an all-in-one Shopify app designed to boost your sales.

EcomRise offers powerful features like upsells, cross-sells, volume discounts, and trust badges that can increase conversions and build customer trust. With tools to optimize cart recovery, create urgency with sales pop-ups, and protect your content, EcomRise is the perfect addition to your Canadian dropshipping store.

Ready to boost sales for your Canadian dropshipping store? Try EcomRise Free NOW.

Tips for launching a dropshipping business in Canada

Starting a successful dropshipping business in Canada requires thoughtful planning and strategic decisions. Here are five tips to help you get started on the right path:

1. Choose the Right eCommerce Platform

Selecting an eCommerce platform is crucial for your business. Platforms like Shopify, BigCommerce, and WooCommerce offer excellent features. Shopify is the most popular for dropshipping due to its user-friendly interface and extensive integrations. Shopify also supports various payment methods like Visa, Mastercard, Apple Pay, and PayPal—key for Canadian customers. Be sure to pick a platform that matches your technical skills, budget, and business goals.

2. Work with Canadian-based suppliers

Using suppliers based in Canada ensures faster shipping, better customer service, and more straightforward returns. Suppliers like Printful, Spocket, and DropCommerce offer high-quality products with short delivery times, helping you create a smoother customer experience. While local suppliers may cost a bit more, the benefits of faster shipping and improved service far outweigh the costs.

3. Offer Preferred Canadian Payment Methods

To optimize your store’s sales, offer payment options that Canadians prefer. Credit cards (55%), debit cards (11%), and digital wallets like PayPal and Apple Pay (23%) are commonly used in Canada. Additionally, consider integrating Interac, a Canadian online banking system, to ensure your customers have secure and familiar payment options.

4. Plan for Your Business Expenses

While dropshipping doesn’t require upfront inventory, there are costs to consider:

Domain Name: About $11/year.
eCommerce Platform: Shopify, for example, starts at 3-free-day trial plus $1 first month.
Dropshipping Apps: Some are free, while others can cost around $10-$50/month.
Marketing: Budget around $250-$2,000/month, depending on your strategies. Remember these expenses as you plan and grow your business.

5. Understand Canadian Sales Taxes

Canada has three types of sales taxes: GST (5%), PST (varies by province), and HST (up to 15%). You’ll need to charge these taxes depending on where your customers are located. Be sure to consult with a tax professional or local tax authority to ensure your business complies with all regulations.

6. Provide Excellent Customer Service

Customer satisfaction is key to growing your dropshipping business. To equip the excellent customer support service for your Canadian dropshipping business, you should:

Maintain clear communication by offering transparent shipping, return, and refund policies.
Make sure to answer customer inquiries quickly in order to establish trust.

Providing outstanding customer service can assist in retaining customers and enhancing your dropshipping business's reputation.

7. Track and Optimize Your Business

Use analytics tools to monitor your store’s performance. Track key metrics like sales, customer behavior, and website traffic. This data will help you refine your marketing strategies, adjust product offerings, and improve the overall customer experience.

8. Stay Updated and Reinvest

Stay updated on industry trends and new tools to enhance your business. Reinvest your profits into expanding your product range, improving your store’s functionality, or increasing your marketing efforts. This continuous improvement will ensure long-term success.

Other territories to start dropshipping

Besides Canada, here are some destinations we suggest you launch the dropshipping business:

FAQs About Dropshipping in Canada

1- Is Dropshipping Profitable in Canada?

Yes, dropshipping in Canada can be highly lucrative. With a high GDP per capita of $52.1k and Canadian consumers spending an average of $1,746 annually on eCommerce, the country provides a strong market. The eCommerce sector is expected to grow by 5.61% each year, making it an ideal place for dropshipping ventures to thrive.

2- How Much Does It Cost to Start a Dropshipping Business in Canada?

Starting a dropshipping business in Canada is cost-effective compared to traditional business models. You'll need around $300 to cover initial expenses such as your eCommerce platform, domain registration, and marketing. As your business grows, marketing costs will likely become your most significant expense.

3- Can I Dropship From Canada to International Markets?

Yes, you can efficiently run a dropshipping business from Canada while selling to international customers. Many Canadian suppliers offer global shipping, and you can also work with international suppliers who can fulfill orders worldwide. Keep in mind, however, that longer shipping times and higher shipping costs impact customer satisfaction.

4- Do I Need a Business License for Dropshipping in Canada?

Depending on which province or territory you live in, you might have to register your business. It's essential to check the local regulations in your area, and tools like BizPaL can help you determine what licenses you need to get started.

5- Where Can I Find Dropshipping Suppliers in Canada?

Working with Canadian suppliers offers faster shipping times and improved customer service. Some reliable suppliers include Printful, Spocket, and Syncee, which all offer local supplier options. You can also explore niche suppliers for specific product categories, such as cosmetics or apparel.

6- Can I Use AliExpress to Dropship to Canada?

Yes, you can use AliExpress for dropshipping in Canada. AliExpress allows you to filter suppliers by those that ship to Canada or have warehouses in the country, which helps reduce shipping times.

7- How Much Do Dropshippers Make in Canada?

On average, dropshippers in Canada can earn between 20% to 30% profit on their sales. Earnings vary based on the number of products sold and the overall profitability of your niche. With effective marketing, there's no limit to how much you can scale your earnings.

8- Can I Dropship on Amazon in Canada?

Yes, Amazon Canada allows dropshipping, but you must adhere to its dropshipping policies. Amazon tends to favor sellers who use Fulfillment by Amazon (FBA), so some dropshippers prefer setting up their stores on platforms like Shopify to have more control and flexibility.

Read more:

9- What Payment Methods Should I Offer to Canadian Customers?

In Canada, credit cards account for 55% of transactions, making them the most popular payment method. Other widely used methods include PayPal, Apple Pay, Google Pay, and Interac for direct bank transfers.

10- How Do I Choose the Right Niche for My Canadian Dropshipping Store?

To find a profitable niche, focus on Canadian market trends. Popular niches in Canada include clothing, healthcare products, electronics, and cosmetics. Use tools like Google Trends or analyze top-selling products on marketplaces like Amazon to identify high-demand items and tap into trending categories.

Your Dropshipping Journey in Canada Starts Now!

Congrats on taking the first steps toward building your dropshipping business in Canada! The country's booming eCommerce market, combined with a high level of disposable income, makes it an ideal place to succeed in this business model. While research and planning are essential, don't get bogged down—start. Take the leap, learn along the way, and refine your strategy as you grow.

Every successful dropshipper started somewhere, and now it's your turn. Stay flexible, adapt to changes, and keep pushing forward. If you have any questions, drop them in the comments, and remember—your Canadian dropshipping empire is within reach!

To deepen your dropshipping knowledge and level up your skills, check out these essential articles!

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