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Statistical data shows that from 2017 to 2021, global e-commerce industry revenues increased by 67%. Running online stores has become exceedingly popular, and thanks to the dropshipping business model, it has become accessible even to small entrepreneurs. What information should be included in the terms and conditions of an online store operating in the dropshipping model?
Dropshipping as Direct Sales
The dropshipping business model can exist in two forms – as direct sales or intermediary services.
The direct sales model involves transferring numerous obligations related to order processing to an external company. Of course, the entrepreneur is required to establish a business and it is the entrepreneur who will issue invoices, file tax returns, and ultimately be responsible to customers. However, in practice, all business-related tasks can be delegated to subcontractors. This pertains to aspects such as:
- procuring, packaging, and shipping products;
- conducting online advertising campaigns and email marketing;
- creating and maintaining the website and updating its content;
- collaborating with influencers, bloggers;
- legal assistance and compliance with GDPR, AML regulations.
In practice, dropshipping in the form of direct sales is suitable for novice entrepreneurs who wish to explore the market and are uncertain about which products will sell well or offer specialized products catering to a narrow target audience.
From a practical standpoint, a simple dropshipping process in the form of direct sales might look like this:
- A buyer places an order in the entrepreneur’s store, who then informs the wholesaler about the order;
- The customer pays for the product (also in the store), and after the payment is received, the wholesaler packages and ships the order;
- The entrepreneur settles with the wholesaler, transferring an amount corresponding to the order value minus their profit margin.
Dropshipping as Intermediary Services in Poland
It’s important to note that an entrepreneur operating an online store doesn’t always have to act as the seller. The dropshipping business model often relies on intermediaries and offers for goods sold by companies from China or other Asian countries can easily be found on auction platforms.
In this case, the third-party entity is the seller, while the entrepreneur acts as an intermediary, earning commission from the sale.
In the intermediary model, the intermediary receives orders and payments from customers, but on their behalf and in their name, enters into agreements concerning selected products. Subsequently, the intermediary settles with the seller, making payments for the price and delivery costs. Product delivery is directly handled by the seller, who operates a warehouse, for instance, in China.
It’s important to understand that in the intermediary model, the products visible on the online store are not purchased directly by the customer. The customer simply selects items to be purchased by the intermediary on their behalf from the seller (intermediary in the sales agreement).
In the case of the intermediary model, the real seller’s information must be provided in the terms and conditions. The total product price (including customs duties and taxes) should also be specified, along with any applicable procedures for product complaints or returns, if such procedures exist under the legal framework governing the concluded agreement. The terms and conditions should also contain information about who enters into the intermediary agreement, on whose behalf, and with which entity.
It’s worth noting that foreign regulations may not necessarily match Polish law’s equivalent constructs, such as warranties (product non-conformity) or the right to contract withdrawal. Consumers engaging in such transactions take on significant risk but may lack access to legal protection mechanisms.
The Office of Competition and Consumer Protection and the State Trade Inspectorate initiate proceedings against dishonest entrepreneurs who fail to fulfill all informational obligations while operating in the dropshipping model. Such actions carry the risk of significant administrative fines.
Additionally, in the intermediary model, entrepreneurs often encounter tax difficulties, particularly concerning VAT. In this regard, seeking individual tax interpretations is recommended to prevent unexpected tax audits.
Advantages of Dropshipping in Direct Sales Model
The primary advantage of dropshipping is saving on the transport of goods from the distributor to the store, which doesn’t need to maintain its own inventory. It also leads to lower costs for the entrepreneur since they only pay for products ordered from the wholesaler. There’s no need to import the entire store’s assortment immediately. This approach allows for better tax optimization planning as financial resources aren’t tied up in inventory, and lower costs impact income tax, while avoiding VAT registration.
Operating an online store in the dropshipping model eliminates the need to hire staff for simple technical tasks like packaging shipments and sending them via mail or private carriers. The wholesaler takes over all such activities.
In passing, it’s worth noting that the dropshipping model is an attractive solution for individuals operating unregistered businesses. This method automates the sale of goods or services and minimizes formalities.
Legal Aspects of the Terms and Conditions
Despite numerous advantages, it’s important to remember that the entrepreneur bears full responsibility towards customers for failing to fulfill obligations (e.g., providing GDPR-compliant information or delivering faulty products) unless they solely act as intermediaries. In such cases, however, all information about the contracting party and details regarding pricing, delivery, returns, etc., must be provided to the customer.
While documentation creation and dispute resolution can be outsourced to external firms, failure in this area exposes the entrepreneur to third-party claims. Therefore, it’s crucial to only collaborate with reputable, experienced firms, especially when addressing legal and regulatory matters. One of the most critical yet often overlooked aspects is the terms and conditions.
Terms and Conditions of an Online Dropshipping Store in Poland
Entrepreneurs operating online stores must take care of their terms and conditions. The minimum requirements are outlined in the law on the provision of electronic services. According to its provisions (Article 5 section 2 and Article 8 section 3), the terms and conditions must indicate:
- the entrepreneur’s electronic addresses;
- the first name and surname, place of residence, and address (for individual entrepreneurs) or the name or company name, registered office, and address (for companies);
- the type and scope of electronically provided services;
- the terms of providing electronically provided services;
- the terms of contract formation and termination for electronically provided services;
- the procedure for handling complaints.
In practice, online store terms and conditions are often much more comprehensive. Most entrepreneurs enable additional actions through the platform, not just order placement. These might include submitting reviews, creating user accounts, product reservations, BNPL payments, or opting into newsletters. All of these actions should be outlined in the terms and conditions.
Additionally, the terms of electronically provided services cover not only the platform itself but also the purchasing process, including order placement methods (through accounts or ad hoc without an account) and password requirements.
The terms and conditions of an online store typically include information about shipping methods and associated costs, as well as order placement procedures.
The terms and conditions must always be placed on the website in a conspicuous location for the recipient. As per Article 384 § 1 of the Civil Code, a template contract agreed by one of the parties, particularly general contract terms, contract templates, and regulations, binds the other party if it was delivered before the contract was concluded.
Furthermore, a template contract in electronic form should be delivered before the contract is concluded and in a way that allows for easy storage and retrieval in regular business operations.
Contract Formation and Termination Conditions, Claims, and Withdrawal from Contract
Crucial aspects of service descriptions include product complaints and the right to withdraw from a concluded contract.
Product Complaints in Dropshipping
Seller’s obligations presume that products will be delivered to the consumer in accordance with the contract. The new consumer protection law provisions primarily grant consumers the right to demand repair or replacement of the product at the entrepreneur’s expense. Consumers can demand a price reduction or contract withdrawal only if:
- the entrepreneur refused repair or replacement of the product or failed to ensure its conformity with the contract;
- non-conformity persists despite attempts to rectify it;
- the product’s defect is too significant to expect repair;
- the entrepreneur’s statements or circumstances indicate they won’t bring the product into conformity within a reasonable time or without excessive costs for the consumer.
The right to contract withdrawal is not granted if the entrepreneur disproves the presumption of the product’s non-conformity with the contract.
Similar rights are provided for consumers who purchase digital goods or services (e.g., computer games on the Steam platform). However, it’s the consumer’s responsibility to update the software. Neglecting to download an update, leading to the improper functioning of a digital product, precludes claims of defectiveness.
The entrepreneur should respond to a consumer’s complaint within 14 days of receiving it, as stipulated by Article 7a section 1 of the amended consumer rights law. After this period, it’s presumed the entrepreneur deemed the request justified.
It’s necessary to distinguish complaints from warranties, which are entirely voluntary. Sellers, manufacturers, importers, or distributors can offer warranties, defining the protection period and scope.
Considering the recent implementation of new consumer protection regulations, online stores should promptly update their terms and conditions. It’s advisable to entrust the unification of such documentation to an experienced law firm.
Contract Withdrawal in Dropshipping
Consumers have the right to withdraw from distance or off-premises contracts without stating a reason, and they can exercise this right within 14 days of receiving the product. A clear statement, such as an email with specific content or pre-prepared withdrawal forms increasingly offered by stores, suffices for withdrawal.
Reimbursement should occur immediately and no later than 14 days from the submission of the statement, using the same payment method employed for the purchase. Consumers bear no costs related to product return, unless they choose a different, more expensive delivery method.
It’s important to remember that the right of contract withdrawal is excluded for numerous product or service categories, including:
- custom-made or personalized products that cater to individualized consumer needs (e.g., custom-engraved crystal tableware);
- sealed goods that, for reasons of health or hygiene, are not suitable for return (e.g., medicines, dietary supplements);
- goods liable to deteriorate rapidly, e.g., vegetables, fruits, and unpasteurized preserves.
Of course, entrepreneurs don’t need to list the entire statutory catalog in their terms and conditions; it’s sufficient to adapt them to their business profile.
The entry into force of new regulations implementing EU directives necessitates swift adaptation for the e-commerce sector. The absence of or failure to update terms and conditions doesn’t only expose the store to potential customer disputes, but primarily to significant financial penalties imposed by the President of the Office of Competition and Consumer Protection (UOKiK). Entrepreneurs considering the intermediary model in dropshipping should approach this cautiously instead of direct sales.