The ‘work from home’ trend is one thing that most of us have lived through during the Covid-19 crisis. This has given many people flexibility and an opportunity to maintain a perfect work-life balance that the majority of us haven’t been able to experience earlier.
With this in mind, establishing a dropshipping business is likely to be one of the best options for those looking to generate a stream of income for themselves.
But similar to anything else, starting and running a dropshipping business comes with its challenges. While there are many benefits of starting a dropshipping business as there’s no stock to store and products to ship, it’s still not something that can make you rich overnight.
Especially if you don’t avoid the mistakes related to payments, problems can grow quickly. We know it’s easy to get started with a dropshipping business model. But here, it is crucial to understand that it works the same way as any other physical business. There are customers, and you have to invest in them to build your reputation.
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PayPal Dropshipping Explained
Paypal is a prominent payment gateway that facilitates the global transfer of money from one party to another. If your account receives too many disputes, then you’ll end up getting your account banned.
Fortunately, you can avoid this issue by keeping your customers happy and creating a healthy PayPal profile.
If you’re using PayPal dropshipping for your business and want to learn more about why PayPal bans dropshipping stores and how you can avoid this issue, then you have come to the right place.
In this post, we’ll help you understand how you can correctly use Paypal for dropshipping. So follow along!
Why Is PayPal the Best Payment Solution For Dropshipping Stores?
Better Conversions
Paypal is a safe and reliable payment platform designed to build an unparalleled customer experience. One large dropshipper sold more than $100M of inventory out of which up to 43% were paid through Paypal.
Research suggests that integrating PayPal as a payment option has proven to increase conversions by a massive 7%-18%.
Did you know our conversion add-ons are also designed to boost traffic and sales? They’re easy to activate and deliver real-time results without needing to write a single line of code.
Global Coverage
Dropshipping is quickly becoming an integral part of an ecommerce business model. Credit cards are not popular in many countries.
Paypal enables you to spread your reach to those countries that want to embrace online payments without needing customers to provide their credit card info.
Seller-Friendly
With PayPal, sellers do not have to worry about anything. Whether it’s currency conversion or security, PayPal has got you covered.
Dropshipping Isn’t Prohibited
Unlike other payment options, such as Stripe that do not support dropshipping businesses, Paypal is fully compatible with the dropshipping business model.
All in all, PayPal is an effective payment solution for dropshipping stores. You must have seen many dropshippers spreading negativity about Paypal. But the fact is that if you do things right, you’ll face no hurdles at all.
Why Does Paypal Ban Dropshipping Stores?
Similar to any other online payment company, PayPal also wants to maintain its reputation as one of the safest payment solutions available online.
Since many dropshipping stores don’t care much about the products, packaging, and shipment, they end up having unhappy customers who start a dispute on PayPal after having a bad experience with the store.
In addition to that, some customers also initiate a dispute because of a broken or poor-quality product.
Here are some of the reasons why dropshipping stores are at a greater risk at PayPal.
No Tracking Info
As an online business dealing with dropshipping products, you’re by default considered as an ecommerce entity by Paypal. For Paypal, your nature of business demands you to ship different products from your warehouse to the buyers.
But when PayPal finds that you’re not keeping track of your customer’s shipping information in your account, they start investigating the details available on your website, including product categories and disputes your customers have started against their orders.
As a result, most dropshipping stores end up getting banned by Paypal. Once their account gets restricted, they’re no longer able to withdraw cash from their PayPal account.
Solution: There’s a PayPal tracking code app that you can use to automatically generate tracking codes for each order.
Lack Of Inventory
As mentioned above, PayPal considers every online business as an ecommerce store (that has a warehouse and a personalized shipping and packaging process). They expect your store to have an inventory and a warehouse.
Since the idea of dropshipping revolves around a business model that does not have to hold inventory, dropshipping is seen as a risky business.
Many times you get a reply stating “the type of business you’re in is risky,” and you cannot use Paypal.
Paypal being a popular payment company doesn’t want to engage in any sort of legal charges and lawsuits. They always want to play safe and prefer collaborating with companies that have product and shipment evidence.
Lack Of Documentation
When you start a dropshipping store, you’re supposed to use a PayPal business account. To sign up for this account, you have to provide your legal business name along with some other details, including your business number and essential business documents.
The Dropshipping business model, because of its uncomplicated and straightforward structure doesn’t require dropshippers to have this documentation.
That goes without saying that when you’re not able to present your essential business documentation as evidence, the account ends up being banned.
Make sure you get yourself registered and have all of your essential business documentation handy before you sign up on Paypal.
Evidence Of Identity
Paypal takes the information on your website very seriously. However, some dropshippers choose to display the wrong information on their website. Most of them lie about the location of the company.
Trying to provide wrong information about location and proof of identity may result in getting your account banned.
Disputes
Paypal is keen on how you handle your customers and the types of products they’re receiving. Dropshipping stores, because of their dependency on suppliers for shipping, inventory, and product quality do face conflicts and disputes regarding broken/damaged products, products not as described/shown, and other delivery-related issues.
Customers can file complaints with the hope of getting a refund if they have, say, an email conversation as proof. As a result, PayPal will restrict your account until your conflict with that customer is resolved.
Things You Must Do To Prevent Getting Banned By Paypal
Set Up A Paypal Business Account
The process starts by setting up your Paypal business account. Even if you have a personal PayPal account, just ensure you invest time in creating a dedicated business account for your dropshipping store.
With a business account, you can submit essential business documentation, which validates that you’re not a scam.
Make sure you fill in all the required details, including information about stakeholders, legal info, etc. We’d suggest you also upload your bank statements to help PayPal see that you run a real business.
Carefully go through Paypal’s Acceptable Use Policy to know the rules.
Provide Legal Documentation
When you create a PayPal business account, you’ll be required to submit your name and business name only.
But what if you have confronted a dispute after some time? In that case, PayPal will ask you to provide additional documentation. The biggest mistake dropshippers make is they do not keep their legal documentation and proof of registration handy.
Some people even try to submit fake documents.
Needless to say, such activities will result in an immediate ban on your account.
To prevent your account from getting banned by PayPal, make sure you create an account from the current one you’re currently living in. Also, get in touch with your legal advisor to seek help regarding legal documentation and taxes.
Provide Tracking Info
Once you have your legal documentation sorted, it’s time to get your tracking details in place. Here, you must choose a shipping method that allows you to track and trace a tracking number.
You can then include that number in its corresponding order while entering details in Paypal.
With a tracking number, you provide PayPal shipping evidence. Also, it will reassure your customers that their parcel is in the delivery process and will arrive soon.
Provide Clear Information About Delivery Times
Another effective way to limit PayPal dropshipping bans is by reducing the number of disputes you have on your account.
There is a steep gap between customers’ expectations and reality. The more you reduce this gap, the better.
Unlike other ecommerce businesses that stock their inventory, most of the dropshippers get their products shipped from China or Poland. Even if you’re dropshipping from the US, you cannot quote anything lesser than a 10-day delivery schedule. But customers from the same country expect their products to be delivered within 5-6 days.
The biggest challenge for dropshippers, in that case, is to deal with disputes that have been reported by their customers directly to Paypal. They don’t even get an opportunity to explain their situation to their customers.
That is why you must always provide accurate information and delivery dates to your customers. Try to be as transparent as possible. You can also send a follow-up email or a text message to keep your customers informed.
Again, providing your customers with a tracking number will help them self-track the progress of their deliveries.
Sell Quality Products To Avoid Conflicts
In addition to shipping conflicts, product quality is another factor that causes conflicts and disputes.
Since dropshippers do not get to see the products they’re selling, they’re not sure about how they look.
But, if you’re building a serious dropshipping business, you must be sure about the quality and authenticity of your products.
Make sure you carefully examine the samples you have got from your suppliers. It’s also crucial to know about each product’s features and specifications so that you can better guide your customers.
To build a good reputation, it’s also essential to invest your time in creating custom product descriptions. You can also add HD images and videos highlighting the real benefits of your products.
That goes without saying, you should pick the best supplier for your store that has good ratings. Last but not least, carefully go through Paypal’s Acceptable Use Policy (AUP) and adhere to it to avoid future complications.
Provide Excellent Customer Service
For any dropshipping business, customers are certainly the most valuable asset. Complaints and disputes can ruin your reputation. For this, you have to develop excellent customer relationships.
Try to resolve complaints and disputes at your earliest to prevent them from escalating. Integrate a live chat support system to make it easy for your customers to contact you.
Handle Your Disputes Wisely
Simply put, a dispute is a process whereby a customer can open a dialogue for one of two reasons.
- INR, also known as Item not received
- SNAD, also known as, significantly not as described
First and most importantly, you have to ensure that you respond to the dispute as quickly as possible.
The next step is to submit the tracking number by clicking the ‘Add Tracking Info’ tab available on your dispute page. You’re also required to answer your buyer’s dispute with a text message.
Wrap Up
The general misconception about Paypal is that the platform doesn’t support dropshippers.
But that’s not correct!
With impeccable customer service and quality products, there’s a reduced chance of getting a dispute. We’d suggest you check the official Paypal website and go through their FAQ section to get answers to questions you have in mind. We wish you all the very best for your dropshipping journey.
Check out our guide on How to Build Your 7-figure Dropshipping Business.
Llouela Asim