Dropshipping and White Labelling

Your Legal Partner For Dropshipping and White Labelling

Dropshipping is typically an arrangement that allows a merchant business to operate free from the constraints of holding stock by leaving the physical stock and supply arrangements to be managed by a third party, usually the manufacturer of the goods. White labelling, on the other hand, is an arrangement whereby a business engages a manufacturer to produce generic goods which the business will brand and sell as its own to consumers. More business services include:

Tinsdills recently expanded this department following an acquisition of Grindeys Solicitors

Specialist Advice For All Dropshipping and White Labelling Matters

Dropshipping is a term often loosely applied to cover a variety of evolving supply chain models and can arise at different points in the supply chain (for example, manufacturer to distributor, distributor to merchant or manufacturer to merchant). However, dropshipping is typically an arrangement that allows a merchant business to operate free from the constraints of holding stock by leaving the physical stock and supply arrangements to be managed by a third party, usually the manufacturer of the goods.

One of the key areas of concern will be to establish how responsibility for compliance with consumer law will be apportioned between the parties. In a drop shipping arrangement the manufacturer will inevitably be involved and in control of processes and procedures that are regulated but where regulatory compliance is the responsibility of the merchant. For instance, many dropshipping arrangements will involve the manufacturer dealing with many (if not most) of the aspects of order fulfilment, from packing and delivery to handling complaints and returns.

Branding plays an important role in the resale of goods. Having a recognisable brand goes a long way towards establishing consistency in goods and garnering consumer trust in your business. However, it is not always commercially viable or desirable to manufacture your own goods (particularly when seeking to provide a wide range). In those cases, white labelling may be an option. A white labelling agreement is entered into between a seller and manufacturer for the manufacturing of generic products by the manufacturer, to be branded and sold by the seller. 

Our team of specialist business law solicitors is able to assist with all aspects of drop shipping and white labelling arrangements, from negotiating the terms of the arrangement to preparing the relevant agreements.

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    Dropshipping is an evolving supply chain model but often refers to an arrangement between a seller and manufacturer (or another third party) which allows the seller to operate its sale of goods business free from the constraints of holding stock by leaving the physical stock with another party. The supply arrangements for goods are usually managed by a third party, often the manufacturer of the goods.

    It will be for the parties to decide how much responsibility for consumer law compliance is apportioned to each of them. However, on the basis that the manufacturer of goods is often in control of much of the process (usually, packaging and delivery of goods as well as returns and complaints) the manufacturer will often also be in control of whether the merchant business is compliant with its consumer law duties. As such, the merchant business will often want the manufacturer to have the burden of ensuring compliance under the dropshipping agreement.

    It will depend on the provisions of the white labelling agreement whether you can make any changes to the goods themselves. However, the manufacturer of the generic goods will typically insist that the white labelling agreement expressly prohibits the modification of any goods or other materials supplied. These provisions not only protect the manufacturer’s intellectual property rights in the goods themselves but also mitigates risk in respect of any potential product liability claims. 

    Caroline, Becky and the team acted on our behalf in the management buyout of our shares in our commercial refrigeration and ware washing goods distribution company. It was a complicated transaction under which there were various parties including finance, numerous lawyers, accountants and tax advisers. The team negotiated a fair deal for us and were supportive, explained complex matters in simple jargon-free language and we felt confident in their ability in acting on our behalf. We would like to thank the team at Tinsdills for their hard work, dedication, help and patience throughout the transaction.”

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