10 Questions to Ask Yourself Before Starting a Dropshipping Business

The Philippine e-commerce scene is booming — millions of Filipinos now shop online every day. But while the dropshipping model seems simple on paper, launching a sustainable and profitable dropshipping business in the Philippines is anything but easy.

Behind every “no-inventory” success story is a series of smart decisions that minimize risks in logistics, finance, and legal compliance. To help aspiring entrepreneurs navigate this complex environment, here’s a 10-question self-assessment based on the Philippine Dropshipping Due Diligence Framework.

These questions are grouped into four pillars: Strategic Foundation, Operational Excellence, Regulatory and Financial Compliance, and Customer Experience and Scaling.

1. Is my chosen niche viable and defensible against competition?

Your niche determines everything — from marketing strategy to long-term profitability. High-demand categories like car accessories, home essentials, kitchen tools, and beauty products remain popular in the Philippines. However, oversaturated markets are vulnerable to intense price wars, especially against foreign suppliers with local warehouses (the so-called “China factor”).

👉 Choose niche, defensible products that rely on trust, uniqueness, or curation — such as eco-friendly items, specialty gadgets, or design-forward home goods. Compete on value and brand, not just price.

2. Have I created a realistic Profit & Loss (P&L) plan that includes local fees, taxes, and returns?

Many new dropshippers underestimate the true cost of doing business. Beyond supplier and platform fees, you must account for marketing spend, shipping costs, taxes, and especially Return-to-Origin (RTO) losses.

Given the Philippines’ high reliance on Cash on Delivery (COD), failed deliveries can severely hurt your margins. Include an RTO risk rate in your P&L model and calculate your Weighted Average Cost of Goods Sold (WACGS) to ensure sustainable pricing.

3. Have I vetted my suppliers based on reliability, not just price?

Your supplier is the backbone of your business. Delayed or damaged deliveries directly affect your brand reputation — not the supplier’s.

Use this simple checklist when vetting potential partners:

• Do they charge hidden drop fees or subscription costs?
• Do they have Minimum Order Quantity (MOQ) requirements?
• Do they provide real-time tracking and high-quality packaging?
• What is their return or refund policy?
• Can they provide product samples for quality verification?

In short: Choose consistency over cheapness.

4. How will I ensure fast inter-island shipping across the Philippines?

The Philippines’ geography — 7,000+ islands — makes logistics tricky. Long delivery times are one of the biggest reasons customers cancel orders.

To stay competitive, look for local dropshipping suppliers or international partners with warehouses in the Philippines. Services like LBC RUSH and Transportify can help ensure faster inter-island deliveries.

Speed often beats cost. A slightly higher shipping fee is worth it if it prevents RTOs and boosts customer satisfaction.

5. What is my plan to manage high Cash-on-Delivery (COD) failure rates?

Since only about 8% of Filipinos have credit cards, COD remains dominant — but risky. Failed COD orders mean wasted shipping costs and returned items.

To manage COD efficiently:

• Add a small COD fee (₱50 is common) to discourage impulsive buyers.
• Offer discounts or rewards for prepaid orders via GCash or Maya.
• Require SMS or phone confirmation before dispatch.
• Work with couriers that offer tracking and real-time updates.

These measures help reduce COD risks and filter out low-intent buyers.

6. Am I legally registered with the DTI and BIR?

Operating legally isn’t optional — it’s essential. You’ll need:

• DTI Business Name Registration (BNRS) for your business identity.
• BIR Registration (Form 1901) and Certificate of Registration (Form 2303) to pay taxes and issue receipts.

Once registered, you can open formal business bank accounts and activate digital payment gateways. Without these, you’ll be stuck relying on risky COD transactions.

7. Do I understand how customs duties and local taxes affect my business?

If you’re sourcing internationally, imports above the $800 threshold may be subject to customs fees. To avoid delivery refusal and bad reviews, adopt a Delivered Duty Paid (DDP) model — you pay all customs charges upfront and include them in your product pricing.

This transparency improves the customer experience and protects your brand from unexpected costs or delayed deliveries.

8. Have I partnered with reliable local payment gateways?

To scale sustainably, integrate secure payment options like PayMongo, GCash, and Maya. These platforms require your DTI and BIR documents to activate business accounts.

Having verified accounts allows you to:
✅ Accept online payments safely
✅ Reduce COD dependence
✅ Build customer trust

9. How will I maintain great customer service despite not handling fulfillment?

Even if you don’t pack or ship the products, you are still the seller of record — and responsible for all customer communications, returns, and disputes.

Build strong trust by:

• Having clear shipping and return policies.
• Maintaining an FAQ section to answer common questions.
• Ensuring accurate, detailed product descriptions.
• Providing responsive customer support, especially for complaints.

Customer service isn’t just an afterthought — it’s your brand’s shield against supplier or courier errors.

10. Is my platform strategy (Shopee vs. my own store) scalable for the long term?

Marketplaces like Shopee and Lazada are great for testing products and gaining quick exposure. However, long-term success comes from owning your brand and customer data through an independent store (e.g., Shopify).

A smart approach is to:

1. Start on marketplaces to validate demand.
2. Gradually drive traffic to your own branded store.

Owning your storefront gives you control over pricing, customer loyalty, and long-term profitability.

Final Thoughts

Dropshipping in the Philippines is not just about finding trending products — it’s about strategic risk management.

Ask yourself these ten questions honestly before launching, and you’ll be ahead of most beginners who jump in blindly.

✅ Choose a niche that’s defensible.
✅ Model your P&L realistically.
✅ Prioritize reliable suppliers and fast logistics.
✅ Legalize your business early.
✅ Invest in customer service and scalable platforms.

When done right, dropshipping can be a rewarding gateway to Philippine e-commerce success — but only for those who plan, prepare, and persevere.