Dropshipping is one of the most popular e-commerce models because it allows you to sell products without needing to store inventory. This means you don’t need to hold stock yourself—you forward the order to the supplier, who then ships the product directly to the customer. Suppose you’re interested in starting a dropshipping business in Croatia. In that case, our guide covers all the details to help you avoid mistakes, find reliable suppliers, and set up a profitable online store.

What is Dropshipping and How Does It Work?

Although still relatively unknown in this region, dropshipping is a simple process made up of a few key steps. Let’s say you sell traditional Japanese clothing and run an online shop where customers can place orders. When a customer selects a product—such as a kimono—you forward the order to your supplier or manufacturer. They then ship the item directly to the customer, and you earn a profit from the difference between the retail and wholesale prices. The key advantage of dropshipping is that you don’t bear any warehousing or logistics costs, so your entire focus can be on marketing and sales.

Pros and Cons of the Dropshipping Model

Low startup costs are a major advantage since you don’t need to purchase inventory upfront. The first step in launching your business is usually setting up an online store, making the initial setup fairly simple. Working from anywhere is ideal for digital entrepreneurs. Another benefit is the wide range of products available—you can easily adjust your product offering based on demand.

On the downside, profit margins are usually low, meaning your earnings per product may be small. Based on our experience, most issues in the purchasing process stem from poor packaging or inadequate delivery. Although you may not be directly responsible, customers will typically hold you accountable for delays or faulty deliveries. Returns and complaints can also be more complex to manage. Additionally, shipping times may be longer—especially if you work with Chinese suppliers, where delivery can take up to 40 days.

Choosing a Niche

Although it may seem that targeting a broader market is a safer bet, that’s not necessarily true. It’s best to focus on specific products and analyze the demand for them. There are numerous marketing tools to help you research market trends—Google Trends and SEMrush are among the simpler ones for checking search volumes. It’s also important to analyze your competition and determine your unique value proposition (UVP)—what sets you apart. For example, if you’re selling furniture, focus on premium wooden pieces.

Finding a Reliable Supplier

Finding a high-quality supplier is a crucial part of the dropshipping process. This is the key link between you and the customer. It’s essential to choose a reliable partner who will meet delivery deadlines and offer accurate shipment tracking. This reduces the risk of returns, complaints, dissatisfied customers, and negative reviews. A good supplier also ensures consistent product quality and stock levels, and you can usually test this before committing to a full order. Transparency is vital too—make sure you have clear communication about costs, customs fees, and other potential charges. Before settling on a supplier, check their reviews and what options they offer.

Building a Webshop

In this model, one of the most important aspects is having a professional-looking webshop. Since you don’t have physical products in dropshipping, your website is the first and most important point of contact with customers. In addition to making a good visual first impression and ensuring the site functions well, pay attention to a simple and secure checkout process. Poor user experience can lead to higher bounce rates and lower conversion. Unhappy customers often leave bad Google reviews as well.

Marketing and Advertising

Once you’ve chosen your sales platform, it’s important to determine the best marketing channels to reach your audience. Clearly define your target audience and identify where they spend their time online. Businesses often try to be present on every channel, only to fall short on delivering relevant content. On the other hand, if your target audience is under 25 and you have a limited budget, there’s no point in advertising on Facebook—it’s better to focus on Instagram and TikTok. Don’t forget about SEO and content marketing, especially if you don’t have a budget for Google Ads campaigns. While organic reach takes longer to develop, it’s free and often more sustainable than paid ads.

Pricing and Profit Margins

Before setting your prices and profit margins, be sure to research the market. Check what your competitors offer and at what price. When defining your product prices, consider the 3x rule—set your retail price at three times your wholesale cost to cover marketing expenses and still make a profit. For example, if a product costs you €50, sell it for €150. Try different prices to find the optimal selling point. Including shipping costs in the product price can also improve your conversion rate.

Handling Shipping and Returns

Shipping is a crucial element in the sales process. This is often where issues arise—delays, damaged goods, etc. If you’re operating within Europe, it’s recommended to work with suppliers who have EU warehouses to reduce delivery times to 3–7 days instead of 20–40. Don’t forget to define your return policy. Consider making the customer responsible for return shipping costs if the item is not defective. Automating order tracking can also significantly simplify the entire process.

Legal Framework for Dropshipping in Croatia

To start a legal dropshipping business, you first need to register as a sole proprietor (obrt) or company. If you expect low turnover, you can start with a flat-rate sole proprietorship (paušalni obrt). Just keep in mind that if your annual revenue exceeds €39,816.84, you are required to register for VAT. You can read more in our blogs Webshop Guide: Everything You Need to Know Before Starting an Online Store and Legal Regulations for Online Stores: Registration, Regulations, and MTU.

Manage a succesful dropshipping business

If you focus on a quality niche, thoroughly research the market and competition to offer more than they do, work with reliable suppliers, and have a professional webshop—you’ve already made great strides toward a successful dropshipping business. Just don’t forget the legal requirements and marketing tools along the way.