Starting a dropshipping business is a great way to create income and take control of your life. You’ll get the opportunity to build a company and sell existing products to customers. Dropshipping can be a step forward if you plan to sell your own goods later, because dropshipping helps you practice and plan with minimal risk. You’re in control of the sales and marketing while avoiding inventory costs.
I mean, who doesn’t want a part of the $4.28 trillion eCommerce pie. So you might wonder “How do I start a dropshipping business?” In this article we’ll review knowledge, tips, and tools to understand if starting a dropshipping business is a good idea for you.
What is dropshipping?
Dropshipping is a business concept where you operate as a storefront without ever having stock in hand. Your business does sales and marketing like a traditional brick-and-mortar store or eCommerce shop. Once a customer makes a purchase, you send the order details to a partner who ships the goods to the customer.
Typically, you partner with a manufacturer or wholesaler. After the customer pays you, you pay the partner to use their inventory to fill the order. The supplier delivers from their warehouse right to the customer’s door. You don’t have to worry about packaging, transporting, or storage.
Dropshippers make money by charging a higher price for products than they buy it for. Negotiating lower purchase rates, turns the gross profits and gross margin into profits.
How does dropshipping work?
Dropshipping may seem complex at first, but the process is very straightforward. When you start a dropshipping business, you act as the middleman between a consumer and the manufacturer or wholesaler. The dropshipping business model relies on you to make it easy for the customer to buy a product. And the supplier can move large quantities of their inventory.
Customers pay you retail prices for the goods. You pay your supplier the wholesale rates. The difference allows you to run your operations, pay for marketing, and give yourself a nice paycheck each month.
Benefits of creating a dropshipping business
Dropshipping a lot of business advantages that make it a compelling option. A dropshipping business model makes sense if you want to try out a new product or industry without sinking a lot of startup capital. Let’s examine a few of them.
1. You don’t need a lot of capital
The best part is that you can start a dropshipping business with a small amount of money. Dropshipping has the potential to generate substantial revenue, but your upfront costs are small. You’ll need a website, eCommerce platform, and early marketing campaigns for customer acquisition.
You don’t need to worry about inventory and storage costs, fulfillment expenses, large teams, or supply chain experts. So, you can start a dropshipping business with less capital and you can reinvest what you earn more quickly.
2. Hardly any geographic restrictions
In the COVID era, few workplace demands are as high as the ability to work from anywhere. Dropshipping lets your team do just that. You’re managing a digital storefront and SaaS technology, meaning you don’t need any fixed location. If your partners handle returns you’ve outsourced all location-specific activities. All you really need is a reliable Internet connection for you and each employee or partner.
3. Pick your own products and change your catalogue
Some people believe flexibility is the greatest advantage of dropshipping. You test out a wide range of products in any niche, but you can switch, add, and adjust at a moment’s notice. Many dropshippers like to create multiple ecommerce stores. Then offer different product lines and products from their wholesaler partners.
Dropshipping gives you as much flexibility as you want to try new product ideas. You can work on specific categories or customer types. And you can try multiple marketing tactics and channels for customer acquisition. Plus, you’re never at risk of getting stuck with inventory if you ever need to pivot.
Starting a dropshipping business in 4 steps
Starting an online business can be stressful. Sourcing products, hiring staff, getting money to buy that inventory, finding customers, enticing people to buy, and then getting orders to people accurately with guarantees to protect your business. And most of that work is before you ever make your first sale! That’s exactly why so many people want to start a dropshipping business. With dropshipping you eliminate many steps that make starting a business difficult. Dropshipping is more affordable. Starting a dropshipping business really boils down to four steps.
1. Identify a market and choose a niche
It is necessary to define a target demographic and have the product ideas that speak to this group. You can target your audience directly or through their needs with others, such as kids’ products aimed at parents. To better identify a marketplace, do some search using Google Trends to understand a niche’s potential traffic and audience.
Find what you think you’ll enjoy selling and marketing. Then, look within that space to see if there’s an area where you have a strong or new product idea. Finally, find if there are products available for dropshipping in that niche.
SaleHoo’s list of wholesalers in dropships suggests that you should start with:
a non-seasonal product,
that leading brands do not dominate,
is cheap to ship,
and retails for at least $15.
In this market, you need to make sure you make money even if you have a slow start to sales. Once you’ve got some product ideas, look for relevant activity on social media, especially Reddit and Facebook.
The niche must be genuinely attractive but also laser-focused. A portfolio of products that aren’t focused can be challenging to market. If you’re not enthusiastic in your subject, then you will likely become discouraged. When you plan to start a successful dropshipping venture, it takes a lot of work. Explore your potential niches before you make a decision and give yourself room to experiment and be creative.
The right dropshipping business idea
The best dropshipping business ideas are profitable ones that you think you’ll enjoy. Fitness, fashion, jewelry, beauty supplies, sports gear, clutches, luggage, and other accessories are some of the constantly evolving niches. In these, many online retailers continue to enter and succeed because of the large markets and continued consumer demand for something new.
Based on our review of 2021 and 2022 sales in eCommerce, here are some areas to consider:
- Pet supplies. Even during the pandemic and other economic downturns, consumer spending on pets has stayed steady. Pet ownership is also at an all-time high.
- Kitchen supplies. With more people staying home and shifting their food budgets, there’s a demand for better kitchen supplies. The sourdough bread craze may have passed, but there’s always something new to take its place.
- Electric bicycles. We’ve seen a significant increase in interest in electric bicycles during the pandemic. However, it can be tough to ship an electric bike, so being a dropshipper may help you tap the market while avoiding big expenses.
- Home gym equipment. This is a niche that is almost always in demand, and it has only grown in recent years. The good thing is that you can carve a small niche here easily, targeting specific types of weights and equipment or specific types of people.
- Home office equipment. What’s good about this niche is that you have multiple targets. The expansion of home-based learning for school-age children means that the home office gear can now be targeted to adults and kids in most families.
2. Research the competition in your niche
A lot of dropshippers have gone wrong by looking for products with little rivalry. A niche without competition could mean there is a lack of demand. There are many reasons why some products tend not to have many competitors, such as high shipping costs or poor profits.
Remember that you’ll compete with other dropshipping services in addition to retailers like Walmart and Amazon. When there is a high demand, the business model is viable. This is a good sign that there is high demand in dropping shipping operations.
There are so many choices out there when trying to sell your product. Let demand be your guide, or you’ll probably not see many sales. Once you choose this profitable product you can dropship, then you can begin selling. Google searches and trends, social activity, the presence of other sellers, and your personal experience should all guide you to products and areas where there is an audience.
3. Build your eCommerce website
You don’t need a tech background to start your company. Many ecommerce platforms already exist. These have the store largely ready for you, including site functionality, services and plugins that support dropshipping. You’ll need a small budget to get started, but most eCommerce businesses begin with a mix of free and paid services, templates, and tools for their website.
Remember that design sells, so you will want to set some money set aside for web development and proper images. While design can be custom, you’ll want to use established tools as you get started.
For example, there are dropshipping plugins that help you find products and also help you integrate with supplier software and billing systems. That’ll make running your business easier. As you get established and start generating revenue, then you can investigate additional website customization.
A lot of dropshippers choose to start a personal webshop. It’s an excellent long-term way for making money online. It’s quite easy to get started online. If you have time to invest and want to be in your company for the long haul, then starting a store is a good alternative. SEO and influencer marketing are some of the most effective ways to draw customers for your store.
3 top eCommerce platforms for dropshipping
Shopify is one of the most popular ecommerce website platforms. You can use it perfectly for dropshipping. It gets high marks from customers for being user-friendly and has great support. Plus, there are tons of Shopify apps for dropshipping, finding suppliers, and managing customer interactions. Shopify plans start from roughly $29 to $299 monthly and beyond. Learn more here.
Roughly 30% of eCommerce sites use WooCommerce. The platform is free to use and easy to install. Woocommerce has a lot of existing plugins and customization add ons, and that’s where you start to see expenses of your platform. Thankfully, you can get started for free and most people can work well within the system. The requirement is that your existing site needs to be a WordPress site and you’ll need your own site hosting. See our Woocommerce vs Shopify comparison here.
Magento eCommerce is the enterprise version of the Magento platform. Owned by Adobe, it is for those of you willing to make a significant investment in your dropshipping store. Full-feature packages start at roughly $15,000. Magento Open Source is a free package, but most people will find it needs customization and some heavy development, which can generate significant costs. Learn more here.
4. Working with suppliers
If you want to start a dropshipping business remember it takes some paperwork. Depending on your business location, you may need to get a business license from the local government. In some places, an occupation permit is needed for starting a business from your house.
Always look up your local laws to determine what permits you’ll need, where you’ll pay sales taxes, and other regulations. A Sales Tax License and Seller’s license are often needed.
After that, it’s time to launch your eCommerce platform and start reaching out to suppliers to find someone with products you want to sell.
Dropshipping is a lucrative, worldwide business model, and that means many companies and services exist just to support you. One of the most helpful are dropshipping supplier platforms that connect you with products and people. You can use these to build relationships and expand products in your niche. Here are a few to consider:
- AliExpress Dropshipping. This marketplace has a large selection of products to buy in bulk. It’s free to start looking and building relationships, so you can try products without financial burdens. Many vendors on Alibaba have high-quality product images for their sites and provide you with these to make sales on your site easier.
- Oberlo. It can be tough to sort through large marketplaces like AliExpress. That’s why services like Oberlo help you sort and shift through AliExpress and then incorporate dropshipping goods directly into your store. Oberlo manages integrations and simplifies site management.
- CJDropshipping. This service helps you integrate dropshipping products into stores and websites, and it has free apps for platforms like Shopify. It’s a good tool if you want to offer products from small businesses and independent designers.
- SaleHoo. The service is a wholesaler supplier directory that’ll connect you directly with suppliers in multiple niches. It’s a big competitor to Alibaba because of its expanding reach.
4. Marketing your dropshipping business with everything you have
After you’ve found products and built a site, it’s time to market your dropshipping business. Marketing is how you start generating sales. When beginning your business, you’re likely on a strict budget. So, it’s time to start building your ground game and embrace spending some of that small budget you have. Go fast after the first sales, try different things that work (with small budgets), and double down on what works for you.
Here’s a brief overview of some of your top marketing channels. If you have a larger budget, look for more advanced options like sponsoring an influencer or larger paid promotions.
Email marketing for drop ship ecommerce
Email marketing remains one of the most effective methods of acquiring customers for any dropshipping store. There are multiple ways you can target people at each step of your sales funnel.
You’re going to need people to opt-in to your email campaigns. This means giving people a reason to share their email and sign up. A great tactic is through incentives like a discount code when they first join. Marketing automation tools help speed up your list growth. Some dropshippers will also buy email lists to start their sales (which may not be the best idea). It is smart to invest in email list building tools that automate many steps and capture visitor data.
Other good campaigns to create — this is now more possible directly in your eCommerce software like Shopify — include retargeting abandoned carts, re-engaging people with new deals, offering support after purchase, and asking for referrals or reviews.
Email marketing is easy to start. And there are many free and cheap email marketing tools that fit well with a starting ecommerce store. Look for help that’s geared specifically to you, such as this fashion email and marketing automation guide.
Blogs and content
Blogs still generate sales. As a part of Search Engine Optimization (SEO) people find your blog on your website and fall in love with your products. Or you can find content that your audience loves where you can advertise or sponsor.
Look for blogs and forums where you can participate and promote your dropshipping niche. There’s a lot of crossover here with your favorite social media, so looking at Facebook and Reddit may help you find what types of posts perform well.
It’s harder to create traction organically on social media nowadays, but it’s still possible. Some of the biggest eCommerce sales channels are Facebook and Instagram, though TikTok is taking off too. Reddit can be reliable for more established brands or if you have time to build and moderate a community.
A smart ecommerce business needs to have social media profiles on at least one of those platforms. Be consistent and eventually you’ll get more followers. Look for what you love from companies and try to emulate that.
The competitive nature of dropshipping means you need to advertise. That covers paid ads, especially search, social and video content. Take time, find and follow guides, and check your images and deals before you launch a campaign.
Determine what you can afford if you’re offering a discount. Use your search-related research earlier to determine keywords to advertise against on Google. And don’t forget new options like Google Shopping Ads that can help people see your products more quickly.
Finally, optimize for sales
The final consideration for starting your dropshipping business is how to make it more profitable. Here are three easy options that can lead you to success.
1. Less competitive pricing
When you run a successful dropshipping business the key is to generate profit with the difference between the price of goods you offer and the price your dropship suppliers charge. If you’re struggling to generate sales, review your pricing. You may be charging too much for a specific product, especially as an unknown store.
Look at what products you can afford to drop the sales price on for customers. Some dropshippers even use loss-leader tactics where a specific product gets most people “in the door” but is sold at a loss. That makes people shop more and the other items added to their carts are what generates your profit.
2. Outsmart and outsell the competition
If you want to separate yourself from thousands of other people thinking of beginning a dropshipping business. You’ll need a couple of tricks up your sleeves. Ways to be better. That starts by studying your competition and looking for gaps.
Ask yourself, “What makes me not want to buy from them?” It could be the website, images, poor customer support, or slow shipping times.
Target those disadvantages and offer something better. Solve the problem and promote your solution. If you’re struggling to find these issues, look at reviews and comments. See where people are upset and then overtake your rivals.
3. Find out what’s trending
If you’re a friend who always knows the latest trends, then dropshipping can be great for your personality. Even better is going for “drop surfing.” That’s a specific type of dropshipping where you identify what’s hot and trendy now and try to predict what’s next. This model means you take more risks but when you guess correctly, you’re positioned to capitalize on a trend as soon as it starts. There’s no guarantee of successfully understanding what’s next, but dropshipping is always about trying something new, taking chances, and capitalizing on new opportunities.
How to start a dropshipping business
Those are the steps for starting your dropshipping business this year. We welcome your thoughts and comments, and we wish you all good luck and happy selling!