Dropshipping seems to be the preferred business model for the 21st-century entrepreneur for many reasons. You can set up an online store in less than a day, with an initial investment of just a few dollars. It’s also probably the most flexible way to make money through online sales.
In this article, we’re going to show you how to start a dropshipping business. There’s a lot to go over, but overall it’s less demanding than other e-commerce ventures. If you carefully go through each step, you'll be well prepared to generate revenue quickly.
Dropshipping
With a dropshipping business model, you get to call all the shots. That means you’re entirely responsible for building your brand from scratch. You decide what kind of items you’re going to sell and how and where to promote them. Also, you have much more control of shipping costs, so you can aim for solid profit margins.
A dropshipping company can be operated from any location. There's no need for an office, a factory, or even any workers. As a result, you’re able to focus on expanding your company rather than worrying about inventory and overheads. And since the overheads don’t rise linearly with revenue, dropshipping is one of the most flexible e-commerce market models available.
Nowadays, there are hundreds of resources you can turn to for setting up an e-commerce shop. The best choice is determined by many factors. Mainly, you have to think about your budget, the productivity level, and the extensibility of your e-commerce platform.
But before I move on to the more complex stuff, let’s start with the basics – what is dropshipping actually?
What Is Dropshipping?
Simply put, dropshipping is an order-fulfillment method that allows store owners to sell directly to the customer without stocking any product. When a person orders a product from a dropshipping shop, it is sent directly to them from a third-party seller. They pay the retail price, while you cover the selling price of the distributors. The difference is your profit.
Because you don't have to spend money on inventory, starting a dropshipped online shop is virtually free. In reality, you can start your business with just a couple of bucks by using a free open source shopping cart like WooCommerce.
All you need is a website and credit card processing to start taking orders right away. From there on, it boils down to marketing strategies, product development, and, of course, networking.
Dropshipping Beginner FAQ
One of the most common questions is – is dropshipping legal? The answer is yes; drop shipping is entirely legal as long as you receive the necessary vendor permits. After all, a dropshipping company is similar to every other online business. The main distinction is that the supplier handles the delivery while you take care of the orders. Many major corporations, such as Target, use dropshipping as an external distribution channel.
If you're setting up a dropshipping website, rest assured it's 100% legitimate without restrictive regulations. Just make sure you have a local business license is required as well as a seller's permit.
How to Earn Money With Dropshipping
Compared to a conventional online business, dropshipping has a significantly smaller profit margin. Dropshipping margins range anywhere from 10% to 30%. However, depending on the sort of merchandise you sell, it can vary greatly. For example, some more successful entrepreneurs can make it to 50-60% margins.
Overall, the profit margins can be determined by the level of competition and how crowded the industry is. Generally speaking, you can expect a 10-30% margin for an average dropshipping shop. The great thing about this business model is that your e-commerce company will grow indefinitely once you gain momentum. You're able to channel your resources on ads instead of carrying inventory or manually shipping orders.
If you put in the time and get lucky with the right product, you could make anywhere from $200 to $3,000 in the first month or two of setting up your shop. Don’t be afraid to get ambitious – as long as you perform diligently and adjust to any curveballs that come your way.
Your average income is determined by one significant factor: the number of quality suppliers you can find. It only takes one successful product for you to start making five figures a month. You won't get a big win from every supplier, but the more partnerships you cultivate, the bigger your chances are. The suppliers you secure would have a direct relationship with your profits.
Steps to Dropshipping
In the following few paragraphs, we’ll show you how to start a dropshipping business by following these essential steps:
- Selecting a lucrative niche
- Finding a reputable dropshipping supplier
- Building a website
- Creating a PLP page
- Using paid ads and social media platforms for the promotion
1. Choosing a Niche
You can't go wrong with a dropshipping niche that's already proved to be successful. If you want to start an e-commerce company with the best chance of success, there’s nothing wrong with playing it safe.
According to SaleHoo, one of the leading dropshipping companies, these are the most lucrative niches for 2021:
- Health and self-care
- Clothes and accessories
- Baby products
- Outdoor equipment
- Jewelry
- Watches
- Smartphone, TV, and camera accessories
- Gamer gear
You should also look into sub-niches while researching dropshipping product concepts. For example, if you mainly deal with yoga equipment, why not include meditation music and other associated interests in your product line? The sub-niches you have can expand the expected number of potential buyers.
However, it doesn't matter how brilliant your product is if there isn't a need for it. You'll have a hard time making any profit if no one wants to buy your stuff!
Every self-made entrepreneur will tell you it's much easier to meet current demands than to generate one. That’s why choosing a niche is vital when it comes to starting a dropshipping business. Fortunately, there’s no shortage of online tools you can use to calculate the demand for your particular product.
Online Tools
Google Keyword Planner
The easiest way to assess the level of interest for a particular product is to look at its appearance on search engines. And as luck would have it, Google has a tool that renders this type of info for free. Keyword Planner is an excellent resource for all online business owners, especially ones that deal in dropshipping.
All you have to do is set up a Google Ads account and go to the official Keyword Planner website. Simply type a word or phrase, and it will tell you how many people are looking for it each month. Keyword Planner also allows you to choose between broad, expression, and exact-match categories when reporting search volumes. It can especially come in handy when setting up a marketing strategy since it provides insight into the average cost of ads per keyword search.
Google Trends
Although the keyword tool is helpful for raw search data, many business owners prefer Google Trends for a more in-depth analysis.
Google Trends provides information not included in Google's Keyword Planner, such as reports on search interest fluctuation over time. Ideally, the niche you're joining should continually be expanding, and Trends will tell you if that's the case.
You'll also be able to see a list of related searches, as well as the most frequently asked questions. When it comes to marketing and SEO, focusing on these elements can make a world of difference.
Facebook Audience Insight
Facebook is the world's most popular social media platform, with over 2.23 billion monthly active users. According to statistics, the average adult in the United States spends almost 40 minutes per day scrolling through News Feed. It makes sense to use those numbers to your advantage when trying to find the perfect dropshipping niche.
Facebook Audience Insights is a fantastic tool for finding niche audiences and patterns for dropshipping products. The free tool allows you to learn more about your target audience on Facebook. It collects data from users to determine the size of a possible dropshipping niche and the pertinent preferences.
You can use Facebook Audience Insights to dig up essential information like demographics, location, activity, and page likes.
Tips for Finding a Good Niche
While there are no particular rules to choosing a niche, we can offer some crumbs of wisdom to help you decide:
Look Into Niches With a Lot of Accessories
Most merchants earn just around 5% to 10% from products alone. The accessories game is where the real money comes in, especially if you're dealing with tech items like smartphones or smart TVs.
Look for Fashionable Items That Aren't Available in Your Region
You'd probably go to the nearest Home Depot or Lowe's if you wanted garden equipment. Where will you go to buy security devices or magicians' props? The internet, of course. Choose niche brands that are hard to come by in your region, and you'll be able to reach the overwhelming majority of your consumers.
Choose Niches With Low Turnover Rates
If your product listing is continually evolving, you'll waste time and money on constantly updating your catalog and online shop. Selling a low-turnover product line allows you to invest in an information-rich website that can last for years.
No one knows your product better than you. Sure, there are many tricks of the trade, and turning to more experienced sellers is always a good idea. However, the only way to sharpen your instincts is by learning to research on your own.
2. Find Suppliers for Your Products
Choosing the right supplier is the essential part of starting a dropshipping company. Without distributors, your product won't be able to reach the customer; it can't literally ‘sell itself.’ The supplier-seller relationship is the backbone of a successful dropshipping business.
Top-tier suppliers also offer the services of experienced sales representatives. Their input is often invaluable since they’re well-versed in their business and product lines. This is especially beneficial if you're opening a store in a niche you're unfamiliar with.
When figuring out how to start a dropshipping business, this is the most significant learning hump. Luckily, there’s no shortage of reliable suppliers who are lenient toward startups. But how do you even get in touch with one? We’ll explain the basics, starting with how to separate the real deal from potential scammers.
How to Spot a Real Dropshipping Supplier
You'll need a dependable and effective supplier to make your dropshipping company successful. Since they’re the ones that store the product and distribute it to consumers, think of them as the business engine.
For that reason, before signing an agreement, you have to make sure they’re trustworthy. Dealing with flakey dropshippers has resulted in the premature death of several startups.
It's difficult to know who to trust, especially if you’re new to the industry. However, there are a few red flags to watch out for, such as bad ratings, negative comments, and low quantity goods.
If a supplier demands monthly or recurring payments, you might want to steer clear. Ongoing expenses may indicate they’re acting as a member of a directory rather than an independent party.
It's common for pre-order fees to vary based on the size or complexity of an order. Suppliers that demand higher-than-normal pre-order prices should also be avoided.
Another thing you should look out for when selecting a dropship supplier is the minimum order requirement. An efficient dropshipping company can usually charge a flat delivery fee and fill-in orders as they arrive. Suppliers that fail to do so are not the best choice since they’re more suited for bulk shipping.
All in all, a professional supplier will tell you their business model upfront and adhere to it without fault. They won't ask you for any monthly fees for their services and won't hesitate to sign a contract. If you notice any of the aforementioned red flags, maybe keep looking.
How Do You Find Dropship Suppliers?
The answer is simple – open your laptop and start digging. Research which dropshipping suppliers are available and which ones better serve your needs based on the goods you plan to sell.
Depending on whether you're dropshipping outside the US or catering to local clients, you may need to pick between a domestic and an international supplier. You'll need to do your homework when buying raw materials and calculate delivery times and activity prospects.
Some of the top suppliers include:
Each of these platforms has proven its worth by providing high-quality service to millions of dropshipping companies. If you’re just putting your foot forward in the world of e-commerce, you’ll probably rely heavily on your supplier. That’s why you should turn to established industry names, at least in the first few months.
Pro Tip: Request samples from the top two or three potential suppliers. Test their service level, shipping dates, packaging, and any other supplier-related issues you might have so that you are delighted with your decision.
One of the most common fears is picking up the phone and calling to inquire about their service when it comes to suppliers. Sure, you can always send an email, but it’s much more informative to have an actual conversation, as terrifying as it sounds.
You'll most certainly be greeted by someone polite and eager to answer your questions. Here's a trick to make it easier: write down your questions before you make the call. It may sound silly, but it’ll give you the confidence you need to be more assertive.
3. Build Your Site
You've picked a niche; you found a supplier, now it's time to talk shop – an online shop that is. As mentioned, there are many different platforms you can use to build your website. Assuming this is your first dropshipping endeavor, you’re probably looking to save up as much as you can. With that in mind, let’s introduce you to WordPress e-commerce plugins.
WordPress
You can build your full-featured e-commerce site by using WordPress. There’s no real need to hire an agency or a website developer if you have a clear vision of your brand. With WordPress, you’re free to choose the theme, the look, and the layout of your online shop. You can even incorporate plugins with exclusive features that’ll improve the user experience. WordPress is known for its impressive library, which of course, includes e-commerce extensions. The best thing is – they’re all pretty cheap.
WooCommerce
WooCommerce is a top choice for WordPress plugins. The e-commerce extension can transform any website into a thriving online shop. It's an open-source site, which makes it suitable for budget-conscious entrepreneurs. However, you still have to pay for stuff like hosting, a domain name, and security features.
So, why WooCommerce instead of Shopify? WooCommerce, like WordPress, is a more beginner-friendly alternative. It's free to use, and the plugins are surprisingly accessible, allowing you to expand your store's features at a low cost.
There are over 50,000 plugins to pick from, helping you build a one-of-a-kind website with few hiccups. The extensions cost an average of $39 each, which is incredible compared to Shopify's fixed-priced plans and pricey applications.
Another advantage is the absence of transaction fees. There’s no third-party payment portal, unlike Shopify. WooCommerce makes better sense if you're selling a variety of goods. It's also more appealing for sellers that want to have complete creative control when it comes to their online shop.
4. Create Product Listings for Site
A product listing page (PLP) contains items organized by category or search demand. This page is an integral part of the e-commerce experience because it directs users to product description sites, reeling them to purchase.
PLPs, also known as ‘category sites,’ are metadata-rich. Since each product links back to a category page, it significantly impacts SEO rankings and internal link-building strategies. Nowadays, most e-commerce traffic is directed to product listing pages via email, social media, or paid advertisements.
Product listing sites can be improved in a variety of areas with optimization and personalization. Make sure to include product marketing text focused on conversion for each product. Companies typically include the item name, price (or range), and available colors below each product on a PLP. Some merchants even have a ‘Quick View’ feature on their desktop, allowing shoppers to open a popup with more product information. It gives them a better look into the item without ever leaving the listing page.
Include a Blog
If you want your dropshipping site to stand out, you have to include a blog. The unique content can make your brand more recognizable and increase the demand for your product.
Also, a great blog will help you get organic traffic from search engines. With every published article, you create a new tab on your website. The more blog posts you upload, the more page views you’re likely to have.
Furthermore, Search Engine Optimization improves as you continue to add new content to your dropshipping store. It's a well-known fact that these strategies don't produce immediate results; however, they will pay off in the long run.
After your latest blog post is published, it’s perpetually indexed by web crawlers all over the web. As a result, you continue to receive activity (and requests) months after it was published.
Monthly Activities
Of course, building a website is a long-term process. It requires a lot of maintenance and optimization. The grind never ends, so if you don't want to fall behind, make sure to do the following:
Grow Your Blog Each Month
Always add new content. The richer your blog, the higher the traffic.
A/B Test With New Products and Different Pricing
If a high percentage of buyers end up abandoning the cart, you should run this test to determine the problem areas in your marketing campaign. Simply put, split testing simultaneously displays two variations of the same web page to various segments of website users. You can then compare which variant drives further conversions and stick with that one.
Grow an Email Database and Do Email Marketing
We’ll talk more about email marketing in the next section. For now, let’s just say it’s one of the more effective strategies for e-commerce websites.
Proven Affiliate Marketing Methods
It's time to talk about marketing strategies now that you know how to start a dropshipping business. You have to make sure your promotional campaigns are on point if you want to stand out in this industry.
Paid Ads
Paid ads are meant to elevate your brand by targeting audiences that would respond well to your product. If your website isn’t showing up on the first page of Google, you can use paid advertisements to pull in more traffic. The cost per click for most ad networks averages out to a few dollars, so it won't put that much strain on your budget.
Google and Facebook
The average cost per click on a Facebook ad is around 97 cents, which isn't that bad if you're new to the platform. Facebook advertisements are flexible, and most brands will do well on them. They seem to entice buyers to spend in the spur of the moment, perfect for a dropshipping business.
One of Google Ads' best qualities is that it integrates beautifully with Google Analytics. The free data tool provides a wealth of information about your site's traffic. The advanced features monitor conversions and use the acquired data to automate the ad views.
Simply put, it determines the probability of ad clicks leading to an actual transaction. Google Ads also has an excellent algorithm that adapts as more data is fed to it. This means you'll be able to hand over complete control of keyword bidding once you've made enough sales.
Email Marketing
With dropshipping, the real promotion starts after you land a purchase. You can increase your monthly income by 30% by using automatic email funnels, known as sales funnels. For someone new to email marketing, doing things right may be a challenge. However, the return investment is reason enough to give it a try. Start by creating a series of emails that’ll be sent automatically when particular triggers are, well, triggered.
What are triggers? That depends on you. They’re mainly activated when a transaction occurs, but that’s not the only option. You can set a trigger when someone leaves a product in their cart but doesn’t complete the order.
Even though they haven't made the purchase, they'll get a promotional email containing reviews of similar products. It's a pretty straightforward and successful strategy that's been around for decades.
Blog – Grow Your Content
We’ve already mentioned the benefits of incorporating content marketing into your dropshipping business. If you want to create a long-term traffic source for your online store, include a unique blog. Write posts that entertain and educate your target audience about topics related to your dropshipping niche.
Apart from generating more traffic, you’ll help your future customers by talking about current events and industry trends. It can also lead to more purchases. With a competent blog, your website will seem more professional and thus more appealing. It’ll encourage potential buyers to trust the quality of your product.
5. Social Media Promotion
As a new dropshipper, you probably have a more modest marketing budget. Influencer marketing is a cost-effective way to hit the target demographic. The strategy allows you to negotiate an associate fee with the person who runs the profile rather than paying a fixed rate. It's a win-win scenario because they'll also profit from each sale, and your advertising costs will be significantly reduced.
Of course, nothing is stopping you from engaging with online communities and promoting the business yourself. You might not have as big of a reach as a well-established influencer, but it’s the only marketing strategy that’s entirely free. Why not take advantage of the digital age and blow your own horn on different social media platforms?
Facebook, YouTube, Instagram, Pinterest
Never underestimate the sheer potential of Facebook as a promotional tool. With so many users, there’s bound to be a group dedicated to your chosen niche. Don’t be afraid to reach out to online communities who might be enthusiastic about your product. Just remember not to be too ‘salesy’ in your interactions. You want to come off as trustworthy and professional, not pressure people into wanting to buy from your company.
Since we’re talking about online communities, fewer platforms have a greater reach than YouTube. Most of us who remember the humble beginnings couldn’t predict that ‘being a YouTuber’ will become a lucrative profession. These days, a shout-out from Jackcepticeye can triple the demand for a particular product.
As a fresh face on the e-commerce market, you might want to try a more accessible channel. Ideally, you want someone from the same niche who has a decent following to do a product review and link your store in the description.
Rising e-commerce merchants can also turn to Instagram for engaging with prospective buyers. Thanks to the wide range of targeting and promotional tools, you can pinpoint the type of consumers you want to reach. You can also use Instagram Shop to sell your goods. This makes it easier to land purchases to convert.
Buyers don't have to leave the platform and visit the website to complete the purchasing process. Do we even have to mention the number of influencers you can reach out to for a potential partnership? You can scroll through the Explore page and find a profile that goes well with your product line.
Don’t feel embarrassed about reaching out – Instagram influencers are famously open for collaboration. If they like your product, they'll probably ask for a free sample instead of compensation.
Lastly, Pinterest is an effective platform for organically marketing your dropshipping shop. You can reach a broad audience by pinning items alone. It can’t hurt to also have a link to your website pinned on your profile. All in all, it’s an excellent way to promote your dropshipping business for free.
FAQ
How Profitable is Dropshipping?
Extremely. Because of the large number of e-commerce transactions taking place worldwide, dropshipping is as lucrative as ever. The market is still growing! Profits from e-commerce and dropshipping have surpassed $4 billion, a growth of 7% year on year over the past decade. Furthermore, small businesses are experiencing a nearly 30% rise in conversion rates thanks to smartphones.
Dropshipping also has the advantage of avoiding high-risk financial circumstances. There’s not much to lose when you’re not spending that much money upfront. Since you're not paying for storage or delivery, there's no urgency to make sales.
How Hard Is It to Start a Dropshipping Business?
By now, you’ve probably realized just how simple it is to launch a dropshipping business. With so many e-commerce platforms, dropshipping sellers, and accessible marketing strategies, pretty much anyone can open an online shop.
However, that’s kind of a Catch 22. Since anyone can start a dropshipping business, the competition is steep. You’ll probably run into many stores offering the same commodity at similar rates. That's why you should focus all your energy on coming up with a unique product and promoting it on every possible platform.
How Much Does It Cost to Start a Dropshipping Business?
You need four things to launch a dropshipping website: a domain name, hosting, a CMS (content management system), and dropshipping software. The price range can vary depending on the platform and cost you anything from $10 to $150. You can save a lot of money by choosing an open-source shopping cart like WooCommerce.
All in all, there are no inventory costs upfront, no storage costs, and virtually no overheads. It’s definitely one of the cheaper startups.
What Are Some Dropshipping Product Ideas?
The first move in starting a business is to come up with the perfect dropshipping product. It's also the point at which many a young entrepreneur faltered and gave up. Most of us fantasize about running a business from our own home and earning money online. But only the most determined can make it a reality.
When brainstorming product ideas, don’t be afraid of trends, crazes, and fads. Fashionable items are excellent additions to your dropshipping store's inventory. Try looking at trending products if the best-sellers list doesn’t appeal to you.
Also, always keep a lookout for competitive brands. Study your rivals' products and the methods they use to source and market them. If you can figure out their pricing policy and predict what new goods they'll sell, you’ll stay one step ahead.
If you don’t have the slightest idea what kind of goods you want to sell, that’s okay too. To inspire you, here are some of the most successful dropshipping product ideas in recent years:
- Fitness trackers, resistance bands, smartwatches
- Yoga equipment (leggings, mats), sports bras, seamless underwear
- Essential oils, massagers
- Facial masks, anti-age serums, anti-dandruff shampoo
- Rice cookers, smoothie blenders
- Organic tea, matcha
- Niche hobbies: ukulele, calligraphy pens.
Can You Dropship With No Money?
You can drop your shop if you don't have any income. Therein lies the appeal of this business model. Since you don't need a store for merchandise, no money is required upfront. Suppliers are responsible for delivering the goods to your clients. Apart from the advertising cost and website maintenance, there are no monthly fees.
Can I Dropship on Amazon?
Today, Amazon has such a significant share of the e-commerce revenue that most businesses can get by selling as a third-party vendor. In short, yes, Amazon allows dropshipping on their platform, as long as you obey a few ground rules:
- Allow and manage returns
- Follow the seller agreements and Amazon's policies
- Always be the official seller of a particular product
- On packing slips, invoices, and other product-related paperwork, identify yourself as the seller
- Before mailing the shipment, remove any material that reveals third-party involvement
Amazon oversees the orders, order delivery, customer support, and pretty much everything else regular dropshipping suppliers do. But there's a catch: the company will also have access to all your sales data.
Do You Need a Business License to Dropship?
No, that is the simple answer. To start selling or dropshipping, you don't technically need a business license. Setting up a shop with most sale platforms is pretty straightforward. You simply log in, make an account, enter your social security number and bank account, and you’re good to go.
The actual practice, however, is a little more complex. It's not advisable to work without a license, even if it's not mandated by law. There are three crucial factors to every successful business: liability, legitimacy, and taxes. Without proper licensing, you risk losing one of these qualities in the long run.
Our advice is to look at the local laws and regulations in your area. Businesses in most regions are required to obtain a license, which in turn must be renewed regularly. Dropshipping companies, many of which are run from home offices, may be exempt. However – it’s better to be safe than sorry.
Recommendations
Before we wrap up, we want to draw your attention to a few other ways to set up a dropshipping website. While WordPress and WooCommerce are excellent starting points, you can benefit from a professional developer later down the road.
As your business grows, so will your online store. If site maintenance ever becomes too much to handle, consider the following options.
Buy a Website
There’s a way you can make the process of starting a dropshipping business even quicker. You can buy an existing website for your online shop. The top three developers with the most reliable websites are:
Flippa lets you look into dropshipping shops from all around the world. The platform connects you with dropshipping companies, as well as potential wholesale suppliers.
FE International is a lucrative e-commerce network with a limited number of locations. The setup is efficient and well-established, and it requires little maintenance. Their advisors have a range of insight and skills that can guarantee your sales goals are fulfilled.
And That’s How to Start a Dropshipping Business
Hopefully, this article addressed all your questions about dropshipping startups. It’s the least complicated e-commerce model, well-suited for a wide range of products. Also, it doesn’t require a substantial initial investment, so the stakes aren't that high.
Think carefully before you pick a niche and start developing a product. Watch out for scammers and learn how to spot authentic suppliers.
Your website is the stronghold so take care of it well. Think of a unique product idea, and don't shy away from self-promotion. And that’s how to start a dropshipping business.
