A Complete Guide on How to Start a Dropshipping Business
Imagine owning a store with a skilled and dedicated workforce in charge of your inventory, storage, and shipping, all for free. If you are thinking this is too good to be true, then I guess you know little about the amazing world of dropshipping. This article is a journey on how to start a dropshipping business.
Just like every business in 2020, dropshipping has been affected —while some niches have suffered, a few other niches have blossomed during the pandemic. It still will make a whole lot of sense to start this year and it will only grow bigger in the coming years.
The global dropshipping market was valued at USD 102.2 billion. If this number is impressive, then get ready to be excited as its value would increase every year by over 25%.
So, what is stopping you from taking advantage of this ever exciting market?
In this article, I am going to show you exactly how to start a dropshipping business.
If you treat dropshipping like a business and don’t treat dropshipping just like dropshipping, I think you will take it more seriously and you will do better.
–Suhail Nurmohamed
What is Dropshipping?
Dropshipping is a unique kind of business model where the retailer creates online stores and other sales channels to reach customers, but the inventory and shipping of products are carried out by a third party of suppliers. The suppliers are responsible for the processing, packaging, and direct shipping of products to customers.
In the dropshipping business model, the retailer is saved the cost of keeping stock and the labor of dealing with the transfer of customer orders and shipment details. Thus, this expensive and often tedious aspect is ceded to either the manufacturer or a wholesaler.
Understanding How Dropshipping Works
It begins with you building an online store to attract people to your products. Note, there is no limit to what products you can market since you incur no expense in stocking up products.
When someone places an order for a product, you forward the order to a third party that owns the product you’re selling, and you pay for the product at the wholesale price. This third party supplier then packages and ships to the customer, all in your business name.
Remember, the customers come to you and not the supplier. For all they know, the products are yours. You decide prices for the products. Your sales margin is 100% decided by you.
What you charge is a retail price for the product, but you pay your supplier the wholesale price for the same product. Since wholesale prices are much cheaper than retail prices, you are able to profit from products you never owned in the first place.
Some Impressive Numbers to Consider Before Starting Your Dropshipping Business
Numbers they say do not lie. Below, I would use statistics and numbers to show the direction dropshipping is going. These numbers could help you in deciding if this is the business for you.
- Over a third of products sold on Amazon in 2011 came through dropshipping. Note, amazon sells hundreds of billion dollars worth of products yearly so dropshipping is easily worth tens of billions on Amazon already.
- By 2021, there would be over 2.14 billion digital buyers giving you endless possibilities as a dropshipper.
- Retail eCommerce sales would be worth over $4.2 trillion by the end of 2020
- More than a fourth of online retailers have adopted the dropshipping model so you are not alone in this journey.
- Manufacturers profit 18.33% more from dropshipping than using other retail methods
Why Dropshipping Makes Sense For You
Let me share with you a few reasons why dropshipping is the perfect business model for you.
1. You can get started really fast
It literally takes you just a few hours to become a dropshipper. The requirements are not complex. In no time you could set up your business and find lots of products to sell.
2. You need very little capital for dropshipping
This is one business model you wouldn’t need to take on a bank loan or to visit your wealthy uncle to get started.
Remember, you are not paying for the products you sell. You don’t need storage space and you wouldn’t be paying anyone for packaging and shipping.
3. Dropshipping is very flexible
In dropshipping, you are not tied down to a product. You are allowed to try a variety of products. You could experiment and find out what works best for you.
Challenges of Dropshipping
Since I have painted a rosy image so far, let me balance the equation by highlighting some of the challenges you would face as a dropshipper. As you must have already learned that nothing good comes without a few challenges.
1. Quality control could be difficult
It is hard to determine the quality of your products. You don’t actually get to inspect the products and make sure they are of standard. They go directly to the customers without passing through you. It’s hard to know if it meets your standard.
To solve this challenge, you could first order some samples of the products for yourself. This way you can inspect the quality before recommending it to your market.
2. Shipping delays
Like with any other business that requires shipping, your customers could encounter delays in getting their products from your suppliers. You do not want to lose customers because their products take forever in getting to them.
I suggest you keep great customer relations. Reply to their mails. Call if need be. The key here is to always keep in touch.
3. It’s hard to get discounts from suppliers
Since you do not order in bulk, it would be challenging to get discounts from your suppliers. This could further reduce your profit margin or make you less competitive.
But as a great business person, you should have the discussion with your suppliers. Negotiate a discount. Seek out suppliers who are willing to work out a special deal with you.
Now let’s discuss how to start a dropshipping business. I will break this down into 5 key steps.
How to Start a Dropshipping Business: Choosing Your Niche and Products
Niche marketing is a system of narrowing and selecting brands, contents, and products to serve a particular group of buyers.
Your niche is a segment of the market and all the products in your niche would cater to specific kinds of buyers, like baby products, gym equipment, air conditioning systems, etc.
The more specific your niche is, the better. Gaming chairs are a sub-niche of gaming. You get the idea.
By narrowing your focus, your store and products would rank high in search results and connect you with the kind of audience that ends up purchasing your products.
In the beginning, when you’re still looking for products, the number one thing would just be having enough patience to test the products and being okay with making mistakes because that is how you’re learning the process.
–Shishir Nigam
Finding your niche is the first step and arguably the most important step in dropshipping. A niche would help you focus on the kind of products to market and a specific audience for such products. So how do you go about choosing your niche?
Product research enables you to identify current trends. This way, you can find out trending items in your niche.
Product research is also key to spotting profitable dropshipping niches. Luckily for you, there are plenty of tools for carrying out your research. Here are a few you could use.
Google Keyword Planner – This tool is very useful in deciding the best keywords to target, it shows how often the keywords are searched and exposes you to new useful keywords to work with.
Google Trends – You would want to know how popular a search term has been over a period of time. It allows you to search interest by region, making it a rich tool in predicting top-selling products.
SEMrush – It is great for your keyword research and exploring the online market.
Kickstarter – This free tool is a useful way of finding out what’s trending. Searches are conducted by category and region, this is a smart way to learn which products to watch out for.
Trend Hunter – It is the world’s largest trend community, and with more than 20 million monthly views, here you would be learning from very smart and experienced people. This is a very interesting tool to work with.
SaleHoo Labs – Here is another wonderful research tool for dropshippers and online store owners. It feeds you with valuable information on thousands of products across a wide range of categories, such as:
- Information on your competition. How many people are selling a product on Amazon and eBay
- The average retail price each product is selling for online
- A list of supplies for your products
Even with these great tools, it could seem that you have too much on your plate so I recommend you start from your passion and interests. You would possess a unique perspective of those things that interest you. Letting your interest lead you is an easy way to begin the search for your niche.
If your interest is in automobile engines, you would be in a special place to know products and trends in those markets that can help you identify a profitable niche.
How to Identify Products That Do Well on Online Marketplaces
A product not saturated by big brands and major players – The smartphone market is a great example of an already saturated market. It’s going to be almost impossible to make sales in a market dominated by Apple or Samsung. You want your product to have a chance at claiming a share of the market.
A product that is portable and can be shipped conveniently – This is one reason why fashion always comes top in the dropshipping business. Clothes and shoes are lightweight and easily fit into a parcel. As a rule, your product should weigh less than 2kg, as 2kg is the maximum weight for epacket.
A product that has a perfect price – Your product can’t be too cheap because it would reduce your profit margin and you can’t sell really very expensive stuff that would be hard to sell off. If your interest is in high-end products, I would advise you to wait until your store becomes a household name, then this rule would not apply to you. As a rule, let your products be between 15 to 40 dollars.
A product that stands out – You want a product that is distinctive and would bring new excitement to the market. The three big questions your products should answer are:
- What problems does it solve?
- Is it unique?
- Does it maintain high quality?
Don’t find customers for your products, find products for your customers.
― Hyacil Han, Dropshipping Ultimate Guide: The Expeditive and Accessible Scheme to Earn a Substantial Revenue at Home
Understanding and Surviving the Competition
The ease in setting up a dropshipping business means that you are not the only one out there with the dream of being a dropshipper. The competition is real so you have to set yourself apart from the rest.
The key to this is studying and understanding the competition. Doing the following would help you thrive despite the fierce competition.
- Identify the best in your niche. Look out for the top sellers on eBay and Amazon. Visit their stores. Learn what makes their stores attractive. What makes them top sellers? In this business, feel free to implement all you learn. Also take note of how many sellers are in the niche.
- Customer reviews are very important. Read them. Learn what the market is saying about the top sellers in your niche. Understand the way customers express themselves. What do the customers like? What are their complaints?
As a beginner, you should learn as much as possible. Your competition gives you a great avenue to gather information and understand the market.
Summarising Step 1
- You’ve learned the need of having a niche to attract a targeted audience
- I also introduced you to great tools you could use in undertaking your product research
- We learned four unique ways to identify products that would perform well in the market
- We learned how to study our competition
How to Start a Dropshipping Business: Finding Your Suppliers
In dropshipping, you can’t understate the role of a reliable supplier. An inconsistent supplier could ruin your business and your reputation in a very short time. To a great extent, the success of your business depends on your suppliers’ ability to ship quality products in a timely fashion.
In a survey carried out, more than half of the customers who stopped shopping with online retailers did so because of negative shipping experiences.
There are thousands of suppliers out there. Many of them are based in a different country from you so you can’t just drive by to check them out. Some could be outright fraudulent and others simply unreliable. You need to learn how to spot the good ones. Let’s discuss some methods.
1. Be certain the supplier is into dropshipping – There are suppliers who are manufacturers or wholesalers but have no experience dropshipping. Such suppliers would not understand your demands. They would find it hard to relate to you.
2. Spend a whole lot of time researching the supplier – Their website is usually the starting point. Don’t be put off immediately if their website looks unattractive or outdated. Take all the time you need to check every part of the site. Double-check addresses with google maps. Verify what part of town they are. Things as simple as the location would tell you if they are manufacturers, wholesalers, middlemen or suppliers.
3. Order the product for yourself – This way, you can tell the quality and note the delivery time. Make sure it’s no longer than one to two weeks to the countries you are servicing.
4. Ensure that the supplier has staff you can always rely on – They should be experienced and knowledgeable. You want staff that can give you information on the go. You need to establish contact with these sales reps. Get to know how much they know about their products and services.
5. When it comes to the quality of the products, start with the photos – Get your supplier to send pictures of the products. These would be used for your product listing. Remember great images go a long way in carving you a good share of the market.
6. You want a supplier who you could verify his business – Let your suppliers connect you with others that can confirm their services. They should have a referral list. Note, this is not a surefire of proving their validity but it’s a good way to start.
A Summary of Questions for Your Would Be Supplier
- Do you have sales representatives that I could always call on?
- How good is your tech and is it easy to use?
- What is your delivery time for the countries I dropship?
- How good is your tracking system?
- Do you have quality photos and videos of your products and am allowed to use them?
Finding the Best Suppliers
Reach out to the manufacturers – A mail to the manufacturer could be a great resource for getting trusted wholesale suppliers. Most manufacturers would happily give you a list of their wholesalers who you then call and discuss dropshipping with them.
An online search for suppliers – Begin with the ever-dependable google search. Type suppliers for your product and click to search. Also, through Alibaba and Aliexpress you would reach lots of China-based suppliers.
Explore eCommerce builders – Ecommerce builders like Shopify and BigCommerce allow you to build an online store, then you add apps like Oberlo through which products can be imported from suppliers. This method is reliable and hassle-free.
Use supplier directory – If you want to save time and protect your business from fraud, then using a supplier directory is the right way to go. You usually have to pay for these but I assure you, it’s great value for money. I recommend SaleHoo. It offers you thousands of verified suppliers and great ease in reaching out to them.
How to Start a Dropshipping Business: Setting up the Legal Framework
Dropshipping is a legal business and thus you have to meet legal requirements that differ from country to country. It would be smart to check out your country’s legal requirements before you start selling.
Below are three questions you should provide answers to before venturing further:
- Would you need a license to operate?
- What documentation would you need to fill out?
- What agencies are responsible for this?
Let’s talk about your local requirements. We would discuss the steps in structuring your legal framework and setting up your business structure.
The Business Structure
Basically, your business would be structured into any of these three categories
- Sole proprietorship: This is quite simple with very few requirements though it does not offer liability protection. This means your personal assets could be at risk. Still, this could be an easy way to begin.
- Limited Liability Companies: Now this separates your business from you. With this, you are better protected by the law and it gives more credibility to your business.
- Corporations or public companies: Its name may differ from country to country but what should be noted here is that it offers you the highest protection and growth for the business.
Registering your business with the right agency is the first step in dealing with the legal stuff.
Register Your Domain Name
Your business name is unique and must be protected. In registering your business name you take a step in making sure no one can copy your business. Your business name should be more or less your domain name. Getting a domain name will cost anything from seven dollars to a few thousand dollars.
A few places to buy domain names are Bluehost, Hostgator, and Hostinger.
Get a Business Account
You need an account that has your business name separate from your personal account.
Obtain an EIN or a TIN
An Employment Identification Number or a Tax Identification Number depending on the country is a must for all businesses. Many suppliers would demand your EIN prior to working with you. You would also need it in sorting out your taxes.
How to Start a Dropshipping Business: Selecting Your Sales Platform
So far you are doing great. You have chosen your niche and products, you have found reliable suppliers and you have all your legal work taken care of. Now it’s time you start making sales but then you need a platform to step up your trade. Your platform is basically where you sell your products.
Here you have two main choices. One is to build up your own store using eCommerce builders such as Shopify, WordPress, or BigCommerce and two is selling in a marketplace like Amazon or eBay.
Online Marketplace
Here you have well-established names like Amazon and eBay. They are especially suitable for new dropshippers.
Let’s explore some reasons why online marketplaces are a dropshippers favorite.
- Marketplaces like eBay and Amazon are huge. They guarantee you great traffic
- Setting up an account is incredibly easy
- They are trusted and loved by millions
Well, these marketplaces may seem great but they are in no way perfect. Here are a few reasons why.
- These marketplaces would take a cut on every sale you make
- You can make limited input on your brand, graphics, and services
- It’s harder to stand out and you have great competition on the same platforms.
Despite these few limitations, marketplaces are hugely popular and have great potential for dropshippers. Let’s take a deeper look at two of the more popular online marketplaces.
Amazon: Amazon is a household name with over 300 million active users. It has more than 2.5 million sellers and roughly 25,000 of these have more than $1 million in sales.
As a seller on Amazon, you would pay about 15% of your sales to the company. Fees vary but 15 is an average. The large number of Amazon users makes it a great place for dropshippers.
eBay: eBay has 182 million users. There are about 1.3 billion product listings on eBay. Sales fees are under 10%. Like Amazon, eBay attracts hundreds of millions of shoppers.
Creating Your Own Online Store
If you are seeking a long term career in dropshipping, then this is the path to follow. This involves more of your time and labor but it would ultimately pay off. I would introduce you to tools you can work with to make your starting easier.
The industry is now moving towards building a brand, which basically is just getting a loyal customer who will buy from you, time and time again.
RICKY HAYE
Let’s discuss some great advantages of creating an online store
- You are in charge. There is no limit to your design, graphics, and branding.
- Your business is independent of the marketplace and there are no charges.
- You make a higher profit margin.
- You are not competing directly with other sellers in your platform.
Like I said, if you have the long term plan to build a great dropshipping business, then this is the path for you.
Let me share a few of the challenges you would have in setting up a store:
- It would require money to set up the store.
- There isn’t the assurance of customers unlike in established marketplaces.
- It would take you learning, time, and work. A good amount of effort would be spent on marketing. You would learn how to rank on Google using SEO.
Using the established online marketplaces is clearly the easy route to follow but building your own store offers you long term growth.
Tools like Shopify and SalesHoo stores would make your life much easier as you start your online store.
Note, you don’t have to choose one over the other. You can embrace both the marketplace and the online store method.
How to Start a Dropshipping Business: Learn The Act Of Online Marketing
You are almost there now. Just one more little skill to learn; marketing. Marketing is how you increase traffic and sell your products.
I would have to warn you, this takes time. Give it six months of work. So let’s dive right into it and what you need to be a great online marketer.
It’s easy for anyone to set up a dropshipping store. But if you don’t have the passion within yourself and you don’t have that drive, that fire, and that fuel, you won’t have success.
–Suhail Nurmohamed
1. SEO
SEO means search engine optimization. It helps your site up the ladder in a Google search. You need to optimize your store so it’s ranked high in Google search pages.
The secret is keywords that link pages on your site, make sure your site loads fast and works on mobile devices.
On online marketplaces, you do not control how you are ranked but you could pay attention to the reviews you get, this is a great way to improve your rank on Amazon.
2. Using Social Media
Social media offers you a variety of channels to advertise your brand. Learn the right media for your product. Understand your customers. Note where they are more likely to find you.
Be consistent with your post. Make sure your posts are relevant to the product.
Facebook, Google, Youtube, and Twitter offer paid advertising which could be a great option but I advise you take your time building your social media platform first. Don’t be totally reliant on paid ads.
Ads certainly are a way to get traffic quickly but you do also have to keep up with those ads. It’s not something that you can stop doing because if you do, your traffic dies off because you haven’t built that community around the product.
–Courtney White
3. Work on Your Product Graphics
Request for images and videos from your supplier. Ensure they are catchy and of high quality. Remember, pictures tell the story of a thousand words.
Under the pictures write the most attractive product description. If writing isn’t your thing, get someone with the right skills to do it.
4. A Social Media Influencer Could Be All You Need
Influencers could be like our personal Jinns to make our wishes come true. An Instagram model posing in your shoes and tagging your store may be all you need to get a ton of sales.
Remember the best influencers don’t come cheap, but if you could afford one, it could be a path worth taking. That said, you do not need to target high priced influencers. Research them very well, make sure their audience fits very much with your desired audience and even if they have a few thousand followers of the right audience, you will still make sales, and at an affordable price too.
5. Try Content Marketing
Become a content creator. Blog your store’s website, create a youtube channel, use posts on Instagram and Facebook. Let your content serve your audience. It doesn’t have to be about advertising your brand but your content couldn’t be too far from your brand.
You could have a blog on your store where you do reviews for items in your niche. If you write well-researched SEO articles and have links to items on your store embedded, you would make some sales from this traffic source. This is one of the best ways to increase traffic to your site.
6. Email Marketing
Through an email list, you could easily connect to thousands of customers, you need a method to acquire email addresses. You could also buy an email list.
Once you kinda have success with one store, and once you’ve got your customer service in place, once you’ve got your email systems in place, you know how to run your adverts, it’s easy enough to replicate success over different stores.
–Harry Coleman
Conclusion
It has been somewhat a long read but congratulations if you are still here. Now you have the information needed to sell tons of products as a dropshipper.
You know all you need to on how to start a dropshipping business, now is the time to put all you have learned into practice. If you haven’t yet started, start now with step one, choosing a niche and products. Then continue step by step until you start selling tons of products. Following these guidelines would surely bring success.
We hope you would refer to this guide again and again along your journey. It would also be great if you shared this article with your family and friends. You can never tell, this might just be what they need.
You`re so inspiring, even in case you don`t comprehend it.