Dropshipping is a business model where a company or individual sells products without holding any inventory. When a customer places an order, the company lets the supplier know, who then ships the product straight to the customer on the company's behalf. The customer pays the dropshipping company for the products, which then pays the supplier—often in an automatic transaction—and the products are shipped directly to the customer.
Sounds pretty straightforward, doesn't it? In a nutshell, the dropshipper is a marketer. They don't handle orders or shipping directly, but they're in charge of advertising their shop and products and dealing with customer service.
Step-by-Step Guide to Dropshipping
Choose Your Product
One of the most fundamental aspects of dropshipping is choosing your market and product niche. If you choose a product that's already flooded with competition or one that nobody wants, you're setting yourself up for low sales right from the start. We’ve put together a few key steps to help you choose your market with high profit margins, but minimal competition:
1
Start your research and assess the market to find products that are in high demand by doing some keyword research using tools like Ahrefs or Google Keyword Planner to see what words come up the most and what products people are searching for the most. Checking Google Trends can also help you determine this.
2
Once you've nailed down your niche, it's time to take a look at what the competition is up to. This could mean looking into other dropshipping stores to see what prices they're using, whether any products are sold out, or how saturated the market is. If most of the dropshipping stores you see are selling the same product, it's probably best to avoid selling it yourself.
3
Decide on a target audience and make sure you keep them in mind when choosing your product: always ask yourself if the product is something you know will be popular with your chosen demographic.
Find Your Supplier
Now that you have your product in mind, it’s time to find a dropshipping supplier that offers it. There are tons of different suppliers out there, such as:
AliExpress is one of the largest suppliers, offering millions of different products at affordable prices.
Spocket has a wide range of suppliers and offers easy integration with numerous e-commerce platforms.
WholesaleB2B is a supplier directory with many tools for seamless transactions between wholesalers and retailers.
Salehoo is a popular supplier directory with an easy-to-use product search tool.
Zendrop offers a variety of suppliers and even allows for custom branding on packaging and invoices.
SourcinBox hosts a curated list of suppliers with a focus on quality and reliability.
Doba is another dropshipping platform where you can find tons of verified suppliers and products.
When you're looking for a product on these platforms, the first thing you should do is check how profitable it is. Picking the product with the lowest cost from the supplier could mean you make more profit down the road, but just make sure you don't sacrifice quality. If customers are unhappy with your products and store, and word gets around, it'll hurt your sales.
Also, keep in mind that many suppliers don't actually have a return policy, so be sure to check before you decide. Without a return policy, it could mean that you end up footing the bill if a customer wants to return an item. So it's a good idea to take a look at the reviews for each supplier and see what other retailers have to say. You may even want to buy a sample of the product to try out for yourself so you can be sure it's a product you want to put your name on.
Build Your eCommerce Store
Once you've got your product and supplier lined up, you can start building your eCommerce store to start selling. Before you get started, though, you'll need to choose an eCommerce platform to host it. Fortunately, there are plenty of options out there, and most of them have built-in dropshipping integrations, making it simple for you to manage your business between your chosen supplier and your store. However, keep in mind that the majority of these platforms charge a fee to host, so factor this in when you’re making your decision.
eCommerce Platform
Key Features
Monthly Fee
Shopify
Supports selling on your website, social media, and other marketplaces and hosts international selling.
From $29
BigCommerce
Integration with other sales channels like Google Shopping, though some design tools aren’t so user-friendly.
From $29
WooCommerce
WooCommerce is a free, open-source plugin that lets you turn your WordPress site into a fully operational online store.
Free
AdobeCommerce
eCommerce platform for designers and large platforms with a high level of customization but no integration with other dropshipping platforms.
Custom pricing
Squarespace
Easy-to-use website builder with a range of sleek designs along with inventory tracking and management features.
From $28
Big Cartel
Big Cartel offers a platform for creators to sell their products for free but with low levels of customization and limitations.
FreePaid plans from $12
Having considered all the pros and cons of each eCommerce platform out there, you can sign up for your chosen one and start creating. Different platforms have different levels of customization: for example, Big Cartel is quite limited, but AdobeCommerce is completely customizable. However, with all platforms, you can always create your own store name and start adding your product listings.
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To give yourself the best chance of making sales, you will need to take some high-quality photos and write clear and grammatically correct product descriptions. You can also add your competitive prices, taking into account the competitor prices you researched earlier as well as shipping costs. As a general rule, having a smooth, user-friendly, and well-designed storefront is one of the most crucial steps toward attracting potential customers.
Work Out the Financial Aspects
To start making money with your dropshipping business, you will need to make sure you are set up from a financial perspective, too. This can include the following:
1
Opening up a new bank account for your business: opening a specific bank account or PayPal account for your business can really help keep track of your income and expenses.
2
Consider a payment processor: think about setting up an account with additional payment processors so you can offer this to your customers, such as PayPal or Stripe.
3
Tax-identification number: like any other business, you will be required to pay taxes to the state, so make sure you obtain a tax identification number or employer identification number from your state’s tax authority.*
4
Business insurance: consider investing in business insurance so you will be covered for any damages or liabilities.
5
Business credit card: this could be a good way to help you pay for essential expenses like your eCommerce store, resources, or ad fees.
6
Work out your budgets and financial plan: establishing your financial goals, as well as outlining your spending budgets, is essential for your drop-shipping business to stay afloat. Using tools like QuickBooks or FreshBooks can assist you with this.
*Always make sure to check the rules and regulations regarding taxation for your specific state and area before you start any business activities.
Register Your Business
Registering your dropshipping business formally is an important step to make sure that you are above board, as many states in the USA require dropshipping companies to have a valid business license and a sales tax permit. Like many other businesses, you’ll have to decide whether you want to register as a ‘Sole Proprietorship’ or a ‘Limited Liability Company’ (LLC). After you’ve made this decision, you will need to register at your Secretary of State’s office.
Market Your Business
Once you've got everything in order, it's time to start marketing your dropshipping business. This is probably one of the most important things you can do to make sure your store has a high earning potential and makes a lot of sales. You’ll be more likely to succeed if you create an overall marketing strategy and use many different advertising methods and channels.
Advertising Channel
Key Features
How?
Social Media
You can create a social media presence for your dropshipping business and brand across all platforms to promote to thousands of people.
Creating engaging content including product shots and feedback from satisfied customers.
Paid Ads
Paid ads help you appear across social media and Google and could generate more awareness, and hopefully, conversions to your store.
You can buy ad space through Facebook Ad Manager or Google Ads.
Influencer Marketing
You could harness the popularity of some influencers and ask them to create some content promoting your store or products to their many followers.
You can reach out to some influencers online and offer them something in return, like payment or a free product. Just make sure you stick to any advertising rules.
Email Marketing
Emailing customers every week with exclusive offers and content can help you keep your store at the front of their minds.
Setting up a subscription offer of money off when a customer visits your store in exchange for sharing their email address.
Content Creation
Creating content, such as a podcast, or blogging, can engage a whole new range of customers.
You can start a free blog on platforms like WordPress or Wix, or you can reach out to hosts about guest spots on popular blogs or podcasts.
Affiliate Marketing
Affiliate programs are a great and popular way to increase the number of sales as well as store exposure.
Create an affiliate program and advertise it on your social media, or ask influencers directly to join the program.
Search Engine Optimization
SEO is a vital aspect of any successful dropshipping business, helping your store appear higher in search engine results when a customer is looking for your particular product.
Performing keyword research for your product and including the keywords in titles, descriptions, and URLs can help customers find you and ensure that your site is easy to use and runs smoothly.
Track Your Sales Data
With your store up and running, and sales hopefully flowing, keeping an eye on your sales data is a vital ongoing step for your dropshipping business to ensure its continued success. Key details you should be monitoring include:
1
Profit: Of course, for any successful business, it's important to keep an eye on how much money you're making from your products. If you've got products that aren't selling and aren't contributing to your profits, it might be time to replace them with something else.
2
Demand: You can also use sales tracking to get a feel for what the future demand for your products might be. For instance, if lots of people are searching for woolly gloves because winter is coming, you can make sure you have enough stock for your customers.
3
Taxes: You'll also need to keep an eye on your sales data for your tax reports and to make sure you're up-to-date with the regulations in your state.
4
Budgeting: You need to keep an eye on your profits so you can plan out your annual budget and make sure you're not overspending in certain areas.
5
Quality Control: If you're getting a lot of complaints or returns on specific products, it might be time to switch up your supplier or the product to ensure your customers are happy and want to come back to purchase more.
Fortunately, there are lots of great tools out there to help you keep an eye on your sales data: many eCommerce platforms, such as Shopify or BigCommerce, can even help you track your store's performance. You can also hook up Google Analytics with your store to get the full scoop on your sales, use inventory management tools like cin7 and Zoho Inventory, and get transaction data from PayPal straight to your inbox. If you want to take a more traditional approach, you could also use Excel sheets to help you track any other information to keep you on top of things.
Conclusion
As we have seen, dropshipping is an accessible and affordable way to start a hustle that can scale and grow into a full-time business. However, don't think of it as an easy way to make money, because to be successful you need to invest time in thoroughly researching your market, niche, products, and suppliers before you get started.
Once you're up and running, staying on top of your marketing strategies, monitoring sales, and promoting your business will take a lot of commitment, but you can certainly reap the rewards and perhaps join the top tier of dropshippers earning a six-figure salary each year. Good luck and happy dropshipping.
