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Starting a dropshipping business is the perfect first step into entrepreneurship. You’ll be able to make money by selling products to customers, setting your own prices for those products, and marketing your brand.
You don’t even need to pay for inventory until it has been sold! It may seem like hard work at first but if you have the determination you could easily succeed with this job.
This article will introduce you to the dropshipping business model, how it can work for you, and 7 simple steps to starting your shop.
#1. Choose your niche
The niche you select should be genuinely interesting to you. A product range that isn’t focused will likely be difficult to market successfully, and if it’s not a topic of interest for you, then your motivation may wane- as anyone knows who has tried this before. You should consider the following while selecting a niche for your dropshipping business:
Higher profit margins
When operating a drop shipping business model, your focus is more on marketing and customer acquisition. Both $20 and $1,500 items require the same amount of work to sell them.
The most profitable dropshipping business ideas are not trends. They have trends within them, so you’ll want to make sure they’re products and not the entire store, especially if you’re looking at long-term success. Keep that in mind when writing your plan!
Shipping costs
Even though your supplier will handle the shipping, if it is too expensive for your customers, this would be a customer repellant. Find something cheap to ship so you can offer free shipping and absorb the cost of doing so as an operating expense to attract more sales.
When you contact suppliers, you have the chance to assess their responsiveness and reliability. If they fail to answer any of your shipping-related questions, that might be a sign that it’s time for them to go and find another company that can make a better dropshipping service available for your business.
Accessory-heavy niches
In any retail setting, accessories will be sold at a significant markup. Customers are less price-sensitive about them and shop for weeks to get the best deal on TVs, yet they might not hesitate to spend $25 on an HDMI cable from the same place.
The reality is that there’s a good chance these people made nearly as much money off you by selling you that cable as they did when you bought their flatscreen!
There are several factors to account for when choosing the right product. For instance, even if you find a perfect niche in every way, it would still be a poor choice if there’s a low demand for the product or too much competition. Understanding how demand and competition work will help you make an informed decision about what to sell in your store
#2. Research your product
When starting a dropshipping business, you’ll want to do some product research to gain traction. Opt for trendy products so that you can have more value in your shop.
Your dropshipping business will be more profitable if you can re-brand whatever you’re selling as your brand with custom packaging and branding. Here are the factors to consider while researching your product:
Sales volume
If you’re trying to start a new drop shipping venture and it’s not filling in a gap in the market, then your focus should be on products that are already selling well. This guarantees there is demand for your offerings. Here are some tools to determine your products’ sales volume –
- Amazon’s bestseller list: Amazon’s Best Sellers Lists allow you to see which products are doing well in every category to know what your niche market is buying. Such lists can be viewed by broad categories such as cameras and photos and refined to focus on more specific sectors like darkroom supplies. This will help you model your concept and identify good products that may inspire a new idea for an innovative product.
- Oberlo: Oberlo is a versatile tool for store owners to use. Not only does it offer products from millions of vendors in its catalog, but its personalized search function allows you to select high potential items by displaying bulk order volume data. It connects with your online shop, and when orders are placed, it routes the order to suppliers- all you have to do is click ‘ship.’
Understanding your sales volume can tell you what products are and aren’t selling, valuable information for business growth.
It won’t break down how much revenue your company brings in from product sales but, it will give you the tools to make intelligent decisions about where to reinvest time and money into growing other parts of your business.
Keyword Search and Trend Data
Using keyword data, you can see how many searches have been made for a term in the past day, week or month to measure your concept’s product demand and potential success.
Using general keywords (“pants”) will give you an idea of consumer interest in a category while using more specific keywords (“blue pants”) will allow you to determine product popularity.
Trend data can provide a product’s potential for long-term success, or give you ideas that are currently hot sellers. The beauty of dropshipping is that products can adapt more easily than if they were in stock at an average retail store.
Using search trends provides insight into whether an item is seasonal, meaning it might be important to diversify your offers or skip them altogether. These are the tools you can use for keyword and trend data research:
- Google Ads’ Keyword Planner: Google Ads’ Keyword Planner uses search volume to provide insight into how many times your keywords are searched and helps you compile data. It has helpful features like showing the competitiveness of a keyword, recommending related terms that other advertisers have successfully used, and displaying approaches for planning an advertising budget.
- Google Trends: Google Trends presents data through graphs and shows interest over time. It allows users to see results on customizable timelines and refine them by the specific channel they are interested in, such as web search, image search, or Google Shopping Search. The tool is also equipped with a comparison feature to weigh up the stats of multiple terms against each other and suggests related topics for exploration.
When looking at keywords for your product, it is important to look at the different search volumes. If nobody is searching for what you’re planning to sell, there won’t be any customers.
Competitive analysis
Don’t forget you are competing with other drop shippers and retail giants such as Walmart and Amazon. That is why many potential dropshipping businesses fail; they look for a product with little to no competition, which means there isn’t a demand for it.
- Results page: It is vital to explore search engine results pages (SERPs). You can find your keywords on Google and assess which sites are ranking highly. Explore image searches, shopping results, and standard web results; they all provide valuable information. From here, you can determine who your main competitors will be. Identify their website layout, products, pricing – including cost delivery speed – item descriptions, and advertisements.
- Social media: Platforms like Instagram, Facebook, and TikTok are all effective marketing tools that get a lot of attention from online sellers. Evaluate your competitor’s social accounts – including response time, customer engagement, feed layout, post frequency, and affiliate influencers-to stay ahead in the game. You could search Facebook’s Ad Library for sellers promoting products within your niche to get some ideas on what kind of successful posts they have had in the past. This is a useful way to plan out a strategy when creating your own advertising campaign with these same goals.
- Know their content: Sign up for your competitor’s newsletters so that you can keep track of their content. By subscribing to your competitor’s regular emails, you are getting crucial information sent directly to your inbox. Google penalizes sites for copying content. To get inspiration from a store similar to yours is smart, don’t reuse photos or text that your competitors have published. This bad practice can hurt your ranking on search engines and lead to legal consequences.
#3. Choose the correct supplier
As with any business venture, partnering with the wrong supplier can ruin your business. It is necessary to perform proper due diligence to avoid rushing this step. Most dropshipping suppliers are overseas, and communication becomes crucial in response speed and understanding each other’s language.
If you do not feel confident about a potential supplier’s ability to communicate well enough for your needs, move on from that contact and continue looking for others who will suit you better. There are two ways to choose your supplier:
Dropshipping marketplaces
Marketplaces exist to make it easy for entrepreneurs to launch a dropshipping business, especially new ones. Therefore, they automate the process and are best suited for those looking to start a business easily.
They can help you:
- Efficiently search for products
- Provide listings of your business easily
- Give an easy view of stock availability
- Carry forward orders to be shipped to the relevant supplier
- Confirm shipping to update customers automatically
One of the most important benefits of Oberlo is being able to find products with ease. Platforms like Oberlo host thousands of suppliers ranging from individual manufacturers and wholesalers to aggregate vendors such as AliExpress.
Many marketplaces charge monthly or per-transaction fees to access their platform, but most offer free starter plans to help you get started with dropshipping without any upfront costs. Some free dropshipping marketplaces are:
- AliExpress
- Oberlo
- U.S. Direct
- Spocket
- Modalyst
After the startup phase, many dropshipping ventures diversify their offerings by using more than one marketplace to source goods. You can list and sell products on platforms such as Shopify that offer plug-and-play integrations with various marketplaces. This helps you to diversify your product selection.
Direct sourcing
When your business has a high volume and develops, you can reach higher profit margins by sourcing your dropshipping partners directly. A way to increase your profit margins is by forming relationships with vendors you’ve used on dropshipping marketplaces.
If their products consistently perform with your customer, it’s worth seeking other arrangements to create a more profitable venture for both parties.
Once you find the product niche and establish relationships with suppliers, this becomes selling “white-label” products, which are goods manufactured as fulfilled by other vendors but branded as though they were made by yourself.
You can use these resources to source your products directly from the supplier:
- ThomasNet
- Import Genius
- America’s Mart
- Dallas Market Centre
For many new dropshipping ventures, direct sourcing is a goal for the future. Most companies have average order volume thresholds when it comes to manufacturing and importing. It’s unlikely they’re going to work with startups.
Besides the dropshipping marketplaces, which don’t offer any plug-and-play capability, all of these resources require more work and labor on your part.
For example, you’ll need to add products to your website and forward orders for fulfillment when working with suppliers directly. That will usually be done through eCommerce management software that adds to your operating costs.
#4. Build your website
The fastest way to build a website that supports a dropshipping business is to use an eCommerce platform such as Shopify – a user-friendly and straightforward software, it does not require any technical programming skills for set up. It offers plenty of app solutions that help improve sales.
However, there are still other platforms to consider.
Choosing an eCommerce platform
It is possible to list your dropshipped items on Amazon and other large marketplaces like Walmart or eBay. Some dropshipping sellers fare well on such platforms, but they are not startup-friendly. Proceed with caution–paying the seller fees, shipping deadlines, and customer service requirements are costly.
For selling your products, first get to know the process of sourcing suppliers before proceeding onto seller marketplaces—the best one for you will depend on what type of business model you have as a dropshipper in terms of store features and plans for sourcing suppliers. These are the best platforms to choose from:
- Shopify: Shopify is a platform that enables you to launch an online store easily. It offers a variety of tools, like picking the right domain name and logo design, building user-friendly layouts, and automating order routing so your customer’s purchases will automatically be forwarded to the correct supplier.
- Volusion: Volusion is another dedicated eCommerce platform that caters to dropshippers. It boasts a fully integrated partnership with U.S. Direct, one of the most popular dropship marketplaces out there, and connectivity with Doba – an advanced marketplace for dropshipping products and wholesale goods.
- WooCommerce: If you envision content playing a major role in your business and branding, WordPress is the best platform. You’ll need an eCommerce plugin that works on WordPress, like WooCommerce. You’ll need to buy an extension for WooCommerce specifically or choose from other third-party options available online to integrate with dropshipping marketplaces,
Once you have decided on a platform, it’s time to build your site. Building an eCommerce website involves several steps, like setting up payment processing and connecting it to your domain. You should also design the layout for your website.
#5. Business structure and finance
Launching a legitimate venture is no small task. You’ll need to take care of the legal and financial aspects and the practical aspects of your business. These are two crucial aspects of any business, and they should be pre-decided for a dropshipping business to make it official.
Banking
Deposit all revenue into your business checking account and use it to draw most of the expenses. Without having dedicated banking for your company, accounting can be difficult; you may assume personal liabilities for the business’ debt (e.g if an audit occurs), and create trouble with IRS should one take place.
In addition to this, it’s a good idea to take out a business credit card. This can help separate your finances even more; you might also accumulate major rewards for all of the products you will buy from suppliers.
Business structure
There are many types of business structures and the limited liability company (LLC), S corporation (S-corp), and C corporation (C-corp) are among them. They differ in how much protection they offer, with LLCs having more than Ss or Cs.
LLC: An LLC is a legal entity that can be used when forming a business and offers protection to the owners from personal liability for debts and other obligations.
S-Corp: An S corporation is a corporate entity that protects the owner’s assets and avoids double taxation. The company must have a board of directors who oversee its management.
C-Corp: A C corporation, or C-corp, is a legal structure for a company in which the owners (shareholders) are taxed separately from the entity.
Suppose you don’t register your company as an LLC. In that case, it is by default recognized as a sole proprietorship, which typically works for dropshipping store owners because all that is required to run such an enterprise is just one person who will report their earnings on their taxes without any additional state or federal filing requirements; this also includes not needing an EIN.
The biggest disadvantage of a sole proprietorship is no personal liability protection. If your customers were ever to sue your business, all of the money from your assets would be at risk and could be taken if it was determined as being liable for a flaw or mistake.
For this reason, many store owners opt for an LLC. That being said, it’s up to your assessment of your own risk level if you’re sued due to selling certain products that might increase the chance.
#6. Marketing
Marketing allows you to generate sales from the start and contribute to the quick scaling of your dropshipping business plan. If you’re just starting on your own, it can be tough to make ends meet. Here are some affordable marketing strategies:
Social media
Social media marketing is another great way to connect with interested customers by creating Facebook and Instagram accounts. Social media can be a strong tool for promoting your business.
It also helps you collect data and gives you the opportunity of building an online presence while reducing steps for conversion through audience engagement in their natural habitats – social media platforms like Facebook, Instagram, or Pinterest.
You can easily populate your shopping cart from either Shopify or WooCommerce listings over here – then use those new product listings as shoppable posts across personal networks too! Keep up the good work.
Paid ads
Pay-per-click advertising is a great way to reach qualified audiences on different channels. You can use Google, Facebook Ads, or Sponsored Posts from Facebook, Instagram, or YouTube to advertise your products and services.
The average cost for a click-through of a Facebook ad is around 97 cents, while the cost of an advertisement with Google varies depending on which keywords you target when advertising your product, which affects its quality and price.
However, this doesn’t mean that one form of pay-per-click marketing channel will be better than another based solely on costs because it’s how effective those ads are in converting browsers into buyers that matter most!
SEO
Search engine optimization (SEO) is crucial to eCommerce success, as 93% of people start their online experience by searching. SEO tactics are important to rank higher on an online search.
Search engine optimization can get complicated- shaping how you structure your product descriptions, image files, title tags, and meta descriptions. However, for this to work effectively, a few steps need to be taken, including carefully choosing the keywords you want to use and integrating them into all of the site’s content.
The next step is using your chosen eCommerce platform’s site builder features like creating effective summary titles or headers for each page for search engines like google or yahoo! indexing it properly.
Influencer marketing
Starting a dropshipping business requires you to be scrappy at first. 72% of buyers trust businesses more if promoted by niche-specific influencers, so it’s worth your while to try and get them on board with your products. You can offer an affiliate commission.
An affiliate fee is a charge that the company pays to an influencer who, in return, helps distribute their product and services. The cost of such compensation can vary depending on the marketer’s target demographic.
If you pay an affiliate fee for every sale, it lowers the risk for your dropshipping business and makes it so that influencers have to convert sales. It also means that you will get some pictures from them that increase social proof, which improves your brand reputation.
If the influencer has real followers, they can potentially make a lot more money as an affiliate than if they were paid a flat rate since affiliates can provide many products at once, giving them a chance to make even more money compared to one product sold.
#7. Optimize your store
All of your work can be analyzed once you have spent some time building your website, brand, and marketing. You may find that certain activities are successful while others are not so much. Or you could analyze how competitive pricing is against competitors to see if there’s anything else we can do to improve things.
You can use Google Search Console and Analytics to check your internet traffic from time to time. If you are going to use a third-party tool for email marketing or social media reporting, set up reports and be reminded of them regularly. Even with just one snapshot of data, it’s enough to see whether the campaign is working or not.
Optimizing your online eCommerce store is essential to generate more revenue. By testing and optimizing, you will not fall behind best practices or the performance of competitors who do so as well.
Conclusion
The dropshipping business model is an accessible solution for sellers seeking a low-cost and low-risk way to enter the eCommerce industry. It’s flexible to work for part-time entrepreneurs, but it can take months before a dropshipping store becomes profitable.
By following some of the advice shared in this article, you will be able to create your online store empire. The best way to learn how to start a dropshipping business is by taking that first step and building it yourself.
Guest author: Khyati Hooda is a serial entrepreneur. She is the co-founder of The Hustle Story (Digital Media Company) and Lume. She also helps entrepreneurs and founders grow their businesses and increase revenue without wasting money or time.
You can connect with her on LinkedIn.