The dropshipping business is becoming increasingly popular, and for good reason. The capital you need to start a dropshipping business can be as little as 20 USD, and the fact that you don’t need to hold any inventory makes this particular business model even more attractive.
What’s more, dropshippers can even earn more than 50% profit than sellers who keep their own inventory. Despite all of those advantages, however, stepping into this is not an easy task. Luckily, we are here with a guide to help you to start this e-commerce business.
In this article, we will break down everything you need to know in order to start a dropshipping business. Let us begin with defining what drop shipping is.
Dropshipping is the newest retail fulfillment method, and it’s very efficient. Dropshipping business has many benefits for both retailers and shoppers.
It's a retail technique where merchants don't keep all their products in stock. When you sell a product using this method, you buy the item from one of your suppliers and ship it to the customer. As a result, you don't have to handle it yourself.
It can be challenging to know the differences between a dropshipping business and more traditional retail models. A dropshipping business is considered a form of retail because the seller purchases inventory as needed from a third party to fulfill orders.
The most significant difference is that the seller doesn't have any stock! The merchant doesn’t have to do any of the heavy lifting when it comes to shipping and fulfillment. All they do is send orders to the third-party supplier, who will ship the products on the merchant's behalf.
The ultimate advantage of the dropshipping business is that you can run an online store without opening a traditional brick-and-mortar store. You don’t have to worry about overhead, employees, or stocking products.
All you need to do is set up an online dropshipping store and buy wholesale from suppliers who already have products and warehouse space.
A dropshipper is a middleman who processes orders and inventory for a retailer. The middleman typically makes the most profit by marking up the items they sell for their customers in an eCommerce business.
The responsibility of this dropshipper is mainly to process orders on behalf of an e-commerce store. The retail merchant is responsible for gaining customers by driving traffic to their store and processing orders, while the dropshipper manages inventory and ships orders.
The dropshipper marks up the items they sell, getting the lion’s share of profit. This profitable business model has many benefits, making it easy to understand how it can be gratifying.
Dropshipping eCommerce businesses require very little money to launch and need just an online storefront which means you can sell products from everywhere just by having a laptop.
Maybe that is the reason you are here and looking to start your own dropshipping business. Before that, let us look at some of the benefits of dropshipping.
Starting a business with dropshipping is fast and easy. There are benefits to this type of retail business model, especially if you’re trying to save money. First off, it’s cheaper than opening up a warehouse to store products. And since you don’t have to manage the products you're selling, no employees are required.
You can just focus on getting your business up and running. You can start your own business in a matter of hours. It takes some foundational knowledge, the right resources, and the know-how to use them.
That's why we're here to provide this guide. By the time you’ve read this all the way through, hopefully, you’ll have the required knowledge to launch your own dropshipping company.
One of the best parts about being an entrepreneur is setting your own hours. You get to be your boss and work when you want, where you want. With only a laptop and an internet connection, you will be able to get everything done.
This is perfect for people who wish to control over their lives. You won’t have to work long hours at the office. Instead, you set your convenient times to work. With endless possibilities, you can even go on a vacation.
Dropshipping is a flexible business model that will allow you to make decisions based on what you think will work for your business. You can list new products whenever you want, and you can adjust your strategy as needed.
You can run a business from your laptop and don’t need to make any high-level investments. Advertising is your most significant expense, but you can scale it as your online store grows.
Costs will be low in the beginning compared to traditional businesses, but they will grow as your company do. An online store can achieve is a lot of growth due to the dropshipping business model.
There are tons of benefits to running an online business. You don’t need to spend time or money on hiring staff or renting warehouse space. You can manage your business with relatively ease with just a few basic commitments.
For example, you don't have to hire staff or rent warehouse space. Once you’ve found suppliers and set up the basics, you’re only responsible for managing your online storefront.
Therefore, the drop shipping business can be an excelent idea for people worried about managing their business.
Youu don’t have to change your business model much as you scale up. You just have to focus on selling products and marketing because you’ll be processing more orders.
One of the benefits of dropshipping is that infrastructure costs don't skyrocket when you scale so that you can allocate more to marketing efforts. The more you focus on customer experiences and promotion, the better off you'll be.
One of the benefits of dropshipping is that the costs don’t exponentially increase when they scale. With this in mind, you can invest more in marketing and delivering fantastic customer experiences.
Dropshipping may have its disadvantages, but one of the most significant downsides is that you have to take responsibility for your customers' problems.
You may be doing everything right, but if your suppliers have issues, you're taking the blame. However, this is all part of the business model and should not be something for you to worry about — it’s just part of the process.
Handling customer support and sorting out orders can be a bit challenging and therefore is one of the significant disadvantages associated with the dropshipping business store.
Dropshipping can be a complicated business model for some, especially on a tight budget. A disadvantage is the low margins you can expect initially, but it also has advantages. Dropshipping in a competitive niche gives you a way to beat your competitors and win customers' attention.
With a little bit of careful organization and a dash of creativity, you can turn a profit while staying on a shoestring budget.
However, the right niche and audience are more likely to garner wider margins. Niches with less competition will also have better margins; however, once they plateau, it’s time to optimize your advertisements.
Finding a niche or vertical that's well-suited for dropshipping can help to mitigate the risk of fierce competition among vendors. Too many sellers in an industry will quickly hurt the potential profit margins.
However, if you find a niche or vertical that's perfect for dropshipping, you can use this to your advantage. The success of many dropshipping businesses is also dependent on maximizing advertising.
One disadvantage of the dropshipping process is the lack of control over external factors. This is because you need to rely on suppliers, and they must do everything right and work seamlessly.
Some issues that could arise from them include stocking products, order fulfillment, and shipping. It can be hard to manage everything on your own if you’re not comfortable with it, but luckily, more people are taking part in this thrilling industry.
However, with the proper damage control, keeping customer churn and customer retention issues to an absolute minimum is possible.
While the whole process of dropshipping is relatively straightforward, but things can get complicated when you work multiple dropshipping suppliers. One major hurdle for any company is its different suppliers. Every supplier may have a different set of rules for handling.
This can be complex and sometimes difficult to manage without professional help.
Dropshipping is different from custom-made products, print on demand, and other e-commerce models because it doesn’t give you much control over the product itself. Usually, the supplier designs and brands the product. However, you can usually change the product with a minimum order quantity.
If you want to make any changes to your product, you need to talk to your supplier first. Even if they can accommodate the request, they will have the most control over the production.
Any changes to the product itself usually require a minimum order quantity that is cost-effective and doable for the manufacturer.
Let us now discuss the steps involved in starting a dropshipping business
Starting the drop shipping process can be more accessible and manageable if broken down into a few steps. That is what we are doing in this section.
Dropshipping may seem simple, but a significant commitment and long-term perspective are involved. If you're looking for a short-term, high-paying gig, you're going to be disappointed.
It takes time and hard work to build a profitable company. If you approach your business with realistic expectations about the effort required and your potential for profit, you'll be much less likely to give up on your dreams.
Invest the right amount of time and money when starting a dropshipping business, and you will see the best results.
If you want your dropshipping business to succeed, you need a solid and powerful idea. Your concept is at the core of your business, and you can customize it as you go.
Branding and content that supports your dropshipping business ideas can be developed as you launch and grow your store. Keep in mind that you may need to pivot or adjust your strategy depending on what sells well. Every successful business needs an idea that stays true to its core values.
You can go ahead and start your own business with a vague idea of what you want it to be. As time goes by, you need to build your niche market by researching about your competition and determine how likely your product will be successful in that niche .
This type of approach is critical if you want to gain an upper edge among the eCommerce businesses. Moreover, you could also tap into your hobbies and interests and hink what kind of products addresses some of your problems to find a suitable niche.
Finally, be sure to select a dropshipping business idea that will give you profits. After all, the main objective behind the business is to earn money, right?
Product research is an integral part of a successful dropshipping business. To find out what people are buying, you can look at a current list of trending products by Shopify.
This list includes all the essential stats you need to know, such as global order growth and the popularity of related sellers. Look at the products that are selling and trending to find out what you could sell.
As you start your business, market research is vital. Be sure to identify underserved niches in the market and make sure there is a demand for your offerings.
One of the most time-consuming steps in starting a dropshipping business is sourcing products. You want to ensure that each item is profitable for your store, so consider where you are getting your products.
Will it be from wholesalers? Manufacturers? Regardless, you want to make sure that you're researching each company and the product you want to sell.
As you evaluate potential products and suppliers, here are a few factors to keep in mind:
You can also source drop shipped goods from direct-source suppliers and dropshipping marketplaces.
Marketplaces are the best way to get started with your first drop shipping business for entrepreneurs. This is because Marketplaces that integrate with the eCommerce platforms you use to automate the process and make it easy to buy and sell. The downside of using these marketplaces is that your competitors can access the same products.
You can also prefer a direct source supplier. To find the right supplier, make sure they have a proven track record in the dropshipping business. It is also essential for them to provide excellent customer service.
You should request product samples before contracting with any supplier. A good supplier will refer you to other businesses they work with upon request. If they refuse, consider it a warning sign.
Dropship marketplaces can be an easy way to launch your business, but sourcing products from manufacturers and importers is where you can make money.
That’s because you can cut out the middle man (the dropshipping marketplace) and buy wholesale directly from the source. Although finding the right supplier may take time, it's worth it for your business.
Now that you’ve identified your market and aligned with a supplier, it’s time to build the website where you will sell your products.
There are two ways to do this:
If you sell on an eCommerce marketplace, Getting your store set up on a marketplace like Amazon is easy and convenient, but selling through these platforms will limit your independence.
Besides the fact that you'll be at the mercy of the marketplace's terms of service, you also won't have any control over how your store's branding, design, and marketing.
Which is why, dropshipping with an eCommerce platform is the better way to go. The reason for this is because you have complete independence as you own your business’ website.
For example, you can launch marketing campaigns that sets you apart from your competitors — a far cry from the lack of control ecommerce marketplaces give.
When you're deciding on your e-commerce platform, ask yourself this question: What kind of store do I want? You'll need to know the answer before you make a purchase because it will inform which platform is best for you.
If your store will be more focused on products, there are two platforms you should choose from Shopify or BigCommerce. If you want your store to be more content-focused, WooCommerce integrates with WordPress.
Choose a platform and create your dropshipping site. The last step is to do everything you can to bring in customers. Regardless of which marketing platform you choose, you should optimize your website for search.
You can do this through email marketing, paid ads, and social media. Different platforms have different strengths. We recommend testing a few that work best for you, but make sure they are consistent.
If you want to start a business, you’ll need to decide on an organizational structure. There are three common types of companies:
Sole Proprietorship
This is easiest to establish but offers no personal liability protection. So if your venture gets sued, you'll be personally responsible for paying for it.
Filing requirements are minimal, and you simply report your business's earnings on your taxes. No other state or federal filings are required.
Limited Liability Company (Llc)
A Limited Liability Company (LLC) is an excellent way to protect your assets. While you won’t be completely covered, the liability protection is often more than enough. You may need to file for additional paperwork and pay ongoing fees, but the increased security is worth it.
C Corporation
C corporations are a significant kind of business entity and the most common for large companies. These companies have some liability protection. However, they can be more expensive to incorporate and are subject to double taxation. Income doesn’t pass directly to shareholders but is instead taxed at the corporation’s level.
Onene mistake they often make when entrepreneurs start businesses is to mix their personal and business finances. It’s not just problematic because it can be confusing. If someone assumes the business’s liabilities, it could lead to personal bankruptcy. The IRS is also aware of this situation, and it could lead to an audit.
You’ll want to keep your business and personal finances separate as much as possible.
Use a business checking account, a separate business credit card, and get a business license. You should also collect sales tax if the state collects sales tax and the order is placed by someone living within your state.
With so many things about dropshipping being automated, you can spend time and energy on the following:
Paid ads
Social media is a great place to start, especially Facebook. One-cent-per-click is a steal. It's a pretty good deal for a newer advertiser. Facebook ads are scalable, and products can do well on them. You can also target Google Shopping Ads with long-tail keywords. Price competition with Google ads is often more intense, but it may be worth your time to test it out.
Influencer Marketing
It is a great way for new e-commerce brands to reach their target audience and grow their customer base. This is because people tend to trust influencers more than traditional advertising — they're cheaper, too!
Don't forget to negotiate an affiliate fee with the influencer instead of a flat rate. Yes, the cost will be less for you, and you'll get a win-win situation: They'll make money off of each sale, and so will you.
Mobile marketing
More and more people are using their phones for everything, including shopping. As a result, businesses need to be able to reach customers on their mobile devices.
One way to do this is by creating VIP text clubs and sending exclusive deals and promotions to customers that sign up. You can also provide customer support through live chat conversations with shoppers through Messenger.
Another great way to reach people on their phones is through automated lead generation, cart abandonment, and customer retention campaigns using a mobile marketing platform.
Content Marketing
This kind of marketing is a popular way to build traffic to your store in the long term. You could start a blog with dropshipping and create YouTube videos, infographics, or podcasts to tell your story.
In this context, blogging is a thoughtful way to give back to one's target audience in a more personal, thoughtful way.
Communities
Join passionate groups of people online that share your niche and start supportive conversations with potential customers. The most popular sites for this are Reddit, Facebook Groups, and online forums.
To keep it professional and not be too sales-y, try to help and build relationships with your potential customers. They'll trust your brand and want to shop at it.
To help you with this, you can use our ad maker from Offeo, which lets you create advertisements for your social media. You can edit it according to the platform you are on and increase your ROI.
Our templates are easy to edit and can be customized accordingly. Add music, text, effects, and some graphics to make it more appealing. Moreover, you can upload your videos on all social media platforms. So, you can stop worrying about it.
Properly setting up your drophsipping takes several steps, which are:
On average, the profit margin you can set with dropshipping is between 15%-20%. However, this number varies significantly depending on your chosen niche and your goods' average cost. To make the most out of your best products, try to set your profit margins above 20%.
Beginner dropshippers make between $1,000 and $5,000 per month. Dropshippers then use a fraction of this money to buy the product from suppliers, dropshipping fees, marketing, and the chosen dropshipping website provider.
Because anyone can start a dropshipping business for free, you might be facing plenty of competition -- especially if your niche isn't specific.
Dropshipping is entirely legal. Thousands of business owners use this order fulfillment method, and it's legitimate. However, it would be best to be extra careful when choosing your suppliers as some illegally use another company's intellectual property.
Dropshipping is a low-risk, low-cost alternative for starting an online business. You can now use third-party apps and marketing automation tools to run your business without the struggles. This article about dropshipping should inspire you to create a pathway to success and financial freedom, so you can live the life you’ve always wanted.
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