Written by Fara Rosenzweig

May 15, 2020

If you’ve ever wondered how to start an eCommerce business, a dropshipping business is a way to go. The barriers-to-entry are low and there is good money to be made. However, because the barrier-to-entry is so low, it means that competition can be fierce. 

What is Dropshipping?

Essentially, you’re an online store that doesn’t need to hold any inventory. You sell your products at retail, purchase from your wholesale supplier, and your dropship supplier ships the product from their warehouse to the doorstep of your buyer. You pocket the difference as your profit. You don’t have to deal with packaging, shipping, or storing items, you just worry about your online store, finding a potential customer, and handling any support issues that arise. 

How to Start a Dropshipping Business

Though there is always more than one way to skin a cat, when setting up your dropshipping business, start with basics. 

Choose a Great Niche Market

What niche you choose depends on you. It should be focused, but also should be niche products you really enjoy and understand so that you can successfully scale it. You have to walk a fine line between a trending product niche and one that isn’t so popular that you can’t get a foothold. It’s also good to keep in mind that the work of acquiring a customer is the same whether you’re selling a product for $50 bucks or $500. 

Look for a niche that has plenty of high-end products you can make a healthy profit from, that attract customers with plenty of disposable income. However, be careful of niche products that are extremely expensive to ship. You will have less room to make an attractive offer to your customers (i.e. free shipping) and a lower profit margin. Plus, high shipping fees might be a discouragement to some buyers. 

Research the Competition

Dropshipping is a popular business model. That means there is competition, not only from other dropshippers but also from other big retailers. If you choose to sell a product with little competition, you may not sell a thing. That’s because there’s no demand for the product. You have to have product demand to generate sales otherwise you’re just spinning your wheels. Figure out what your competitors are selling because it will give you a lot of intel on what you a winning product looks like. 

Find a Dropship Supplier

Finding a reliable supplier is an incredibly important step and communication is key. Many dropship suppliers are found overseas, which makes communication around shipping time and expectations that much more important. Do your research and make sure you find a reputable supplier that can handle potential sudden growth. Your dropship supplier can make or break your business, so finding one that’s worthwhile should take some time. Don’t rush the process and listen to your gut. If the fit feels wrong, move on and look for another supplier. 

Create Your Branded Online Store

Consider branding elements carefully, such as your eCommerce store name and website URL. The best eCommerce websites should be simple and memorable, with a tagline to convey your USP. Choose your color palette carefully and pay attention to your site fonts. The more consistent everything looks, the more professional it looks. 

Professionalism inspires confidence, which leads to more sales. There are plenty of eCommerce website tools that help you build an eCommerce website quickly and easily, such as Shopify. The nice thing about setting up a Shopify store is you can choose from a variety of themes to help make your site look pro. You can also build your own custom site, but until you know if your dropship business will be profitable, it’s better to go with an out-of-the-box option like Shopify. 

Decide Your Customer Acquisition Plans

Make a plan to attract customers. You can’t just set up a site and expect them to come. You have to go out and find customers and funnel traffic back to your shop’s site. There are many ways to do this, such as Google or Facebook Advertising, social media marketing, email marketing, content marketing, and search engine optimization. While some strategies work better in the short term, others might work better over the long term. Use a mix of both and map out a plan for the future of your dropship business.

Optimize Your Campaigns

With marketing platforms like Facebook and Google Advertising, it’s important to constantly keep an eye on your campaigns. You need to analyze and tweak them for the best performance. Setting and forgetting is not a thing, at least not a profitable one. Keep an eye on what’s working and what doesn’t, and eliminate the things that don’t. 

How Profitable is Dropshipping?

Incomes can vary with drop shipping. However, provided you set yourself up for success and find a great product to sell, dropshipping can be extremely profitable. Since you aren’t on the hook for the manufacturing or shipping cost of goods, or keeping an inventory, you have bigger margins to win by. 

How Much Does It Cost to Start Dropshipping?

The great thing about dropshipping is that it’s a low risk as far as eCommerce business models go. Start-up costs are mostly your website and maintenance costs. You only pay for inventory after you’ve already sold it to your customer. You aren’t responsible for the costs associated with creating your products or storing inventory you haven’t yet sold. You don’t even need employees for packaging and shipping your items. 

Learning how to start a dropshipping business isn’t hard, it just takes work. Like any business, you will get out of it what you put into it. That’s why it’s so important to build your business around a niche that you’re passionate about and that’s profitable, so you stick with it and don’t give up.