Dropshipping is one of the e-commerce businesses that has become popular in this present time. Some of the online entrepreneurs who understand how it works are making a fortune through it. Hence why a lot of people want to learn how to start a dropshipping business.
In 2017, approximately 23% of online sales last year were fulfilled via dropshipping, which amounts to about $85.1 billion. It is a booming e-commerce industry and that’s why people who are looking for the best ways to make money online want to partake in it.
One thing I personally like about dropshipping business is that it involves low risk and little capital to kick off. To me, it is one of the best e-commerce businesses a beginner can take to.
Are you one of those people who want to learn how to start a dropshipping business? I welcome you to this ultimate guide where I will show you to start a dropshipping business step by step as a beginner. This guide will cover the following subtopics
- Develop your dropshipping business plan
- Do market research and identify a dropshipping niche
- Register your dropshipping business
- Find a reliable and credible supplier
- Choose suitable e-commerce to build your dropshipping website
- Create, design, and launch your dropshipping website
- Market your dropshipping website to get and fulfill orders
But before we get into these steps one after another, let’s look at what dropshipping business is and how it works
What Is A Dropshipping Business?
Before you learn how to start a dropshipping business, it is important you understand what it is. This will help you decide if it is the right e-commerce business for you, and how to approach it.
Dropshipping is a kind of e-commerce business that involves fulfilling orders by selling products on your store in which you are not responsible for warehousing or shipping to the customer.
It’s simply you selling products in your store and passing the sales order to the manufacturer or supplier who ships the product to the customer.
You don’t you purchase the products and resell. All you need to do is to partner with suppliers and manufacturers.
Have their products in your store, get orders, and pass it to them for them to process and ship.
How Does Dropshipping Business Work?
This should be the next question to ask after you have known what dropshipping business is. It is an order fulfillment business that works by you selling directly to customers without stocking any inventory.
Dropshipping business revolves around three parties – the manufacturer or supplier, you, the drop shipper, and the customers. Its working can be summarized in 3 steps:
- A customer places an order or purchases from your e-commerce website or store
- You the drop shipper forwards the order details of the customer to the supplier or manufacturer of such product.
- The supplier or manufacturer processes the order by packing and shipping the product directly to the customer.
How To Start A Dropshipping Business In 7 Steps
Learning how to start a dropshipping business can be likened to learning how to start an e-commerce business. There are steps to follow to ensure you’re on track. As someone who has decided to invest his time in learning how to start this aspect of e-commerce, we have broken it down for you into manageable steps. This is to ensure that you know what to do at every stage.
1. Develop Your Dropshipping Business Plan
The first step to starting a dropshipping business is to develop a dropshipping business plan. Write down the plans you have for your Dropshipping business and the well-thought strategies to execute it.
Get your paper, pen, and put on your thinking cap to get down to work. Your dropshipping business plan should cover the following:
Description: What exactly kind of products do you want to focus on? who are your target customers and where are they? Think of how to make it unique and stand out from your competitors at the same time helping satisfy the needs of your customers.
Market Analysis: You are not the first person to take to dropshipping. There are drop shippers who are already in the business.
Carry out research on your own, make use of statistics and data to analyze the market you’re about to enter to see how you can easily fit in and adapt as soon as possible.
Management: Do you plan to run your business alone? Are you going to hire employees to help you out? Also is your Dropshipping business a sole proprietorship or is it going to be a partnership, etc?
Funding: Although dropshipping is not capital intensive, you still need money to get a few things ready.
Like registering your business, setting up your e-commerce website, and promoting it. If you don’t have the financial muscle for these, you should have a plan on how to source the money.
Sales Strategy: In dropshipping, getting a large volume of orders is key. That is a benchmark to measure how successful you are as a drop shipper.
Some drop shippers use either free or paid traffic as a strategy to drive a large volume of sales.
Financial Projections: In any business, you have financial goals you target over a period of time. It could be the number of sales you expect to record in 1 year and the amount you expect to make in commission also.
All these are what your dropshipping business plan should cover. You should write, read and digest it before you take the next step.
2. Do A Market Research And Identify A Profitable Dropshipping Niche
Identifying a profitable niche is key when learning how to start a dropshipping business. This is because you need to make a profit to stay afloat in the business.
Once you are done with your business plan, the next is to research any niche you think will be profitable.
Dropshipping is a lucrative business same time competitive that you need to be strategic in order to be ahead of your competitors. After all, you and your competitors have access to the same product niche.
What makes the difference is for you to target specific demography and offer them products that solve their problems in a unique way.
The following tips will help you identify a profitable dropshipping niche.
Think of what interests you
There is that which interests you as a person. I mean that which you discuss with friends and sometimes see yourself offering advice on.
You can translate such an interest in selling products that can help people solve their problems. It’s easier to sell what you have knowledge of.
Conduct a keyword search
It is important that you identify keywords customers are searching for in your niche as it relates to a product. The aim is to know the estimated volume of searches for a product in your niche.
There are some reliable keyword research tools you can use. The higher the number, the higher the demand which is good.
Spy on your competitors
One thing is for sure. You will have competitors already waiting for you in your niche. Spy on their dropshipping website to identify the products they sell, price, and marketing channels.
This aim is to help you develop a strategy that will make you a strong competitor or even outdo them.
Know what people are buying
Don’t just go into a niche without knowing what people are buying. This is to avoid going for products that give low turnover.
With a tool like Google Trend, you can easily estimate products that are high in demand.
Check for social media engagement
Facebook, Instagram are popular social media platforms drop shippers leverage to get orders.
For any niche of your choice, check out how customers, audiences engage with products in such a niche.
That will give you an insight. Social media is key to digital marketing. Many of your customers on different social media platforms. Experimenting with how they engage with your niche is what to factor in.
Assess profitability
The ultimate goal of any business is to make a profit. So it is in dropshipping. Evaluate the profit margin you are likely to make after you subtract your expenses.
It won’t be a wise choice to settle for a niche that won’t guarantee a reasonable amount of profit margin. It doesn’t worth your time and effort.
3.Register Your Dropshipping Business
To legalize your dropshipping business, you need to register it with the relevant government agency of your country.
This is to make sure that all the legal documents that empower you as a drop shipper are intact. The following are the procedures to register your dropshipping business.
Choose an entity
A business entity or structure is simply how the ownership of a business is, the roles party or parties play in it.
The business structure you choose directly affects the amount you pay in tax, and how at-risk your personal asset will be.
It is important you consider all these when registering your business. There are 4 different types of business entity you can choose from:
Sole Proprietorship: This is a form of business entity that involves you running the business yourself without any structure.
Here your personal liabilities, asset, and business are not separated. It is the best form for a beginner who is still experimenting to see if dropshipping business will work for him or not. It saves you from paying much tax.
Partnership: Here two or more people come together to own and run the business. It could be in form of a Limited Partnership(LP) or Limited Liability Partnership (LLP).
Limited Liability Corporation (LLC): LLC allows business owners to separate personal assets from business liabilities. It implies that losses or profits are taxed as personal income or loss to everyone involved.
C- Corp: C Cooperation type of business structure is owned by shareholders. The business can be taxed and take responsibility for all its actions without involving the shareholders.
It offers protection for the personal asset of the owner while it is possible to be taxed twice: firstly when the C- Corp makes a profit and again when the shareholders benefit from the dividend. This is likely with the IRS – Internal Revenue Service of America.
Since dropshipping is an e-commerce business that you can run from your home, all these business structures may not bother you at least at this beginning stage. A sole proprietorship will do.
Find a location
This might not be necessary since you are running the e-commerce yourself for now. However, it may be important when your dropshipping business has expanded you have the need to hire employees who will work for you from your office.
Register your business
Before you register your dropshipping business, ensure that you have identified that suitable name that will represent your business. Also, check if it isn’t already registered as a trademark by another person.
This will be after you have settled for a business structure. In addition, secure a domain name for your business.
As a potential drop shipper, you will need a domain name for your e-commerce website. It is expected that the business name won’t be unrelated to your domain name.
Register with the IRS: For you to obtain your Employer Identification Number, you need to register your business with the Internal Revenue Service. This is to enable you to file your taxes as at when due.
Ecommerce is one of the major contributors to the global economy and the government has it covered in its tax dragnet.
Note that IRS which is the Internal Revenue Service is the regulatory agency in charge of taxes in America.
If you plan to run your Dropshipping business outside America, it is also important you find out the relevant government agency of your country to fulfill this obligation.
Apply for permit and licenses: As a drop shipper, some of the products you will sell will require you to obtain a seller’s permit. This especially if you’re selling a product that can be taxed.
However, this permit may vary depending on your state/country. To stay on the safer side, contact the relevant e-commerce agency of your state or country.
Just like a seller’s permit, you also need a seller’s license to collect taxes on the products your sell and remit it to the appropriate government agency of your country.
Again it is necessary you contact the relevant government agency of your country or state to be sure that you comply with the guidelines.
4. Find A Reliable And Credible Supplier
In this guide of how to start a dropshipping business, Once you’re done with the registration of your dropshipping business, the next should be to find a reliable and credible supplier.
This is because it would be a wasted effort to go-ahead to design an e-commerce website for dropshipping without first identifying the reliable manufacturer or supplier to work with.
For some drop shippers who are already in the business, identifying a credible supplier who won’t disappoint is a challenge.
But I’ll show you here how to solve that problem even before it comes your way. Let’s first look at what you should look for in any credible manufacturer or supplier.
Testimonies of satisfied drop shippers and customers: Your supplier who ships the products to the customer should have testimonies of drop shippers who are happy with their service and also customers who are satisfied.
Any supplier who is highly rated must have these proofs otherwise he or she might be a beginner with little or no good reputation in the market.
Product sample: Be sure to physically see the product you want to sell in your store. Any supplier you plan to work it must be willing to send you a copy of the product to ascertain the quality.
This is to avoid creating a negative impression on customers as someone who deals on very low and sub-standard products.
Fast Shipping: This to me is the most important factor when choosing a supplier or a manufacturer.
Your customers want their products to be delivered as stated on the checkout page and you must be sure that your supplier or manufacturer lives up to that expectation.
Fees: Some manufacturers and suppliers would want you to pay a fee to work with them especially as a beginner. Don’t fall for such.
Even if you decide to do such as you grow in the business just to keep your relationship with them going, you shouldn’t pay more than $3 for stocking, packaging, and shipping per product.
How to find a reliable and credible supplier
Finding a reliable and credible supplier depends on two sources; manufacturers and dropship marketplaces. Let’s take them one after another.
Manufacturers
A lot of companies all over the world need people who can drive sales to them. They manufacture a large number of products in all niches of dropshipping.
Some of them don’t know about e-commerce but are ready to partner with e-commerce business owners to make large-volume sales.
The sale to you at cheap prices thereby allowing you to make a reasonable amount in commission.
Many drop shippers prefer working with them because it saves them the cut-out middlemen make when they buy in bulk and retail.
The difficult aspect of it is that many of these manufacturers prefer working with popular drop-shippers who record a high volume of orders. Also, their authentic directories are not easy to find.
Even if they agree to work with you, you’ve to the hard work of adding and managing inventory because most of them don’t offer seamless integration with your store. However, the following online directories can help you see what these manufacturers have to offer:
Dropshipping marketplaces
Dropshipping marketplaces are the easiest ways to source for suppliers as a beginner. It saves you the stress of bothering about how to find winning products in your niche.
With the apps integrated into your e-commerce store, getting suppliers is just a click.
This is simply the middlemen doing the job of getting the products you need for your store from the manufacturers while you focus on how to get orders for those products.
Below are some popular dropshipping marketplaces you can use to source products.
SaleHoo: With $67 dollars yearly fee, you have access to over 8000 suppliers from which you can source products for your store.
Oberlo: It is the best Shopify dropshipping marketplace that you can find on Shopify app store.
As a giant in dropshipping, it is known for suppliers who boast of quality products and speedy shipping. You can start with its free starter plan.
Spocket: This is another Shopify database app that has suppliers of US and EU products. Items purchased from suppliers here are shipped within your country rather than China thereby cutting on shipping cost and delivery time.
Modalyst: If you plan to run your dropshipping business on BigCommerce or Wix, then Modalyst might be dropshipping marketplace to consider.
It integrates seamlessly with BigCommerce and Wix. Also, suppliers here deal mainly with jewelry, clothing, and accessories.
Aliexpress: If you’re looking for suppliers from China, then Aliexpress is the marketplace for you. It is free to join and deals on over 100 million products that are delivered worldwide.
For a beginner, it might a better platform to test out products to see which will be a good fit. Other dropshipping marketplaces are Doba, Dropified, Inventory Source, DHgate, Megagoods, WholeSale Central, Worldwide Brand, etc.
5. Choose A Suitable Ecommerce Platform
Now that you have settled for a niche and identified a supplier, the next is to choose an e-commerce platform where you’ll build your dropshipping website to sell your product.
Here are two options to make: Either you build your dropshipping website from the scratch on popular e-commerce platforms like Shopify, BigCommerce, Woocommerce or you create a store on e-commerce marketplaces like eBay, Amazon, or Etsy.
Let’s take them one after another.
E-commerce Platforms
E-commerce platform is the best for someone who plans to scale his dropshipping business in the near future with all the advanced tools needed.
As lucrative as dropshipping is, it is also competitive and the only way to stay above your competitors is to get your marketing strategy right.
This involves you making use of advanced features, tools, and add ons which e-commerce platforms offer you.
Shopify, BigCommerce, Woocommerce are good e-commerce platforms. But choosing any of them partly depends on the supplier you want to work with.
For Instance, Oberlo is the most popular dropshipping supplier and it integrates seamlessly with Shopify. In fact, it is an app on Shopify store.
So it will make sense to build your website on Shopify if Oberlo is your choice for product supply. Modalyst is an automated dropshipping app for BigCommerce.
So if Modalyst is your choice for suppliers, then it will be better to build your store on BigCommerce.
Lastly is Woocommerce which is an open-source e-commerce platform. The advantage here is that you have total control over your store.
Woocommerce is a WordPress plugin therefore you can integrate a lot of WordPress plugins.
The advantage is that you can decide to make your store content focused which is an SEO strategy that will drive traffic to it.
However, Woocommerce isn’t a good fit for a beginner who doesn’t know much about e-commerce.
You have to take care of hosting, security, update, and backup of your store. Also, you handle all the technical issues that may arise as a result of the plugin you use.
This isn’t so with Shopify and BigCommerce which are all in one e-commerce platforms.
Check out my detailed comparison of:
MarketPlaces
Amazon, eBay, Etsy are all established marketplaces. They have built trust, reputation, and credibility which make them the choice of many.
The benefits of selling on them are that they are easy to set up and the customers are already there.
However, you’re limited with what you can do with these marketplaces. You don’t have total control over your store.
You can’t do much as it concerns branding, marketing, and designing your store. In addition, these marketplaces charge you a percentage for the amount you make per sale.
6. Create, Design, And Launch Your Dropshipping Website
After you have considered both e-commerce marketplaces and platforms as to where to build your dropshipping website, the next is to settle for one.
Any choice you make will require you to create, designing, and launching your store. The only difference is the level of technicality involved.
For Amazon, eBay, and Etsy, you won’t have to do much. But for Shopify, BigCommerce, and Woocommerce, you have to build it from scratch.
Especially Woocommerce is open-source which implies that your store is what you make of it.
However, Shopify, BigCommerce, Woocommerce have these steps in common:
- Sign up with your email
- Choose a suitable theme from a theme store or third party
- Customize your theme to suit your store
- Add products that your suppliers are willing to fulfill in your store.
- Categorize them into collections to make it easy for your customers to browse and order.
- Set up your check out page where you decide a payment method for your customers.
- State your shipping rate, location, and delivery duration.
If you plan to use Shopify as your e-commerce platform, here is a beginner’s guide that will teach you how it works.
7. Market Your Dropshipping Site To Get And Fulfil Orders
What makes you a drop shipper is the ability to get and fulfill a high volume of orders. That is one of the goals of any drop shipper who wants to make 6 figures in commission a month.
You may have that awesome dropshipping website and valuable products, but if you won’t make any sale if customers don’t see them.
The final step of learning how to start an e-commerce business will be on how to market your dropshipping site to get and fulfill orders. We will look at 4 methods to achieve this.
Search Engine Optimization
Optimizing your store to appear on search engine results is what you should bear in mind when building your store.
Another should be when adding products to your store where you should use keywords in the product title and description.
Platforms like Shopify, BigCommerce, and Woocommerce allow you to start a blog for your store. Publishing content which are in line with your niche is a good strategy.
As customers read the content you publish, you direct them to your product page where they can order products that will help them solve their problems.
You can engage in link-building with companies in your niche. The aim is to build high-quality backlinks to your store.
Facebook and Google Ad
If you have the financial muscle, you can run ads for your dropshipping website.
Although it is not advisable for a beginner who is still learning how to start a dropshipping business, it could also be a kind of exposure for your store to target customers who may always come back to patronize you.
Facebook and Google Ads is a marketing strategy for some six-figure drop shippers.
Social Media
Building large followers on Facebook, Instagram, Twitter LinkedIn, Reddit is a way of creating a social media presence for your store.
The strategy is to post helpful content as it relates to your products frequently on your different social media platforms to drive engagement.
Most of your customers are on these social media platforms and you can’t afford to leave them out.
Although managing these different social media platforms can be challenging, you can make use of Social Media Management tools to automate most of your activities.
Email Marketing
E-commerce platforms like Shopify, BigCommerce, and Woocommerce integrate with robust email marketing tools like GetResponse or ActiveCampaign. You can leverage that to integrate any of them in your store to collect the emails of your customers. The aim is to hit them up whenever you have products you think will be of help to them.
Wrapping Up
I congratulate you for following this guide till this concluding stage. I trust that by now that you have an idea of how to start a dropshipping business.
Starting from drafting your plan, choosing a niche, registering your business, identifying a supplier, choosing an e-commerce platform, designing your store to marketing it.
All these are steps are aimed at guiding you towards getting it right. Remember that dropshipping is lucrative same time competitive.
You have to be unique to be ahead of your competitors.
The strategy should be choosing a profitable niche, working with a credible supplier, building your website on any e-commerce platform that suits you, and having a formidable marketing strategy. I look forward to reading your success story.
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