How to Start Your Dropshipping Business in 7 Simple Steps
What you'll learn
What you'll need
Starting a dropshipping business in 2022 can be a very lucrative way to make full-time money. With the right strategy, you can launch strong.
If you’ve been wondering how to start a dropshipping business but don’t know where to start, follow this guide. You’ll find out how dropshipping works and the steps to take to launch your own dropshipping business.
We would have laughed at the idea if someone had told us years ago that you could sell physical products without needing to stock them first.
Yet, here we are.
We are talking about dropshipping, and it's a game-changing retail model.
People have made millions by dropshipping products from their homes, a strategy you can use as an entrepreneur.
This article will dive deeply into how to start your own dropshipping business from scratch.
We will explain dropshipping, how it works, and the key steps to get it right.
Keep reading!
What is dropshipping?
Dropshipping is a retail fulfillment business model where a store doesn't keep the products it sells in stock.
Instead, when a retailer sells a product, the supplier will ship it directly to the customer.
How does dropshipping work?
To break it down, here is how a standard dropshipping process works,
1. The customer places an order with the retailer
The process starts when customers order online from a dropshipping website or store. Then the retailer will receive an email containing all the order details, including the customer's name, address, and other information required to process the order. The customer will also receive an order confirmation email.
2. The retailer forwards the order details to the supplier
The retailer forwards the order details to the chosen supplier of the product, usually using automation. The supplier can be located anywhere in the world.
3. The supplier prepares the order for shipping
The dropshipping supplier will work on preparing the order for shipping. Depending on the order type, the supplier may customize the product to meet the retailer's instructions, like adding a logo and white-label name.
4. The supplier ships the product directly to the customer
Finally, the supplier ships the order to the customer's address anywhere in the world through a logistics service provider.
Why should you consider dropshipping as a business?
Dropshipping is an increasingly popular way for passionate entrepreneurs and small business owners to start selling products they love.
Here are a few reasons that make dropshipping a lucrative business idea.
Easy to start
When you look at the dropshipping business, you will find that it is one of the easiest businesses to start. This is because all you need to do is find a supplier who can supply your products and a store to showcase them online.
You do not need to worry about storing or shipping the product.
The supplier will ship the product directly to your customer while you get paid.
With this business model, you can get started with a minimal investment.
Easier to scale
It is easier to scale and grow a dropshipping business than many other models. This is because you don't need to invest in inventory, and this will save you time, money, and resources. You need an online store and marketing strategy to start selling your products to customers globally.
Profitable
As a dropshipping business's upfront investment and running and operational costs are relatively low, you can make healthy profits.
Flexible operations
If you're looking for flexibility in running your business and want to be able to work from anywhere in the world, then dropshipping might be a good fit for you.
All you need is your laptop, an internet connection, an ecommerce platform, and to develop a profitable business model.
What are some challenges to consider when starting a dropshipping business?
Many people who try to run a dropshipping business fail because they don't understand their tradeoffs when choosing this model. They must fully understand how to find a good product idea, dropship products with a good profit margin, advertise to their target audience, and automate anything they can.
While there are several pros to starting a dropshipping business, it is wise to be familiar with some commonly faced challenges. This way, you can create a more successful business.
Limited product customization
Product customization refers to a process in which the end user chooses different aspects of the product they want to buy. Some examples include selecting colors, sizes, or other features that make it unique from others within the same category.
However, as a dropshipper, you depend on the supplier to a large extent. Product customization can be limited, especially for specific product types. This means that you cannot offer the same level of customization as if you were selling your own products.
When a customer is looking for something more unique than what is available on the market, this can be a disadvantage.
High competition
The low-entry barrier to starting a dropshipping business also makes it flooded with competition.
There are many dropshippers out there who are selling similar products, and they're all trying to win over customers. This means your chances of success in a dropshipping business will be low unless you do something different.
If you don't have a unique angle or product, then it's easy for other sellers to undercut you on price and steal away your potential customers.
Low-profit margins
When you place an order with a dropship supplier, you receive a single unit instead of bulk orders from a wholesale supplier. The single unit they sell means they have to go through more trouble with each order, so they charge more than a regular wholesaler.
This cuts into your profit per sale. On average, dropshipping business margins can be between 15-20%.
There are ways to boost your margins, like increasing process and sales volume or decreasing your advertising costs, but some of these parameters are not in your complete control.
Problematic customer support
Providing good customer support as a dropshipper can get tricky. This is because you don't always have needed control over the products your customers receive.
If the product arrives damaged, or not what they expected, you have to deal with these issues as the retailer.
7 steps to start your own dropshipping business
Now that we understand what dropshipping is, how it works, and its pros and cons, it is time to get down to business.
Here are the key steps to follow to help you get started on the right track with your dropshipping business
1. Know your goals
The first step in starting any business is to have a clear idea of what you want to achieve.
The more specific your goals, the easier it will be to work towards them.
Your goal is the reason why you started the business.
It can be anything from "I want to make money," or "I want to become financially independent."
To make money online with your dropshipping business, you should set a monthly goal of how much you want to make.
For example, you might decide that your goal is to make $10,000 per month in profits. This may sound like a lot of money, but if you have this goal in mind when starting the business, it will be much easier to work towards it.
Your goal will decide everything from the products you choose to sell to the marketing strategies you use to reach your customers.
2. Pick a niche and products to sell
One of the most important decisions you'll make when starting a dropshipping business is what niche to go after.
Your niche is the product or service that makes up most of your sales.
Having more than one niche is possible, but it's generally best to focus on just one.
This decision will impact every other aspect of your business, from where you source products from dropshipping suppliers and how much you pay for them, to what marketing channels you use to drive traffic to your website and how much money you can make with your dropshipping store.
Once you've picked a dropshipping niche, everything else follows after that.
It's essential to think about this decision carefully because it will significantly impact your business's success or failure.
If you choose the wrong products, then no matter how hard you work or how much money you spend on marketing or advertising, there's a good chance that your store won't generate sustainable sales.
Tips for picking the right dropshipping products to sell
Know your audience
When picking products for your dropshipping business, you should be specific and clear about your target audience. It will help you to find the right dropshipping suppliers, manufacturers, or wholesalers for the products in your target market.
Know your competition
You also need to know the market competition to identify who your competitors are and how they could affect your online business.
Knowing this information will help you decide on the price of your product and how much profit margin you can expect from each sale.
Validate the demand
Another vital thing to do is to ensure a good product demand.
It means you need to research what kind of products will sell well in your niche and then validate this before you invest any time or money into them.
You can use Amazon's Best Sellers lists, Google Trends data, and other relevant tools to help you find out what products are popular with your target audience. It might also be worth testing products with paid advertising to assess consumer demand.
Consider shipping costs
When you first start dropshipping, you may be tempted to choose products based solely on their price and profit margins. However, if you want your small business to grow, it's crucial that you also consider shipping and packaging costs.
It is because those overhead costs can significantly impact your bottom line.
In turn, you will benefit from picking lightweight, easy-to-ship products that are high quality and meet your customers' needs.
Follow your interests
As an entrepreneur, it's important to remember that you're not just selling a product. You're selling yourself. Your brand and story will help your customers to trust and connect with you.
That is why it can be a good idea to consider your personal interests when selecting your dropshipping products.
3. Research and vet suppliers
Once you know what products you want to sell and what audience you want to target, it is time to choose the suppliers who will fulfill the orders on your behalf.
The supplier is vital in starting and running a successful dropshipping business. It is crucial to research different suppliers before deciding on one.
Use dropshipping marketplace sites like AliExpress, Alibaba, Doba, Worldwide Brands, and more to research dropshipping suppliers and their products.
Once you have decided on a supplier, make sure that you vet them properly.
If you are looking for quality suppliers, here are some things you should look out for when choosing a dropshipping supplier.
Fair price
Find a dropshipping product supplier who can offer a competitive price for their products.
Reliable customer support
Make sure they have excellent customer service to help you with any problems that may arise when you need them most.
Fast shipping
Choose a product supplier who can offer fast and reliable shipping times for your orders. This will help build trust with your customers and improve conversion rates.
When shipping from overseas suppliers by sea, it can take several weeks for a customer to get their product, so make sure they are aware of this. Paying for faster shipping will cut into your profit margins, so keep this in mind.
Good reputation
In addition, you should choose one that has been in this industry for many years and has an excellent reputation among its clients. Look at their online reviews and see how others feel about them before doing business with them.
Product customization options
Securing a dropshipping product supplier with a vast product range and customization options can make sourcing products much more effortless than sourcing from multiple suppliers who only offer certain types of items within their portfolio.
Clear policies
Choose a dropshipping provider with clearly stated policies and terms.
For example, if there are restrictions on where your products can be sold or what payment methods are allowed, they should include these details in their terms and conditions.
4. Set up an online store
An ecommerce website is an essential part of any dropshipping business. It's an online storefront where you can list products for sale and receive customer payments.
Technically, you can also start dropshipping from ecommerce marketplaces like Amazon, provided you follow their dropshipping related terms and conditions. This strategy doesn't require you to launch your own website.
However, it is highly recommended to have one.
Benefits to having an ecommerce website to run a dropshipping business
- It allows you to build up trust with customers over time. This is important because once someone knows who they're buying from, they'll be more likely to buy again in the future should they need something else from your company or brand.
- You can customize the look and feel of the site, set up funnels and offers, and even drive advertising traffic to it. You don't have to worry about someone else controlling your business.
- You also have full access to data on customer behavior like where they are coming from, what pages they're visiting most often, and so many more metrics. This information can help you improve your site and make it more effective at converting visitors into customers.
Tips on how to create a dropshipping website
Leverage an ecommerce website platform
Going with an ecommerce platform can help you save a lot of time and money. You don't have to hire web developers and designers to create one to get started.
All you have to do is choose the right platform, pick a pre-built template, and customize it according to your needs.
Shopify and WooCommerce using WordPress are two popular platforms to launch your dropshipping website quickly.
Invest in high-quality landing page copy
If you're looking for a way to increase conversions, you must have a powerful landing page. Your landing page copy should be able to engage your customers and convince them that your product is what they want.
Pro Tip: Write persuasive landing page copy with the help of AI. Learn more about how CopyAI's suite of copywriting tools can help.
Display testimonials and reviews
It helps you build trust with potential customers by showing them that other people have done business with you successfully before and they were happy with their purchase.
Include product videos
By adding a video, you can show customers what your products look like, how they work, and how they're made. When people see your product working well in a video, they will be more likely to buy it because they can see its real value.
Keep navigation simple and clean
Your store's navigation should be simple, clean, and easy to use. It should also help users find their way around the site easily.
5. Manage your finances
No matter your business, you should keep a close eye on your finances. If you don't, you may find yourself facing severe financial problems down the road. It is also true for dropshipping businesses.
It may seem simple, but many people do not know how much they have in their bank accounts or debt on their credit cards. You need to know exactly how much money you have to make informed decisions about what to do with it.
Tracking where your money comes from and goes is also essential. It will help you determine what expenses are necessary for running your business and which are unnecessary. It will also help you estimate how much cash flow you need for each month or quarter.
6. Market your products
Marketing is arguably the most critical part of running a dropshipping business that requires your complete involvement.
You can have the best products and delivery times in the world, but if your customers don't know you exist, they won't buy from you.
Here are some channels to market and grow your dropshipping business.
Influencer marketing
Influencer marketing is a great channel to market your dropshipping business to your target audience.
Influencers are people who have a large following on social media platforms, and they can help you promote your brand by endorsing it to their followers. In return, you typically compensate with a fee or free products.
Paid advertising
Paid advertising allows you to reach people who might not otherwise be exposed to your products.
For example, if you're using ads on social media or search engines, you can target people based on their interests and demographics. It makes it easier to find potential customers likely to purchase from you.
The most used social media sites for paid dropshipping advertising are Facebook, Instagram, and Google ads for search engines.
Content marketing
Content marketing offers an affordable way for online retailers to gain exposure and generate sales without relying solely on paid advertising.
Creating and promoting high-quality content can help you win trust so that people will buy from your online store.
7. Analyze and optimize
To succeed with dropshipping, you must continuously analyze and optimize your website and operations.
If you don't do this, you will fall into one of two categories:
- You will run out of money because your costs are too high, and you cannot get enough sales volume to cover them.
- You will not know what is and isn't working in your business, so you cannot improve or change it.
To avoid these pitfalls, you should clearly understand how your business operates and quickly make optimizations based on data and analysis.
FAQs about starting a dropshipping business
What type of business is dropshipping?
Dropshipping is a legitimate ecommerce business that online retailers around the world use. Dropshippers work with suppliers by placing their products onto a dropshipping ecommerce website where customers purchase the product, which is then fulfilled and shipped by the supplier directly to the customer.
How much does it cost to start dropshipping?
You can get a domain, hosting, and set up your own website on Shopify for around $100, more when you need to buy add-ons or plugins to get more customization features to improve your dropshipping business.
Once you have your products on your site and start advertising, your costs will be how much you set your budget per day on pay-per-click.
What do you need to start a dropshipping business?
Products, suppliers, your website, money for advertising, and dropshipping tools like Oberlo that help import products on your site from dropship suppliers and manage your operations.
You could also start an LLC after you have started seeing profits to legitimize your business and help with tax purposes. With your LLC, you will receive a tax identification number (TIN) that you can open a business bank account with, as well as a sales tax ID from your state (if you live within the US) to pay sales tax if your state requires it.
How do you run a dropshipping business?
Once you have found profitable dropshipping products and reliable suppliers, use tools to help automate your inventory management, shipping orders, and keep track of your sales. You’ll also manage paid advertising campaigns and find more products and suppliers if you ever run into out-of-stock issues.
You should also invest in content marketing to get organic traffic so that you can start to lower your advertising costs, eventually. Using AI tools will help you publish quality content quickly, but make sure you develop a content strategy first.
What is the most profitable dropshipping business?
Having an ecommerce website selling products with decent profit margins using multiple reputable suppliers is the best way to have a profitable dropshipping business.
How do you grow a dropshipping business?
Once you have started to see some success and want to grow your dropshipping business, there are a few ways you can do this. You could increase your advertising budget on profitable products to increase your sales or find more products and suppliers to add to your site and advertise to generate more revenue.
You’ll also want to invest in content marketing and learn search engine optimization (SEO) to increase your rankings and traffic to your ecommerce products. Both take time and money for at least 6 months before you start attracting search traffic, which is why many dropshippers prefer paid advertising for quicker sales.
Final thoughts on starting a dropshipping business
Dropshipping is one of the best business models for entrepreneurs who want to start their online store without worrying about inventory and manufacturing.
The low investment requirement makes it an attractive option for people with limited resources but a lot of ambition.
But please note that it is not a get-rich-quick scheme.
While the business model may look simple on paper, it takes a lot of hard work and perseverance to make it work.
Even when things don't go as planned, you need to be willing to learn from your mistakes.
We hope this guide has given you a clear path to embark on your dropshipping journey.
Further, if you want to create quality content at scale to support your business growth, CopyAI's suite of AI-powered copywriting tools can help you with it without spending a bomb. Give it a free trial today.
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