How To Start a Dropshipping Business
How To Start A Dropshipping Business: From Finding Suppliers To Scaling Your Brand
If you have seen the success stories online, you have probably heard about dropshipping as one of the easiest ways to make money online. However, dropshipping is more than just a quick strategy to earn while you are surfing – and is not essentially what you will see described on many blogs and forums.
In order to help you see what dropshipping is all about, we are answering some of the popular questions at first, before we dive in to our guide below.
What Is Dropshipping?
Basically, what dropshipping represents is a great way to start an eCommerce business online without needing to worry about your inventory or shipping. In its full definition: dropshipping is:
a supply chain management method where the retailer does not keep goods in stock but instead transfers the customer orders and the shipment details to either the manufacturer, another retailer or a wholesaler – who then ships the goods directly to the customer
So, dropshipping is very simple – as simple as listing a product for sale on your website and sending an email to your supplier to ship the item on your behalf wherever you get an order. However, while dropshipping is simple – starting a dropshipping business definitely needs some attention on your end. Especially when it comes to finding the right suppliers and making the most of the products you want to sell.
The Amazing Benefits Of Dropshipping
As we said above, dropshipping is a strategy where the retailer does not keep the products in inventory – but instead relies on wholesalers or manufacturers to actually ship them to customers. This arrangement has several advantages that make it unique and popular nowadays, including:
- A broad product offering – Dropshipping allows merchants to offer a lot more products for sale than what is feasible if the merchant has to inventory everything. For example, even a seller that sells something with limited physical space can try dropshipping and expand on his product line
- It helps merchants come to market more quickly – Dropshipping eliminates the waiting times when the products are shipped from the distributor or manufacturer to the merchant. Skipping the weeks of shipment time, dropshipping products online is the perfect way to start selling the products the moment they hit the market
- It lets you explore new lines – With dropshipping, you don’t need to stick to one industry or niche. Instead, you can test new products, see how they sell and basically try to sell them without having to bring them in your inventory. This is another major advantage of dropshipping.
- It reduces your investment – With no physical inventories, dropshipping is a great way to reduce your investment and keep it to as a simple strategy as running a website. You don’t need much money more than paying for the hosting, ads and maintaining your website.
- It gives you more time – Dropshipping arrangements are also great because you don’t’ receive, stack, store, pull, pack or ship products. All of these processes are time consuming which means that dropshipping can save you time and let you focus on actually selling the products.
There are so many other benefits of dropshipping. As for downsides, there are almost none. Even though people would say that orders can get mixed up, what matters is to create a sustainable dropshipping system online that works for you and is fully automated.
Below, we are showing you how is that done.
Understanding Dropshipping: Why Would Someone Buy From You When They Can Buy The Same Products Online?
A lot of people ask themselves why dropshipping is an effective way for both sellers and consumers to shop and be satisfied with their shopping decisions.
Knowing that the prices of products will be a bit higher on dropshipping websites than on supplier websites, people ask themselves what is the main reason that makes shoppers buy the same products for drop shippers.
The truth is quite simple – shoppers are very busy nowadays – and they need the products to come to them instead of searching for them.
In other words, no one has the time to look for supplier stores and find products to their needs. Alternatively, a lot of shoppers don’t know what products they need until they see an ad that perfectly solves their problems.
Here, the unique competitive advantage of drop shippers is that they find the products, label them in a special way and make them find their way to the consumers. This technique is why paying a bit higher price matters, and how people want to buy products in the very end.
Basically, there is a 3-way supply chain when it comes to dropshipping. Even though this is a fancy term, a supply chain refers to all of the subjects in the dropshipping cycle. This includes:
- Manufacturers – Ones who create the product and do not sell it directly to the public but sell in bulk to wholesalers and suppliers.
- Wholesalers/suppliers – The group that buys products in bulk from manufacturers, marks them up slightly and sells them to retailers like you for resale to the public. Working with wholesalers/suppliers is essential in dropshipping because they are able to ship the products and let you earn on the price difference.
- Retailers – People like you (assuming that you are interested in launching a dropshipping store) with websites and ones who basically sell the products they got from the wholesalers.
How Does Dropshipping Work: Explained In Action
If you are still not sure how dropshipping works, let’s describe it with a simple example.
- Step 1: Customer is interested in buying a bed for his dog
- Step 2: A dropshipping store is selling dog beds (after partnering with a dog bed wholesaler)
- Step 3: The customer easily finds the dropshipping store that sells dog beds (whether by an advertisement, search engine or any marketing effort that the store has made previously)
- Step 4: Customer sees a large variety of dog beds online and chooses one
- Step 5: Customer fills the personal information such as address, shipment method etc. and places the order
- Step 6: The dropshipping company receives the order and automatically transfers it to the wholesaler, who also receives it and proceeds to sending the product directly to the customer
- Step 7: The dropshipping company earns for the price difference in selling the product, while the wholesaler earns his margin price
If this example seems interesting to you and you want to try launching your own dropshipping store, you should know how to do it in the right way. That being said, dropshipping boils down to a couple of important processes that you need to consider at first, including:
- Finding and working with suppliers
- Picking the best products to dropship (knowing what would sell etc.)
- Starting Your Dropshipping Business: How To Set Up Your Store with Shopify
- Scaling Your Dropshipping Business And A Set Of Rules You Should Always Remember
In order to explain these better, we are dedicating a section to each of the processes.
Finding And Working With Suppliers: How To Pick The Right Suppliers When Dropshipping?
As we initially explained it, dropshipping is a system that is not perfect, stress-free or easy. If that was the case, anyone would build a successful dropshipping business and the point of this technique would be lost.
Instead, the model has some definite advantages and comes with a number of complexities and problems that can be solved only when you know how. The first one is finding and working with suppliers. Here, it is important to find suppliers that are reliable, communicative and ones that will do basically anything to provide your customers with products at the right time when they order them.
After all, since you are not shipping your products yourself, you need a reliable supplier that will do this – and one you can trust in order to get the products to your customers as quickly and in the safest way possible.
How To Spot Fake Dropshipping Wholesalers
There are a lot of fake dropshipping wholesalers whose goals is to scam you – and appear as middle men that take your money and do not send any products at all. The best way to spot them is with the following tactics:
- they want ongoing fees – real wholesalers wont charge a monthly fee for the privilege of doing business with you and you sending orders their way
- they sell to the public – in order to get genuine wholesale pricing, you need to apply for a wholesale account, prove that you are legit and be approved before placing your first order
- per-order fees – you definitely don’t want to work with a wholesaler that charges a per-order fee of $2 to $5 – something that also makes you earn less in the end
- minimum order sizes – some wholesalers have minimum initial order size which is the lowest amount for an order – and something that can cause complications when dropshipping (if you find this with a legit supplier, you should pay in advance for any costs of separate orders below the minimum and sort out the case)
Finding The Right Wholesale Suppliers
Now that you know how to spot a fraud from the real deal, it is time to start searching for the right suppliers. Here, you can use a number of different strategies – some more effective than the others – and methods to make most of your search.
Step 1: Contact The Manufacturer
The best way to negotiate a deal is undoubtedly to contact the manufacturer and make the most on the products you want to sell. If you know the products you are going to sell, you should call the manufacturer and ask for a list of the distributors – and then contact these distributors (wholesalers) to see if they dropship and inquire about setting up an account.
Step 2: Search Using Google
If you decide to search for high-quality suppliers via Google, you should know that you need to search a lot – only because wholesalers are terrible at marketing and promotion and usually not among the top search results for ‘wholesale suppliers for product X’. However, you can try and find a nice wholesaler. It is important to use a lot of filters and never judge by the website – but instead narrow things down to the actual contact.
Step 3: Order From Your Competition Or Attend Trade Shows
If you have a hard time finding a supplier, you can always order from your competitors that you think are dropshipping – and obviously have their prices increased on your website in order to make profits.
Alternatively, you can attend trade shows as a great way to connect with all the major manufacturers or wholesalers in a specific niche. This can be a great way to make contacts and research your products and suppliers in one place.
Step 4: Check out the directories
There are some supplier directories you definitely need to check out with thousands of products and a lot of suppliers selling them. Below, we are listing some of the most popular destinations:
Step 5: Before you contact the suppliers…
Before you start contacting the suppliers, make sure that you are legit by registering your business legally – so that you can apply for an account. Most of the wholesalers reveal their pricing to approved customers only. Also, make sure your website is visible and understand how you appear to the wholesaler. Know that these people are always bombarded by people with ‘amazing business plans’ and ‘great dropshipping ideas’ who never order anything.
Also, it is safe to say that you need to be confident when making your calls and show the wholesalers why you want to work together with them. Be serious when calling and make sure to leave the right impression.
In the end of this chapter, let’s sum up the meaning of a good supplier. So, a good supplier is one that:
- Has expert staff and industry focus – The best suppliers have knowledgeable sales reps who know the industry and the product line
- Offers dedicated support – The quality dropshippers should assign you an individual sales representative who will be responsible for taking care of you and the issues you are having
- Invest in technology – Most of the professional suppliers invest in technology and have features such as real-time inventory, online catalogs, customizable data feeds and online searchable order history
- Can take orders via email – This can significantly automate your business and make it easy to automate your orders without having to pick up the phone every time you have a new order
- Centrally located – A great supplier is one that is centrally located – with packages reaching more than 90% of the country within 2-3 business days as well as solid international delivery times
- Organized and efficient – Some suppliers have great systems that result in efficient and error-free fulfillment
As you can see, finding the right supplier is definitely a hassle – but is worth it in the very end. As soon as you find one, you should move to finding the right products to sell (in case you didn’t know what you would sell before that).
Picking The Best Products To Dropship
The next part in this dropshipping guide is the point where you need to pick the hottest products to dropship. There is a lot of science in making this decision as to what works, what is popular and what is trending at a current time on the market.
According to many people, the biggest hurdle when it comes to dropshipping online is picking the right niche and the products to focus on. This is mainly because nowadays, there are literally millions of products to choose from and many of them are offering big benefits to businesses.
The most common mistake at this point is to pick a product based on personal interest or passion. As you probably don’t know, successful dropshipping online is not about selling what you want – it’s about selling what the market needs.
So, if your goal is to build a profitable dropshipping website, you definitely want to consider setting your interests aside and make sure you know how to search the right products that the market actually wants.
Below, we are listing a couple of ways to measure the demand for a specific product and potentially see if a niche is profitable based on the demand.
Finding Products To Dropship Via The Google Keyword Tool
The Google Keyword tool is according to many – the best way to measure demand for products and see how many people are searching for them. Fortunately, Google has made this a lot easier with transparent search volumes on each product. All you need to do is visit the Keyword Planner by Google, type in a word or phrase and see how many people are searching for it every month.
The tool will let you select broad, phrase or exact match types when it comes to search volumes. You can also search for specific location and look at the difference between local search volume and global search volumes. Additionally, you can search for variations of the word and consider using them on your website. This way, you will get a combined traffic on your website and know all the terms to use for people searching for a specific product or niche products.
Finding Products To Dropship Via Google Trends
Another powerful tool by Google is the Google Trends tool. The reason why this tool is great is simple – it gives you search volume over time and lets you see how interests for particular products are growing – all based on searches.
There are top and rising terms that also let you gain perspective on the things that are searched in a particular niche or related to a particular product – which can be significantly helpful when planning your marketing and SEO efforts.
On top of that, you can also see the geographical concentration and where people are searching for a term geographically. With this, you can identify where you customer base for a niche is most heavily concentrated and know where and how to advertise.
Finding Products To Dropship By Trusting Your Gut And Having Common Sense
Earlier, we said that putting your interests aside is what matters most when dropshipping. And while that is 100% true, you still have to know some things, trust your gut and have common sense.
Basically, this applies when it comes to specific seasons, interests and trends that are present every year. For example, you can run a Halloween promotion in late November or a Christmas sale on your products in early December. Identically, you can pick Halloween and Christmas products at this times of the year and know that the interests for them will be rising.
Additionally, you can dig deeper by staying in touch and being informed with things like the election, sports events, showbiz trends and everything that can help you make most of new products and sell them to the global audience. This can be the best strategy you ever had – and if you are early with it – it can also bring you tons of new customers on a daily basis.
Starting Your Dropshipping Business: How To Set Up Your Store With Shopify
At this point, you basically have an idea of the ideal products and ideal suppliers to look for before starting your dropshipping business online. And even if you don’t, you need to make this step and transform your passion for dropshipping into something tangible.
The truth is, dropshipping needs commitment – and a big investment of time (which is bigger than money) from the start. This means that you need to be disciplined and invest heavily using these two currencies: time and money.
While time is needed so you can learn how to pick the best products, work with the right suppliers and optimize your store to perfection (not to mention traffic generation), money is needed so you can negotiate with suppliers and set up deals, as well as maintain your website. A good thing to know at this point is that you can easily make $1000 to $2000 in your first month (or even more) once you get things straight.
Another big benefit is that once your dropshipping business is up and running, you will have so much time (and money) and maintenance will be so low, that you will even think of launching another store. However, in order to get to that point, you need to learn how to set up your store and increase your profits over time.
To do that, we personally recommend working with Shopify, the world’s leading eCommerce website and one of the easiest platforms ever introduced to the eCommerce world.
Setting Up A Dropshipping Store With Shopify: The 10-Step Plan To Doing It Right
As soon as you figured out what products, suppliers and ideas you have when it comes to your dropshipping passion, it’s time to register with the best site out there – Shopify – and make most of your dropshipping business.
Below, we are listing a 10-step plan to do this thing right – and get started in no time.Step 1: Register With Shopify
The first step is to visit Shopify and get started with your 14-day free trial. All you need to do is fill in the form and click the ‘Start your free trial‘ tab, filling up the store name and entering your basic contact info.
Step 2: Buy Your Web Domain
At this point, it goes without saying that you need to buy your web domain for your dropshipping store. Instead of waiting, it’s best if you secure your domain and pick a nice name for your shop that is not too long and one that has mainly words (and numbers) – and not dashes or any signs.
Buying a domain name is easy and can be done through Shopify. All you need to do is visit the Shopify website, go to the sidebar and click on ‘Online Store’ and then ‘Domains’ and ‘Buy New Domain’.
If you are still thinking about a domain name or don’t know if it’s taken, you can check available domains at GoDaddy.com and make sure before you buy yours.
Step 3: Set Up Email Forwarding
Now that you purchased and verified your domain, it’s time to set up your email forwarding for your store. To do that, you should go to ‘Online Store’ > ‘Domains’ > ‘Manage Domains’ tab.
Here, you can select the web domain you just purchased and you will be redirected to a page that has the heading ‘Email Forwarding’. This page basically means that if your customer or supplier emails you at firstname.lastname@example.org, the email will be automatically forwarded to another email address (which you use regularly). So, all you need here is to add your email address.
Step 4: Choose A Theme For Your Shopify Store
Once you complete the previous steps, it’s time to choose a theme for your Shopify store. In case you didn’t know, Shopify has a collection of beautiful themes that are desktop and mobile compatible. All you need is to navigate from ‘Online Store’ to the ‘Themes’ tab and ‘Visit Theme Store’ after that.
Then, you will be relocated to Shopify’s theme store and be able to choose a theme for your online store. Even though all of the themes are great out there, make sure to choose one that is simple and visually pleasing. Once you choose it, just click on ‘Install Theme’ and then ‘Customize Theme’ – where you will be able to customize things and make it unique to your needs.
Step 5: The Must-Have Pages For Dropshipping
The main pages you need for successful dropshipping include the following ones:
- About Us
- Product Page
- Contact Us
Shopify makes adding and editing pages easy. All you need to do is go to ‘Online Store’, select the ‘Pages’ tab and play with the pages which is easy from there. Each of these pages should have the right information based on your dropshipping store and your abilities. Most importantly, make sure to be unique when writing them.
Step 6: Add Your Products And Brand Collections
This is the point where Shopify gets exciting – and where you can start adding your products and brand collections. To add your first product, you need to go to ‘Online Store’ and then navigate to the ‘Products’ tab. Once you are there, you need to click on the ‘Add Product’ button and add the details about your first product.
Make sure to organize your product based on Product Type, Vendor, Collections and Tags – and add a price (that can also be compared to your competitors’ prices with the handy Shopify feature located right next to setting your price).
It is important to say that once you add your first product, you can duplicate and edit instead of starting similar products from scratch. This can save you time and make product adding easier.
Step 7: Pick Your Shopify Plan
Assuming that your 14-day trial will be over in a couple of days once you start adding products and playing around with your store, the time will come to pick your Shopify plan and see how it goes.
At this point, you will be ready to get in the game and will be able to choose a Shopify plan that best works for your dropshipping website, the amount of products that you have and all the details that are there on Shopify’s page.
There are three main plans to choose from, starting from $29/month, $79/month up to $179/month. You can easily see what each of them includes and find the best one for your needs.
Summing It Up: Scaling Your Dropshipping Business And A Set Of Rules You Should Always Remember
Let’s face it – dropshipping seems as a lot of effort for people that are new to it. However, as we said earlier, it is absolutely worth it once you figure it out. In fact, once you are up and running, you can build as many dropshipping sites as you want – and you will have the time (and hopefully money) to maintain and scale.
Speaking of scaling…
When you build your dropshipping business with Shopify, you are not just building an income stream. You are also building an asset that you can also sell in the future. And just in case you haven’t seen the market of successful dropshipping businesses, the price tags start from $100k for well-established sites.
Registering Your Dropshipping Business (Company Type, Tax & More)
So, investing time and money is definitely worth it if you want to get into the dropshipping game like a professional. However, there are many people who didn’t spend thousands of dollars to get to the (successful) point of dropshipping where they earn a lot. That is why we recommend investing time rather than money in the beginning – and getting to learn all the strategies for traffic, products and suppliers instead of paying something for a service of any kind.
As we said earlier, you also need to decide on a business structure when running a dropshipping website, and you can choose from three main alternatives:
- Sole proprietorship – The simplest business structure to implement but also with no personal liability protection
- Limited liability company (LLC) – Offering increased protection of your personal assets
- C Corporation – Most of the major companies are set up as C-corps which means they offer the most liability protection
You should also request an EIN number and get your finances in order once money starts rolling in. You only need to collect sales tax if the state you operate from collects sales tax AND if the order is placed by someone living in your state. For all orders placed outside your borders – even if they charge their own tax – you don’t need to collect any tax.
Running A Dropshipping Company (The 5-Point Rule You Need To Put To Action)
So, dropshipping with your own online store via Shopify lets you have more control over your products, your personalized design and features that you want to implement and make your shop irresistible to customers.
When running a dropshipping business, you should learn to:
- Accept the fact that things can get messy – The convenience of success comes at a price, and every dropshipping business owner has seen some ups and downs in each sale and each season. From botched orders to out-of-stock items, fulfillment problems etc. – you should learn how to deal with problems before you become successful in the field.
- Adopt the KISS mentality – The KISS (Keep It Simple, Stupid!) mentality will really help you with dropshipping. You will learn that it is all about multiple suppliers, multiple products and simple orders – that you need to automate instead of complicating them.
- Learn how to deal with refunds and botched orders – Refunds will happen, broken products will occur and unsatisfied customers will always be there. You need to accept your mistake, make it up to them or make the supplier pay to fix it. Also, don’t be greedy and cover the loss instead of arguing with customers.
- Learn how to manage inventory and multiple suppliers – At some point, you will want to manage your inventory and have multiple suppliers. This is the point where you will have some ground rules that they will need to follow – instead of you chasing their rules.
- Pick your products wisely – Try to sell items that you know are carried by suppliers, ones that do not have major costs to be replaced and ones that are trending on the market. Always check their availability and know how to deal with out-of-stock orders.
A Final Word
As you can see, dropshipping can be both fun and frustrating. That is why you need to make sure to add value in everything that you do, learn how to communicate with people and focus on the right marketing and SEO to get more traffic and eventually scale your dropshipping business.
Even if you are not a marketing or SEO expert, you can always learn and get the curve of things in that field. The truth is, marketing is crucial for your dropshipping store (especially in the first 6 to 12 months) and finding customers is probably the most important thing you need to do once you set everything up.
In the end, you must learn how to specialize and instead of selling everything, get to know how to sell products for particular interests. According to many successful dropshippers, this is one of the key rules to know that makes searching for customers and products a lot more easier – and one that makes the flow of profits more steady.
So, are you ready to build your dropshipping empire?
Now is the right time! Fingers crossed for tons of success!