You may have decided to start a dropshipping business because you heard it is a low-commitment method of starting a side hustle or making extra income.
Or perhaps you have a passion for a particular niche (historical dioramas, rock collecting, exotic ferns, etc.), and you have adequate knowledge of how to sell to your customers.
Unlike the typical eCommerce businesses, you don’t need to purchase expensive inventories, finance warehousing, or spend so much time completing orders. This makes dropshipping an affordable, low-risk entry point to online retail, providing average profit margins of 15%–20% on the price of each item on sale.
In this article, we’ll be discussing the steps required to establish a dropshipping business. Stay tuned!
Develop A Business Concept
Most thriving businesses are built on a concept centered around their product collection, branding, and content. Your business concept can develop from things you are enthusiastic about or can be based on sales trends you encountered when doing your product research.
As a dropshipping seller, you can think of ideas, test various concepts, and fine-tune your operational plans.
You can start with a vague idea of your brand and business. One of the major benefits of dropshipping is that you are not limited by costly inventory, and it is easy to make changes at any stage.
As you research dropshipping products and business concepts, note that concentrating on niche products boosts your marketing performance and helps your business website rank high in search results. Also, you need to ask yourself how your dropshipping business concept and services will provide solutions to your buyers.
Do Product Research
It doesn’t matter if you are niche-focused or diversified, you must make your product research to get to know the items that are selling fast. Look for trending categories and products to earn your store traction.
Some e-commerce platform like Shopify updates their list of selling product. This can be a good way to start your research as the list contains important statistics on global order development, expansion of affiliated vendors, and geographical demand for each item.
Below are analytical metrics used to evaluate a product’s potential if you have no idea how to go about it.
- Sales Volume
- Keyword Search Volume
- Trend Data
- Competitor Research
Name and register your business
You need to choose and register your business name to start your business operations. First, you need to look up the internet to see if there is a business with the same name as yours.
Afterward, you need to visit your county clerk’s office to see if there is any local business using your name. If you want to be fully sure that you aren’t using another business’ name, it is better to consult a patent & copyright attorney.
Additionally, it is important to choose a memorable and catchy name when coming up with a name for your business. You can try our business name generator if you have any challenges coming up with an ideal business name.
It’s impossible to run a dropshipping store without working with manufacturers and wholesalers who will supply your products.
Regardless of how you find your product suppliers, product sourcing is one of the most time-consuming stages of starting a dropshipping business.
It would be best to analyze each partner vendor and product separately to ensure that your efforts yield profits. The following factors are very important when reviewing potential suppliers and products.
- Item Popularity: The existing sales volume of a product is a simple metric you can easily find on most dropshipping platforms. It is possible to market less popular products effectively, but hot and fast sellers are often better investments of your efforts and time.
- Profitability: The cost of shipping and processing fees on your credit card will take a constant bite off your profits. Therefore, it will help if you evaluate the wholesale cost of each item and recommended pricing for profit. It is important to note that you can boost a product’s markup to make more profitable sales or lower it to attract more buyers.
- Item Quality: One of the most significant setbacks of dropshipping is that it’s pretty hard to measure the quality of your products. You can request a sample to get a hands-on experience, but this can take a lot of time because if it’s a whole store’s worth of products. Most dropshippers depend on the ratings given by marketplace suppliers and the number of sales when evaluating the quality of a product.
- Location: The location of your product supplier influences delivery speed and shipping cost, which are important factors in a customer’s buying decisions. Several dropshipping suppliers are in China, so try to work with suppliers who can provide ePacket shipping trackable and fast deliveries.
- Supplier Reliability: It’s quite difficult to know how reliable a supplier is until you’ve worked with them. Nevertheless, most dropshipping platforms have strict policies against vendors who receive continuous quality and service complaints. The reviews received by a supplier can be a helpful resource when trying to know the trustworthiness of a supplier.
- Return Policy: Most dropshipping platforms aim to prevent returns while providing solutions to most problems through no-return refund policies. However, it is important to review each marketplace or vendor’s return policy and the process you use.
Build An Online Store
You need a user-friendly, traffic-driving, and accessible e-commerce platform before starting your dropshipping business operations.
For this phase, you’ll need to make your website presentable, create compelling offers and deals, and choose a good e-commerce platform.
Make Your Website Look Great
Your website should be customer-friendly. It needs to be easy to use; the interface needs to be simple and clean.
Before you launch your store, look at other websites in your niche for examples. Consider home pages, the format of the copy used, the design of the product page, and the presentation of the images.
After you have made a note of the layout and different looks of all the stores in your niche, browse through Shopify to find apps that will enable you to model your store after other successful brands.
Provide Amazing Offers And deals
An awesome drop-shipping tip is to create an offer that is compelling. You need to present the right product with the right deal.
Drop-shipping is one of the most effective methods of attracting customers. When you create a bundle deal, make sure to focus on selling more of the same product.
Upselling is also a key way to make sales. This is when you convince or persuade a client to buy something else that is more expensive. If people love your product, they will want more of it.
Choose Your Ecommerce Platform
An e-commerce platform is required to create a website with a shopping cart & payment processing functions.
You can sell your dropshipped products on Amazon and other big platforms like eBay and Walmart, but you need to be careful. These platforms have high seller fees, tough customer service requirements & shipping timeframe.
Numerous dropshipping vendors do well on these marketplaces, but they are not startup-friendly in any way. Be familiar with your suppliers and make sure you process on your site before reaching out to seller platforms.
The best marketplace for your dropshipping business depends on your business concept and supplier sourcing strategy.
Below are some of the leading marketplace options for dropshipping vendors.
We recommend Shopify for product-focused dropshipping because it eases the process of launching an online store. Moreover, this platform provides tools to design a logo, choose a domain name, and create a user-friendly layout.
Shopify also easily integrates with platforms like Doba, Oberlo, Sprocket, Modalyst, and several plug-and-play marketplaces. This platform also allows you to automate order routing to deliver your buyers’ purchases to the appropriate supplier immediately. Likewise, monitoring completion and shipment tracking from the Shopify dashboard is easy.
Currently, Shopify integrates with over 140 dropshipping platforms, apps, and tools. Once you’ve registered an account with your preferred eCommerce marketplace, creating a functional website is straightforward.
Set Up Your Business & Finances
To establish a legitimate business, you must satisfy the following financial and legal aspects.
- Business Structure
- Business Licenses
- Sales Tax
It is best to separate your business finance from your personal finances right from the start. This stage is often overlooked by part-time or casual store owners, which may cause a lot of problems.
Create a business checking account, deposit all income into it, and remove all expenditures. Your business accounting will be challenging without dedicated banking since business liabilities can be assumed personally.
Moreover, you’d probably be in trouble with the IRS if an audit happens.
Additionally, getting a business credit card is a good idea as it can help separate your finances and accumulate significant rewards for the products you’ll be purchasing from suppliers.
You can get a bonus of over $500 if you register a small business credit card and checking account with Bank Of America. Bonuses like this can cover a few startup costs.
Drive Sales With Marketing
You must market your business once your website starts operations to attract customers. Create accounts for your dropshipping business on social media platforms like Instagram, Pinterest, and Facebook to promote your store through shoppable posts and audience engagement.
You can efficiently fill a Facebook Shop with your WooCommerce product listings or Shopify. Afterward, use those listings to share and create posts across your private network.
You can create shoppable posts on both Instagram and Pinterest, which is a great approach to reaching potential customers in their own space. Moreover, it decreases conversion stress, grows your online presence, and helps you collect data.
For example, a New York-based intimate wear brand knowns as The Natori Company experienced a 100% gain in revenue and a 1,416% boost in website traffic through IG referrals.
Set Achievable Goals
The main goal for you is that you want to be a profit-making business. You have to set specific goals so that you do not lose focus. Measurable goals will help you achieve your goals sooner and faster.
There is no point in overextending yourself. This will lead to a lot of pressure and failure. Your goals should have timelines and should also include the “how.” Point out how you plan to achieve the goals. Brainstorm and figure out what will make your drop-shipping business a success.
Set goals according to numbers. Compare how much you are selling currently to how many sales you want at the end of the next month. Also, by what percentage do you wish your sales to increase? Additionally, how many new customers do you want to acquire?
Run Your Dropshipping Store
Orders will begin to trickle in once your dropshipping business is up and running and your marketing strategies are set. Operating your dropshipping shop comes down to good customer service, supervision of orders, and fundamental accounting.
As your business expands, it will be best to use analytics to assess your performance and discover ways to propel growth and generate more income.
Fortunately, order management and satisfaction are effortless on dropshipping platforms, but you will have to keep an eye on it. The dashboard of your eCommerce platform will always report fresh data. In cases of unshipped orders, you can easily follow up through an inquiry to your product vendor.
Facilitating relationships with your suppliers is essential to your business. As your dropshipping business expands, you can consider moving away from dropshipping platforms and do your product sourcing directly for bigger margins. Build a good relationship with your vendors and keep interactions professional.
A drop-shipping business is a great low-risk, low-cost way to start selling online, whether you’re a novice entrepreneur or an e-commerce veteran.
Running your business online is no longer a challenge with the growth of third-party applications and marketing automation technologies.
We hope this drop-shipping guide encourages you to get yourself on a road to success and financial independence, so you may live the life you’ve always desired.
Related: Ecommerce Store Name Generator
Related: Domain Name Generator