We are still listening to people asking whether the dropshipping business model is working or not. Or is it dead? The fact is, the business model itself is not dead although it is harder to get successful now.
People are not buying online like they used to 10 years ago and there is huge competition when you are selling online.
Dropshipping still remains one of the good business models to start a business online without requiring to invest hugely in the inventory. However, if you think that it is easy, think again. It is not.
The reason many dropshippers fail is that they think that it is easy to start and get success. They have not realised the need to spend time and effort to build it successfully.
Today we will be sharing how to start a dropshipping business step by step so you can too start your business today.
What is dropshipping?
Dropshipping is a business model in which you sell products to customers without owning or physically handling the inventory. Instead, you partner with a supplier or manufacturer who handles the storage, packaging, and shipping of the products directly to the customer. You will act as a middleman, taking orders from customers and forwarding them to the supplier, who then fulfils the orders on behalf of you.
The key advantage of dropshipping is that it eliminates the need for you to invest in inventory upfront, as you only purchase products from the supplier once a customer places an order. This significantly reduces the financial risk associated with traditional retail models.
Dropshipping also offers flexibility, as it allows you to run an online store without the need for a physical location or managing complex logistics. However, you face challenges such as intense competition, lower profit margins due to supplier fees, and potential issues with product quality control and delivery times.
Successful dropshippers focus on building a strong brand, selecting reliable suppliers, and providing exceptional customer service to differentiate themselves in the market.
How Does Dropshipping Business Model Work?
Dropshipping is a business model where you, the business owner do not own any stock. However, you have an order fulfilment process where you will order the product from your suppliers when someone bought it from you. And your supplier will fulfil the order by sending it to your customers directly.
You only focus on selling the product, and the order fulfilment will be handled by your supplier. Your customer pays the retail price you set, you pay the suppliers’ wholesale price, and the rest is profit.
One of the most common dropshipping businesses is using the Shopify eCommerce store builder with the dropshipper supplier app integrated. All your sales processes can be automated with the app. Once someone orders from you, the order will be sent to your supplier automatically for fulfilment.
Is dropshipping really profitable?
This is depending on how you control your product cost. If you are not able to get a direct supplier from the manufacturer, you will end up losing the market as your cost is too high to compete with other competitors.
However, it is good to start a business because you don’t need a huge starting cost for buying the inventory before knowing whether it sells well or not. With this, you can test different products fast and only when you are certain that they will sell, then only you start buying your own stock.
How to Start a Dropshipping Business in 9 Steps
Commitment to Your New Business
Many new business owners take dropshipping as a side hustle or some get rich quick projects that they can have the minimum effort to get a huge success. You can of course get faster success if you have a huge marketing fund and the skill and experience to build the dropshipping business. However, in most cases, you don’t.
There is lots of work required to get it successful. You need to be committed to your business like any other business in the long term. If you are looking for a business that you can earn six figures by doing part-time, it takes more than that.
And one of the things many people fail is because they quit too fast. They start their business and expect to get a huge amount of sales within days and without any paid marketing. When they don’t see any sales, they will get discouraged and quit.
There is one saying, if you don’t have money, you better have time. If you don’t have the huge marketing fund to get your business in front of the target customer, you better work hard to show your business to more audiences.
Select Your Dropshipping Product Niche
After you are committed to starting your business, now you want to know what you want to sell and who you want to serve. To do this, you need to run market research on what people are buying online and what is trending.
This is the same process as when starting a business. No matter if you are doing physical business or online business, you need to know your product, market, competition, and niche to see whether is it a good product to sell.
You can start by googling about the top hobby idea list. From there, look for the hobby that you like. Ideally, you want to start with the product niche that you are interested. You are going to commit to the product long-term. So, get something that you are interested in. Else you won’t be spending your time creating content and marketing strategies to sell it.
From the product idea, now you can look at the market trend to see whether is there a market demand. For example, there might be something you are interested in and there is huge market interest too. However, if the target customers in the niche are not ready to buy or have no purchasing power, you are not going to sell.
You can try to look at Google Trends or Social Media to see what other marketers are posting and if is there any interest or engagement for their posts.
Furthermore, you want to go niche in your product selection. When you are going niche, you are able to dominate the market in your niche as you are not going to compete directly with larger brands. And you are engaging with a more passionate customer base. When they know you and your brand, they will be spreading about your business and buying from you regularly.
By focusing on more niche and trending products, you can help to get the attention of shoppers.
When choosing a niche, you can look at fitness, fashion, beauty products, electronics, phone accessories, pet accessories and yoga-related items. These are some good entry points for the dropshipping business with low initial investment.
Here are some tools you can use to carry out the research:
Google Trends is a free tool by Google where you can search for the latest trend based on keywords. You can filter the result by country and duration. So some items that may only sell from April to June, you will know that’s the best time to launch which product.
From here, you can look at the popularity over time and see if there is any market interest. Be reminded that this is just the trends but not the search rate.
Google Keyword Planning Tool
This is another free tool by Google to support its Google Ads business. Google planning tool will show what keyword their users are searching for and what is the competition level for the keyword.
This is useful for you to know the competition level and popularity. And next, look for any competitors in the market that rank top on the list.
Perform competitive research
Now that you have done your product and market research, it’s time to perform your competition research. This is very important for you when you are starting out.
When you are starting out, you probably don’t know what is the market preference and how the market performs. This is why you should learn from your best mentors out there. Your competitors that already selling well in your niche.
By analysing what they are doing, their sales page, marketing campaign, ads and so on, you can get some clues on how to build a successful business online. If your niche has a lot of small competitors, then it’s worthwhile to fight against them and be at the top. But if your niche is dominated by one big competitor, then it might be harder for you to win the game.
To do this, you can :
Run a Google search
Start from the Google search bar, look for the search recommendations and the “People also ask” section to get inspiration of what related item your potential buyers might be searching for. Then, make a list of the top five sites that come out in the result. Look at what they are selling and how they sell it.
There is a lot of spy tool online that helps you to spy on your competitors. The tool like Similarweb gathered huge amounts of data online and show what your competitors are doing. This includes but is not limited to how much traffic they are getting per month, where they are getting the traffic from and the demographic of the traffic. You can look at the top traffic source, and if it’s paid traffic, you can then see what they are advertising and outbid them on the same source.
Browse social media
If you want to get the latest trend, look at Facebook or Instagram. Depending on where your target customers hang out online. You can look for the group they are in and what they are discussing or asking about. You can also filter by ads and see which ads your competitors are buying. Then, study their ad structure, target audiences and how long the ad is up. If the ad is there for a long time, it means it’s a profitable one. Use this information to find ways for your business to stand out and improve your social media marketing strategy.
When you are starting out new, your best teacher is your competitors. They have done all the research work for you; you only need to learn from them and apply them to your business. Look at their landing page, prices, marketing strategy and so on. Optimize from their copy and get success in your store.
Choosing Your Dropshipping Supplier
Like any business, choosing a reliable supplier and having a good relationship with them is the key to success. There is no way you can fight your competitors if you are not getting a better deal and supports from your suppliers.
In a dropshipping business, you only handle the sales, marketing and customer part. The rest for the ordered product and fulfilment are all by your suppliers. If they don’t ship your product on time, or the product quality is bad, you will be hit with high returns and low customer satisfaction rates.
This is why also most new dropshippers fail their business. They follow the guide on the internet, connect their eCommerce store with the product from Aliexpress or other platforms, and then add some margin to the product hoping to get some sales.
Again, this may work 10-15 years back but not really now. If you are doing that now, you are going to fail terribly. There are so many different sellers on the platform, how you can pick the good one from the bad one?
If you are getting the product from a platform that can sell by a single unit, how you can compete with those who are willing to white label and buy their inventory? Or someone who hires an agent to source the product from the direct suppliers.
Dealing with agents is good, but when you are just starting, and have so many things to handle, you can leave the heavy loads to the platform. And once you are established and would like to grow and scale your business, that’s the time where get an agent to source for you to keep your cost low and ensure product quality.
Build Your eCommerce Store
It’s time to build your dropshipping store. We will be sharing how to build it on Shopify. One of the best platforms for building an eCommerce store fast. Your Shopify store will be the place where you have your product inventory management, selling products and managing payments.
The goal for Shopify is to simplify the eCommerce store-building process. And in fact, Shopify is so easy that anyone can start building their eCommerce store without technical knowledge.
You can do it in just 6 simple steps.
- Sign up for Shopify’s free trial
- Choose a Shopify theme and customize it. Then, get a custom domain name for your store.
- Configure your payment gateway
- Create your first product to sell
- Install the required Shopify App for your store.
That’s it. I know we oversimplify the process here, but it’s really these six steps for creating an eCommerce store on Shopify.
When you want to build a dropshipping store, how fast you can launch your store to sell the products will determine whether your store is successful or not. You might have found a winning product, but if you are late to the market, other dropshippers might have made the market saturated.
With Shopify, you don’t need to hire a developer or web designer to build your eCommerce store. And in fact, you can get your store ready for launch within 1 hour.
Need help building your online store? Sign up for a free trial of Shopify and read How to Start a Shopify Store: A Step-By-Step Guide.
Decide on a business structure
Many new dropshippers run the business as a side hustle and do not bother to register a business entity. However, if you are serious, you should do it. At least, you are better at filing your tax, and limiting your liability if anyone sues you in the business or so. We’re not lawyers and can’t offer legal advice, hence, you may consult your local advisors for this.
Get your finances in order
No matter how big or small is your business, there will be some costs incurred when you are building it. One common mistake is to mix your personal and business finances. You may not feel any wrong in the beginning, but soon, you will encounter accounting issues and even IRS issues if they audit you.
Hence, keep your personal and business finances separate as much as possible. And that is why you should have a company registered to have a separate entity for your business. Then, open up new accounts in your business’s name. You’ll want to open the following:
All your business finances should go through one primary account. All your earnings and expenses shall be run through the account, not yours. I have seen some business owners that “borrow” money from the company account and “forgot” to return it as they thought all was their money.
Ends up failing to trace the transactions as they did that often. So, never do that. This will make accounting much easier and cleaner.
This is a must for your dropshipping business and you want to have one business credit card for ordering the products only. For me, I will choose a credit card that comes with travel miles so I can use the points to redeem the air miles for free tickets or ticket upgrades.
You will see a huge reward with the right card in the long run as your business grows.
Market your dropshipping store
Once your store is set up and launched, you need to start bringing in visitors. This means you need to start marketing your store. There are different ways that you can market your store depending on your marketing strategy and your target customers.
And to get good results in marketing, you need to create a clear marketing strategy with measurable goals and actions to implement.
I will list down a few marketing ways that you can implement for your business here:
Paid ads (Facebook and Google)
When it comes to paid ads, you should focus on these two platforms first, Facebook and Google (including YouTube). Although there are other social media platforms like TikTok, Pinterest and so on, you should start and focus on these two before expanding to the rest. This is because they own the largest traffic still and works the best for beginners. It is scalable and if your ad is designed well, you can get impulse buys from their users. Take some time to look at where your potential customers hang out and then focus on that platform.
Influencer marketing is a good and affordable way to reach your target customers fast. This is because when you get the right influencers that already have your target customers as their followers, your business will skyrocket. They did the hard work to congregate your target customers. All you need is to find the right influencers and get them to post about your products. Influencers are seen as someone they trust and follow.
They have high reputations and are trustable by their followers. Hence, you can collaborate with them to post about your product. It can be a one-time fee or you send them a sample for review. Or you can even offer them an affiliate fee so they will earn more if they can refer more sales. Your marketing cost will be lower as you only pay for successful sales, and their earnings will be higher if they can refer more sales. And for influencers, you can look for those on TikTok or Instagram. Their follower quality is usually high.
This way may take a longer time for you to get results. But it is an organic way. And if you build it right, you will get long-term free traffic to your business. Content marketing means writing content for your business. It can be blog posts, reviews, guides and etc that you write about your products and niches. By sharing values with your audiences, you can build huge followers getting ranked organically on the search engine. When someone searches for the keyword that you ranked for, you will get free traffic to your eCommerce store.
However, it is worth noting that content marketing or organic traffic takes time to build momentum. If you want to start in content marketing, start a blog around your dropshipping niche and create content that entertains and educates your target audience.
Understand your target customers and know where they hang out. You can then join their conversation and sell your products to the community. Traditionally, it can be a local event or club where people hang out during their free time. Now, it can be forums like Reddit, Facebook groups or even Telegram and WhatsApp groups. When you first start out, don’t be too aggressive to sell your products. You need to engage with the community and be part of the community before selling. Help and provide value to the community so people will trust you as the brand they know and are interested to buy from.
Email marketing is important for eCommerce business. The same goes for your dropshipping business. You can use email marketing for abandon cart recovery to send emails to your potential customers who add to cart but didn’t complete the purchase.
Next, an email marketing campaign can be set to send automated emails to new leads that just join your email list. You can offer a first-time discount for them or send them your onboarding email sequence to introduce your brand and what you can offer to them.
Finally, email marketing is important to build long-lasting relationships with customers and drive repeat purchases. You can send targeted and personalized emails to your potential customers and existing customers about your latest offers, new product launches or regular newsletters.
No matter which marketing strategy you focus on, work hard and master the traffic source for your business. You better have time to work on it if you don’t have the money to buy traffic.
Data Analysis and Optimization
When you launch your store, give it some time to collect some data. You can read from the clickthrough rate, sales rate and demographic to see which products are selling best for which group of customers.
Then, look at your sales figure and which marketing method provides the most sales. Focus on that and optimize it to get more success.
You can also use tools like Google Analytics and Search Console to measure search traffic over time and improve your search engine optimization (SEO) efforts.
Launch your own dropshipping business on Shopify today
If you want to start a business, the dropshipping business model is a great business model. It is low-risk, low cost and easy to start. But it is not easy to get success just like any other business.
Lowering the risk doesn’t mean that you can get success without working for it. You might get a home run on the first try, but that’s not common.
Getting started with Shopify is easy. You can start signing up for a Shopify account for free today, integrate with the dropshipping marketplace and start selling today.