How To Start A Dropshipping Business – A Complete Guide
With retail eCommerce sales hitting $2.29 trillion in 2017 and expected to hit $4.08 trillion this year, it is clear that eCommerce is becoming more prominent globally. And with the ability to reach anyone from anywhere in the world online, getting into dropshipping is becoming more and more appealing. After all, who doesn’t want to be able to sell items from their home without worrying about inventory? So, of course, now you’re wondering how to start a dropshipping business.
We’ve found all the information you’ll need to get your dropshipping business up and running. So, let’s dive right in!
1. Figure Out the Logistics for Your Dropshipping Business
Before you start a dropshipping business, there are some logistical considerations you need to figure out first.
First, you need to register your business name and choose a business structure. You will also need to get an employer identification number (EIN) for tax reasons.
Concerning licenses, you may need to get business licenses and permits for your federal, state, county, and local governments. The licenses you will need will depend on what you are selling and where you do business.
Consult with your local government to make sure you are following the proper protocol. To sell online, you may need the following types of licenses:
- General operating license
- Seller’s permit
- Sale’s tax license
- Home occupation permit
Another logistical consideration to take into account is the cost of starting a dropshipping business. Expect to invest a minimum of $500 in starting your dropshipping business.
Click here to learn more about the costs associated with dropshipping.
2. Choose A Dropshipping Business Niche
There is a lot of competition when it comes to getting into dropshipping. Therefore, it’s essential to pick a business niche that will give you the highest chance of success—the more specific your niche, the better. For instance, the beauty industry is a particular niche, but selling eyelashes is a sub-niche of that industry.
Here you can find some ideas for the best products to sell this year.
If you don’t use any of those, it’s important to investigate the profitability of the product that you want to sell. While you should aim for profit margins of 100% or more, you should expect no less than a 40% profit margin after seller fees, shipping costs, and taxes are applied.
It’s important to note that you’ll have to put in the same amount of work marketing your business to sell a $15 item as you would a $1000 item. Therefore, sometimes it’s better to go with selling higher-priced products. However, if you go with a higher-priced item, you might not sell your item as frequently as something priced lower. You’ll have to make sure that the profits are worth it for you to have possibly slower sales.
You also want to find a product that isn’t expensive to ship. High shipping costs can deter customers from purchasing. Additionally, if you want to offer free shipping to attract more sales, you’ll have to absorb the shipping cost. You don’t want to have to absorb high shipping costs, either.
Additionally, if you can choose a niche product that isn’t readily available locally, you’ll have a better chance of selling it.
To help you check for trends in product searches, you can use Google’s Keyword Planner. You don’t want a niche that is so specific that no one is looking for your product. Google Keyword Planner will help you see what products have a high search volume.
Overall, some of the most evergreen niches that tend to do well, no matter what, are fitness, fashion, jewelry, beauty, backpacks, purses, and tech.
3. Research The Competition
When it comes to picking a niche, you want to pick one where there is some competition, but not too much. Some competition shows that there is enough demand for the product and, therefore, the possibility of profit. However, if there is too much competition, it will be hard to stand out amongst other drop shippers.
To research the competition, you have a variety of resources available to you. Below are the following resources you should consider utilizing:
- Google Search – This can show you who your top competitors are for a specific product.
- SEM Rush or Ahrefs– You can use these to get search results information, globally.
SimilarWeb – You can use this to view niche competitors that you won’t find as easily with a Google search. SimilarWeb will give you a summary of the websites you are searching for, including the following:
- Competitor social media profiles
- Advertising your competitor is doing
- Competitor audience and traffic information
- More competitors of that business
- Social Media- You can look up Facebook ads and social media pages within a niche to find your top competitors and analyze how they are doing. Look at their followers, how they market their brand, their engagement, how you can stand out against them, and things you want to mimic.
- BuzzSumo– You can use this to get blog ideas and see what content from your competitors is doing the best.
- Amazon and eBay– You can analyze what other sellers of your product are doing and how well that product performs.
4. Secure A Supplier For Your Dropshipping Business
When choosing a supplier, you want one with plenty of experience in dropshipping, low fees, fast shipping, and high-quality products. You also want one that is willing to provide you with referrals to other businesses.
Choosing the right supplier is critical, so do plenty of research on this. You also need to make sure that you can adequately communicate with your supplier as most of them are located overseas. You also want a supplier that has the production capabilities to scale with you if your business grows.
To secure a supplier, you have various options to get ahold of them:
- Contact the original manufacturer of the product and find qualified distributors. Keep in mind that not all distributors will dropship.
- WorldWide Brands – this a reputable place to find dropshipping suppliers.
- Shopify– You can connect with reliable suppliers.
- Google- For this, you want to google various words such as “reseller,” “bulk,” “warehouse,” “supplier,” and “wholesale.” Most wholesalers are notoriously bad at SEO, so you may need to dig deep into the Google search to find the best one.
- Alibaba and AliExpress– some of the largest online marketplaces for drop shippers to find suppliers.
- Printify and Merch by Amazon– If you want to create custom white-label products such as t-shirts and tote bags, you can use these print-on-demand websites to design and sell your branded products. Fulfillment would be done on a per-order basis.
- Oberlo– You can use this to find products from suppliers and upload them to your Shopify website.
5. Build Your Dropshipping Store Website
While you could hire someone to design an eCommerce store for you, it’s best to start with a ready-to-go eCommerce platform like Shopify instead.
You should also get your own domain name to establish your brand and rank higher in searches. Make sure in your domain name that you have a broad niche keyword like “fitness” or “beauty.”
Once you are more established and your business starts to grow, you can begin to look into getting a custom-built website. You can find freelance web designers through Fiverr and Upwork that can build you a website relatively cheaply.
6. Market Your Dropshipping Business
To market your business, start with using Facebook ads. You’ll be able to get access to a broad audience immediately, and you don’t have to spend a ton of money on it.
Another way you can market your business is through Instagram. You can also use Instagram ads or partner with influencers. If you partner with influencers, you can pay them to rep your product or provide an affiliate program. With an affiliate program, if the influencer markets and sells your product, they get a commission.
You can also start a blog and write blog posts around your niche. When you do this, you can promote blog posts on various social media platforms. A popular one for promoting blog posts is Pinterest. When you drive traffic to the blog, you’ll also be driving traffic to your website where people can potentially make a purchase. Make sure that you understand SEO basics to help your blog posts rank higher in Google search. You can also hire someone to help you with this.
Overall, though, to keep track of your traffic and conversion rates, you should use Google Analytics and Google Search Console. These will help you see if your marketing tactics are working.
Wrapping Up: Starting Your Dropshipping Business
Now you know what you need to know to start a dropshipping business. Many say that dropshipping is saturated, but with eCommerce sales growing, there is still plenty of room to succeed. You just have to be strategic about what product(s) you sell and how you market your business. Therefore, it’s essential to research. And as with any business venture, it’s important to stay determined and persistent. It’s time for you to make your dropshipping dreams come true!