How to start dropshipping: 9 Essential Steps and TipsLearn how to start a dropshipping business in 9 steps, with tips to help you create a successful dropshipping business model.
Are you looking for a way to make some extra money? If so, you might be thinking about starting an online business or ecommerce store and giving dropshipping a try. This has become a popular ecommerce business model, and you do not need a lot to get started.
There are a lot of reasons why people are interested in trying dropshipping.
For example, you have much lower startup and shipping costs when compared to other businesses. You can also scale your business easily to meet customer demand, while saving on overhead expenses because you don’t have to manage your own inventory.
This type of flexibility makes it very easy for you to get your business going.
Keep reading to learn more about how to start dropshipping, and do not hesitate to reach out to an expert who can help you get your business off the ground. Learn more about how to start an online store and sell a product online.
What is the dropshipping business model?
What if we told you that you could sell products online without having inventory? With dropshipping, you can sell products to customers without having those products on hand. Dropshipping is an ecommerce business model whereby the retailer (you) receives customer orders. Instead of having your own inventory and shipping the products directly to customers, you’ll work with a dropshipping partner, also known as a wholesaler or supplier.
With dropshipping, you’ll have a partner that fulfills orders on your behalf, allowing you to outsource inventory and fulfillment. In this case, you’re only responsible for selling the products. The process looks something like this:
- A customer places an order on your website
- You process the order and send it to the supplier
- The supplier ships the order
- The customer receives the order
The most significant difference between a regular e-commerce business and dropshipping is that you, as the retailer, don’t maintain the inventory or fulfill the orders. Instead of buying items from suppliers with purchase orders and storing them to sell, you forward orders directly to the supplier to fulfill them.
You will be starting a business as an ecommerce entrepreneur, and you never have to worry about managing your own inventory. Because you don’t have to deal with any inventory overhead expenses, it is a relatively easy business to start. On the other hand, you do need to position yourself to quickly fulfill orders that come in. Otherwise, you might have a difficult time getting your business started.
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If you are wondering how to start a dropshipping business, there are a few important steps you need to follow.
Step 1: Get yourself mentally and emotionally committed
If you really want to start dropshipping, you need to commit to the prospect of doing so. Even though it is possible to make a lot of money dropshipping, it is not going to show up in your bank account overnight. You need to invest heavily using either your time or money.
It will take some time to get your dropshipping business off the ground, particularly if you do not have a lot of capital to invest. If you are willing to put in the time, you will learn how your business operates inside and out. This will be important for managing different aspects of your dropshipping business as it continues to grow. You also don’t want to waste your capital on areas of your business that will not help your company grow.
Step 2: Choose a dropshipping business idea
Figure out where you want to position your dropshipping business. Even though you probably want to sell just about everything, that is not going to be possible. You need to do your market research, figure out where the opportunities are, and position your business accordingly.
For example, if you want to open a retail store, you will probably try to figure out what to sell and where to build your store. With a dropshipping business, the process is the same. You need to think carefully about what products you want to sell. You may want to look at what is trending to find opportunities.
Step 3: Research the competition
Once you have figured out what you want to sell in your dropshipping store, you need to research the competition. What are other people trying to sell? How are they doing so?
When you take a look at the competitors, identify the biggest brands in your space. This could include Walmart and Amazon. You may want to start with a simple Google search to figure out who is at the top of the list.
Then, make sure you track their websites closely. When they make adjustments, you may want to make adjustments as well. Look at social media to see what people are saying about different companies.
Step 4: Choose your dropshipping supplier
Your ecommerce business’s reputation and success will depend on your dropshipping supplier. If your supplier takes too long to deliver products, it can affect your growth, so it’s important to thoroughly vet any suppliers you’re interested in. Your dropshipping supplier stocks the products and sends them to your customers; without them, your business simply wouldn’t exist.
Once you know which products you want to sell, you can find a supplier that delivers the highest quality of service to help you grow. A few considerations when choosing a supplier include the following:
- Quality: Your dropshipping supplier should deliver quality products. Remember, your supplier is responsible for manufacturing or sourcing the products, so you won’t have a say once you sign the agreement. Instead, you should vet the products they sell with your own eyes to ensure they’re high enough quality for your customers.
- Profit: Dropshipping comes with lower startup costs, but that also means lower revenue. Ultimately, since your dropshipper is doing most of the work, you can expect less profit. However, you still want to make money, so it’s crucial to factor in all your costs and try to generate higher profit margins by knowing how to price your products.
- Reliable: Your dropshipping partner must be reliable because they can affect customer satisfaction and your business’ reputation. If your supplier doesn’t offer fast delivery or keep products in stock, resulting in delayed shipping times, your customers won’t be very happy.
The easiest way to find a dropshipping partner is to use an online marketplace and vet each supplier you’re interested in working with. You can also get a direct source supplier if you want to sell a specific product.
Step 5: Build your online store
You also need to use a platform to build your online store. That is where you will direct your traffic, sell your products, and process all of your payments. Figure out which domain name you want to use. Pick something that is relatively easy for people to remember but avoid domain names that are already taken.
Consider the different widgets and plug-ins you want to add to your website. These are important because they will make it easier for your customers to find what they want. That way, you can keep your cart abandonment rate as low as possible.
Step 6: Consider your business structure
Next, think carefully about how you want to structure your business. Will this be your primary business entity? Or, do you plan on keeping this as a side hustle? If you have questions about the legal process of forming a business, it is important for you to reach out to a lawyer who can help you.
In general, there are three separate business strategies and entities you should consider. For example, you might want to keep it as a sole proprietorship. This is the easiest option, but it doesn’t provide you with any personal liability protection. Another option is to form an LLC, which has some protection but requires some filing fees. If you think you will have a major corporation on your hands, you may want to become a C corporation.
Step 7: Create a separate business bank account
Designate a separate bank account for your dropshipping business. A common mistake people make is blending their personal and business finances. You do not want this to happen, and it is a very big red flag for the IRS. The easiest way to keep them apart is to have a separate bank account.
Step 8: Market your online store
You need to market your online store as well. If you have an ecommerce business, take advantage of a wide variety of digital marketing tactics that tell people about the products and services you provide.
For example, use email marketing to keep in touch with some of your most loyal clients. Take advantage of social media as well. You do not need to have a profile on every social media platform, but you do need to figure out where your target market hangs out. Then, consider having a profile on those specific social media platforms.
Step 9: Track your KPIs
Once your store is operational, keep track of your key performance indicators, usually shortened to KPIs. That way, you can figure out what is working, what is not, and what needs to improve.
For example, look at the channels that are performing the best and why. Also, look at your advertising channel to figure out what is working and what is not. Do not forget to figure out how people are purchasing products as well. Are they using desktop computers or are they using mobile devices?
Tips to help you start a dropshipping business
If you are wondering how to start a dropshipping business, there are a few tips you need to follow. There are ways to make money dropshipping, but you need to think carefully about the best way to dropship.
If you are wondering how to drop ship, some of the tips you need to follow as a part of your dropshipping business include:
Research target audience, competitors, and products
If you want to make money dropshipping, one of the first tasks you need to complete is market research. There are a lot of aspects to market research, and you need to develop a comprehensive plan if you want to place your dropshipping business in the best position possible to be successful.
Some of the most important aspects of market research include:
Target audience
Who do you think can benefit most from the products you dropship? Why do you think they would benefit them? While you probably want to turn everyone into a paying customer, you need to focus on your target market if you want to maximize the return on your investment.
Competitors
What are some of the other companies in your space? What do they sell? Why do you think those businesses have been so successful? You need to research the competition because you need to find a gap in the market that you can exploit.
Products
What products do you think are going to work best for your dropshipping business? When you research products, you need to identify not only what people like but also the potential profit margins you can make by selling it. Do not forget to consider any potential special shipping requirements those products might have.
If you complete these research steps, you will have an easier time getting your dropshipping business off the ground.
Choose a niche product and reliable dropshipping supplier
Even though you will probably have a lot of business ideas, you should start with a niche based on everything you’ve learned about your target audience and the products you want to sell. There are many niches to choose from, including jewelry, beauty, pet products, and so forth. What’s important is finding a dropshipping partner in the same niche as your online store because it can help you ensure they provide quality products.
Depending on your store, you can partner with multiple suppliers, which can help hedge your risk. Multiple dropshipping partners can ensure that if something falls through with one, you have another one who can fulfill orders quickly. In addition, if one supplier runs out of stock, having a second one will ensure that orders can be fulfilled.
Build a professional website and use effective marketing
Dropshipping is an ecommerce business model, which means you need an ecommerce website to make it work. Your e-commerce store must include products, descriptions, and high-quality photos to help convince visitors to take action and add items to their carts.
If you want your website to work well, some of the most important tips to follow include:
- Make sure your website is fast. No matter what you do, your website has to load quickly to be useful.
- Do not clutter the website with unnecessary information. If you have more information to share, use drop-down menus to make it easier for people to navigate.
- Ensure you think about search engine optimization. Much of your website traffic is going to come from search engines, like Google, and a strong SEO campaign is a must.
- Make sure you update your website regularly. Keep your information accurate, your product listings to the point, and your checkout process smooth.
If you run an effective marketing campaign using your website, you should have an easier time attracting customers. This can go a long way toward helping you grow your dropshipping business.
Set competitive prices and provide excellent customer service
Today, customer expectations are higher than they have ever been in the past. You need to rise to meet those expectations, and strong customer service is a must. There are a few ways you can ensure that you provide exceptional customer service. They include:
- Respond to all customer questions as soon as possible. If someone has a question about a product you offer, try to respond quickly. This will show the customer that you care about him or her.
- Do not overwhelm your customers with your product listings. Keep the text short, sweet, and to the point. Remember that a picture is worth a thousand words.
- If you want to provide strong customer service, make sure the checkout process is easy. Don’t ask the customer to fill out unnecessary form fields, and accept as many forms of payment as possible.
- Own your mistakes. Own your dropshipping suppliers’ mistakes. Take responsibility for everything, even if you feel like it is not your fault. Owning your mistakes can defuse angry customers quickly.
Strong customer service can help you quickly set your dropshipping business apart from your competitors.
Do not forget that you need to review your prices from time to time as well. Keep an eye on your competitors, and make sure your prices are competitive within the marketplace. Remember that your customers are going to shop around, and your prices have to be attractive if you want to maximize your conversion rate.
Continuously evaluate and improve
As you learn more about how to dropship, you need to continuously evaluate the state of your dropshipping business and find ways to improve. For example, you might notice that your abandoned cart rate is a bit high. This refers to the number of people who put items in their carts and subsequently leave without finishing the purchase.
You need to evaluate this situation and figure out why that is the case. Some of the reasons why your rate of cart abandonment might be a bit high include:
- You surprise your customers with shipping costs on the last page.
- You don’t give them enough time to complete the checkout process.
- You don’t accept their method of payment.
- You ask the customer to fill out too many fields.
This is just one aspect of your dropshipping business model that you need to evaluate regularly. Some of the other areas include:
- Is your website loading fast enough? As more people visit your website, more demands will be placed on your server.
- Which of your products is selling the best? Why is that the case?
- Are your marketing efforts attracting more business? Which campaigns are performing the best and bringing in more sales?
The best way to dropship is to continuously evaluate all aspects of your dropshipping business and find ways to improve.
Stay up-to-date with industry trends
The ecommerce industry is one that changes quickly, and you need to remain on top of industry trends if you want to attract as many customers as possible. There are different ways you can keep an eye on the trends in your field as they unfold. They include:
If you are one of the first businesses to capitalize on trends taking place in dropshipping, you can stay one step ahead of your competitors and maximize your customer retention rates.
Be patient and persistent
As you take a look at the number of purchase orders you have, it is easy to get frustrated. You want your dropshipping business to grow as quickly as possible, but you might be disappointed that it is taking you longer to reach your goals than you thought.
In dropshipping, it is important for you to be patient and persistent. You are not going to grow a successful dropshipping business overnight, and there are opportunities for you to be successful. It simply takes a lot of hard work mixed with a bit of creativity.
These tips are going to get you on the right track, but you need to work hard consistently if you want to see results.
Then, do not forget that you can lean on some advanced tools that can provide you with analytics related to your dropshipping business. That way, you can figure out what is working, what is not, and what you can do to improve.
What to expect when your dropshipping business launches
It will take a few months for your dropshipping business to generate a steady cash flow.
As long as you stay on top of your most important metrics, you should put your dropshipping business in a position for success. If you are interested in supporting your dropshipping operation, you need to put the best tools to work for you.
That is why you should consider using Mailchimp to help you market your dropshipping business. You can keep in touch with your customers, share information about your products, and show your customers that you are the perfect option to meet their needs.