Learning how to dropship has become increasingly popular among young entrepreneurs as it doesn’t require a large financial investment to get started.
Today, you can use an eCommerce platform to create your site and buy items from third-party suppliers that fulfill all of your orders for you.
However, there are some factors you need to consider before jumping in head first. Here’s a step-by-step guide on how to start a profitable dropshipping business:
- Step 1 - Fully understand the dropshipping model
- Step 2 - Identify your niche
- Step 3 - Choose a business structure
- Step 4 - Take a look at the legalities
- Step 5 - Get your business finances in order
- Step 6 - Find your suppliers
- Step 7 - Choose an eCommerce platform to build your website
- Step 8 - Buy a domain name
- Step 9 - Personalize your online store
- Step 10 - Work on retaining and acquiring customers
Step 1: Fully Understand the Dropshipping Model
Dropshipping isn’t like running a normal online store. Instead, the customer places an order in your shop. You then forward this order to a supplier who ships the product directly to your customer.
Essentially, you’re using another company’s products and adding your own profit margin. With this model, you never have to handle the product.
Step 2: Identify Your Niche
Before you start selling products, you have to select a niche that you’re genuinely interested in. Aside from ensuring that you’re passionate about the products you’re selling, you’ll be able to hone in on a specific audience. This, in turn, will make it easier for you to target your marketing efforts.
When selecting your niche, make sure that you choose a profitable market. The amount of work you’ll need to put in to sell a $10 product will be the same as with a $1,000. With this in mind, try and go for higher priced products that can really turn a profit.
Additionally, go for products that aren’t expensive to ship and appeal to impulse buyers with the right amount of disposable income. These people need to be actively searching for your product. With this in mind, do some market research before making a final decision.
Step 3: Choose a Business Structure
If you want others to take your business seriously, you need to be legitimate, and that means choosing the right structure.
There are three common business structures for you to choose from in the US. These include sole proprietorships, Limited Liability Companies (LLCs), and corporations.
The structure you choose will depend on your business and whether or not you want personal liability protection. It will also depend on the amount of filling you want to deal with. I suggest you get in touch with a lawyer before making a final decision.
Step 4: Take a Look at the Legalities
Aside from your business structure, you must request your Employer Identification Number (EIN) as this is a mandatory requirement from the IRS. It’s essentially a social security number for your company. Aside from needing this number to pay your taxes, it’s also what will allow you to apply for dropshipping accounts with suppliers.
Getting one is free of charge and takes a matter of minutes on the IRS website.
Furthermore, you must check which licenses you need to trade. While business licenses for dropshipping companies tend to differ because they’re often operated from home, it’s important you research any additional requirements for your business.
Step 5: Get Your Business Finances in Order
The reason I say ‘business finances’ is because many make the mistake of mixing their personal and business accounts when starting a company.
This is a sure fire way of getting your accounts confused. It can also lead to a personal assumption of business liabilities which is a big no-no with the IRS.
When setting up your dropshipping company, open a business checking and Paypal account. Also, apply for a business credit card to use for all expenses as you’ll be making some big purchases when placing orders with suppliers. This can lead to rewards which can bring down your overheads significantly. Please note that you should only use this credit card for business transactions.
Step 6: Find Your Suppliers
Now that you’re legally allowed to start trading, choose your suppliers. This process can take time but it’s important that you conduct proper due diligence so that you don’t end up making the wrong decision. I suggest you place a small order with your top three suppliers.
By doing so, you’ll be able to check factors like delivery times and customer service. You’ll also have the chance to check each supplier’s overall communication skills. After all, you want to be able to get in touch with them if an order goes wrong.
I used AliExpress dropshipping to start my online business. That said, there are now dozens of suppliers to choose from, some of the most popular and reputable ones include Doba, SaleHoo, and DropshipDirect. All of these offer a selection of plans. They also offer various services that can help you streamline your online business.
Step 7: Choose an eCommerce Platform to Build Your Website
Once you have your suppliers, you need to choose an eCommerce platform to build your website. With online shopping growing in popularity, there are hundreds of platforms you can choose between.
Whichever solution you go for, make sure that it comes with a selection of plans so that you can scale your site as your business grows.
Also, check that it allows you to add the number of products that you want to list. Lastly, make sure that you can personalize it to align with your company branding.
Step 8: Buy a Domain Name
The next step is to give your website a name. You can choose any name you want, however, I recommend you go for your business name followed by your preferred domain ending.
This would look something like this: www.examplebusinessname.com.
Using Shopify as an example. Start by navigating to your dashboard and click on the ‘Add Domain’ tab followed by the ‘Add Domain’ button.
Then, you’ll be given the option to buy a new domain, connect one you already own or transfer one from another website.
If you are buying a new one, click on ‘Buy new domain’ and type your preferred option. From there, you’ll see whether or not your choice is available. If it is, it’ll say ‘Buy’ next to it. If not, it’ll be marked ‘Unavailable’.
Step 9: Personalize Your Online Store
Now that your website has a name. It’s time for you to personalize it so that it aligns with your branding and customers find it welcoming. The process is different depending on the platform you’re using. That said, with Shopify, you simply click on ‘Customize theme’ on your dashboard followed by the ‘Customize theme’ button.
You then have three options. You can either stick to the ‘Debut’ theme already assigned to your store or choose a new one from Shopify’s selection. You can also upload your own theme if you’ve had one professionally designed to suit your company.
Step 10: Work on Acquiring and Retaining Customers
Even if your dropshipping business looks the part, it won’t be much use if you don’t have any customers. With this in mind, the next stage is to create a customer acquisition plan and the most effective way to do this is via online marketing.
Facebook is now one of the most popular marketing tools available today. The platform allows you to share products and run campaigns that will allow you to reach a large and very specific audience.
Additionally, make sure to put together a long-term marketing strategy. This should include everything from Search Engine Optimization (SEO), email marketing. You also need to consider other forms of social media marketing like Twitter and LinkedIn depending on your company and industry.
How to Dropship - a Wrap-Up
The key to learning how to dropship is the same as with any other business: you have to keep track of your progress in order to establish what you’re doing well and which processes need improving.
To do this you must analyze and optimize your store by continuously collecting data with Google and Facebook analytics, among other tools.
Spend time testing your operations so that you can fine tune them as your company grows.
In the meantime, do you own your own dropshipping business? If so, let me know how you made it a success in the comments below.