How to Start a Dropshipping Business: 9 Proven Steps

Like any business, starting a dropshipping business to make money online isn’t easy. But it’s a great first step on the road to becoming an entrepreneur. You don’t have to keep inventory to sell to your customers. There are no upfront payments required. If you put your heart and soul into your new business, you can build a long-term source of income.

In this full dropshipping tutorial, we explain the steps you should take if you’re considering dropshipping.

There are some that are mandatory from the start, and there are others that are just a good idea. Addressing them upfront can save you time and headaches in the long run.

At the end of this guide, if you’re still confused about how to start a dropshipping business, you might consider checking out some dropshipping courses

How Does The Dropshipping Business Model Work?

Starting a dropshipping business can be an easy and low-risk way for store owners to sell products online. In the dropshipping business model, the store owner doesn’t need to worry about stocking inventory as all products are sold by third-party suppliers. The store owner sets the retail price and the supplier sets the wholesale price, with the difference being the profit for the store owner.

To start a dropshipping business, the first step is to find a supplier. There are three common ways to do this: 

  • Use a supplier database such as Alibaba or AliExpress
  • Integrate a supplier directory into your store’s back-end with a platform such as DSers
  • Use print-on-demand services like Printify.

For those using Shopify, DSers makes it easy to dropship by offering a marketplace that can be accessed via AliExpress and imported directly into the store with just a click. When a customer buys a product, the order is filled automatically, and the only task for the store owner is to double-check the details and click the “Order” button. The dropshipping supplier then ships the product directly to the customer.

As a dropshipping business owner, you’ll need to create your own website and brand, choose the products you want to sell, and handle shipping costs. It’s important to also set prices that give you a decent profit margin. Overall, dropshipping can be a great option for those who want to start an online store without the hassle of managing inventory.

Can You Buy a Dropshipping Business?

Looking to start a dropshipping business without the hassle of building one from scratch? Exchange, Shopify’s online marketplace, has got you covered! Browse over 10,000 pre-made dropshipping stores for sale that fit your interests and budget. 

Every listing on Exchange includes traffic and revenue statistics, so you’ll have a clear idea of what you’re getting into. All data is directly from Shopify and cannot be altered, giving you peace of mind when making your purchase. Get started on your dropshipping journey today with Exchange!

How to Start a Dropshipping Business in 9 Steps

  1. Make a firm commitment to dropshipping
  2. Choose a dropshipping business idea
  3. Do competitive research 
  4. Choose a dropshipping supplier
  5. Set up your eCommerce store
  6. Decide on a business structure
  7. Get your finances in order
  8. Market your dropshipping store
  9. Evaluate and improve your offering

1. Make a firm commitment to dropshipping

Starting a dropshipping business can be a long-term commitment, just like any other business. So, it’s essential to have realistic expectations about the investment and profit potential of your venture.

As a beginner, you’ll have to invest either time or money, or a combination of both, to get your dropshipping business up and running. In this article, we’ll explore both options and give you a better understanding of what it takes to succeed in this field.

Investing Time in Your Dropshipping Business

If you’re a first-time dropshipping entrepreneur, our recommendation is to start by investing sweat equity and bootstrapping your business. Here’s why:

  • By working on your business yourself, you’ll get a deep understanding of how it operates, and this knowledge will be invaluable as you grow and scale your business.
  • You’ll have a better connection with your customers and market, which will allow you to make more informed decisions.
  • You’ll be less likely to waste money on non-essential projects that won’t bring you any closer to success.
  • You’ll develop new skills and improve your entrepreneurial abilities.

Starting a dropshipping business while still working a 9-to-5 job is possible, but it will take more effort. In the beginning, it’s crucial to focus entirely on marketing to build momentum. To replace an average full-time income of $50,000, you’ll need at least 12 months of full-time work with a strong marketing focus.

While it may seem like a lot of work for a small profit, remember that dropshipping businesses can be more efficient and scalable once they’re up and running, requiring less time and effort than a full-time job. Additionally, you’re building more than just a revenue stream – you’re creating an asset that you can sell in the future.

With around 10 to 15 hours of work per week, it’s possible to generate $1,000 to $2,000 in monthly income within 12 months.

Investing Money in Your Dropshipping Business

Investing a lot of money in your dropshipping business isn’t always the best way to go. Our experience shows that bootstrapping and doing the majority of the work yourself can lead to more success.

Building a business from scratch requires someone dedicated to its success, and outsourcing too much of the work can lead to profits being eaten up by expensive programmers, developers, and marketers. While you don’t have to do everything yourself, it’s best to be the driving force behind your business from the start.

To get started, you’ll need a small cash buffer of about $1,000 to cover minor operating costs and incorporation fees. This will give you enough funds to launch your business and get it up and running.

In conclusion, starting a dropshipping business can be a long-term commitment, and you’ll need to invest either time or money to succeed. By bootstrapping and doing the majority of the work yourself, you can build a successful business that generates a steady income. Just remember to have realistic expectations and be dedicated to your business’s success.

2. Choose a dropshipping business idea

The second step is to conduct market research. Investigate a niche you’re interested in and make decisions based on its profitability. To help you get started, we’ve compiled a list of 130+ dropshipping product ideas.

For better results, focus on niche and trending products rather than competing with big, established businesses. Niche products are easier to sell because they are marketed to passionate customers. You can start a dropshipping business without any money by selling products related to fitness, fashion, beauty, electronics, phone accessories, and yoga.

Here are some examples of niche dropshipping stores:

  • Yoga mats for yogis
  • Pushup boards for fitness enthusiasts
  • Seat cushions for office workers
  • 3D moon lamps for home decoration

To test your dropshipping business ideas, you can also use the following methods:

  • Use Google Trends: This is a handy tool to know if a niche is gaining popularity or losing steam, but it’s not enough to fully assess a niche’s potential.
  • Use Ubersuggest’s keyword tool: Search volume is an important factor to determine the popularity of a niche, which is where Ubersuggest’s Keyword Tool comes in handy. With this tool, you can understand the search volume and competition for keywords, and also come up with new ideas for your dropshipping business.
  • Check popular websites in your niche: Browsing websites within your niche is a great way to get a pulse on current trends. For example, a fashion retailer’s website may have sections for various trends, giving you a good idea of what’s popular at the moment. Another way to get insight is to check out a store’s best-selling products – these items can give you an idea of what’s in demand and could be good sellers in your own store.
  • Check the order volume of products: You can check out how many orders a product’s getting. That’ll give you an idea of how popular it is and what’s selling hot. Don’t write off dropshipping just cause it’s not getting as many orders yet, it could just be a new product that’s still gaining steam.

3. Do competitive research

To succeed in dropshipping, it’s important to understand how your competitors operate. By researching five other dropshipping companies in your market, including at least one or two big players such as Walmart, eBay, and Amazon, you can build a better marketing plan and stay ahead of the game.

Here’s how to conduct your competitor research:

  1. Google search: Start with a simple search using key terms, such as “iPhone cases.” The top ten results will show you who your top competitors are and how they promote their products. For keyword data in a specific country, use tools like Ahrefs or SEMRush.
  2. Competitor spy tools: Use tools like Similarweb and Alexa to see what your competitors are doing online and monitor their activity. These tools provide information on competitor websites, including social media profiles, top traffic sources, number of visitors, and competitors.
  3. Social media sites: Search for Facebook ads to see the top brands in your niche. Analyze how the business interacts with customers, their feed design, and engagement level. Consider following their feed for updates.
  4. Email lists: Subscribe to your competitors’ email lists to see how they market and learn about their promotions and deals.
  5. Website analysis: Study your top competitors’ websites, prices, marketing techniques, product descriptions, reputation, etc. Organize your research in a spreadsheet for easy reference when making store decisions. Use the spreadsheet to see if your competitors are using email marketing and what tactics they are employing.

4. Choose a dropshipping supplier

If you’re planning to start a dropshipping business, you need to find a reliable supplier to help you succeed in this venture. A dropshipping supplier is a crucial part of the equation, as they are the ones responsible for shipping the products to your customers.

One of the best ways to find potential suppliers for your business is through e-commerce platforms like Shopify. The platform offers a marketplace called DSers, which makes it easy to find products to sell online. With just one click, you can add products from various categories like electronics, fashion, and toys to your store, and the best part is that it’s all free.

When you add products to your store, the DSers app uses AliExpress as a source. The product page on DSers contains important information like product quality, shipping times, and how to vet a supplier. You can also find reviews and top-selling products on AliExpress by clicking on the supplier’s link.

If your supplier is based in China, you can consider selling products from distributors who provide ePacket shipping. ePacket is an affordable and fast shipping option for shipping items from China to countries like the United States, the United Kingdom, and Canada. With ePacket, you can have your products delivered to your customers in just two weeks and pay only a few dollars for shipping.

In conclusion, finding a reliable dropshipping supplier is crucial for the success of your business. With the help of e-commerce platforms like Shopify, you can easily find and add products to your store and have a hassle-free shipping process. Ready to start your dropshipping journey? Check out our list of the best dropshipping suppliers

5. Set up your eCommerce store

Your next step is to choose an eCommerce platform, such as Shopify, to start a dropshipping business. Here you’ll send traffic, sell products, and process payments. 

The Shopify platform makes it easy to build and launch eCommerce websites, including registering domain names and adding marketing plug-ins. It’s a complete commerce platform for selling in multiple places (including online), accepting multiple currencies, and managing products easily. 

Neither a designer nor a developer is required to use Shopify. Store builders and Shopify themes make it easy to customize your store’s appearance.

Here’s a guide to help you build an eCom store using Shopify:

6. Decide on a business structure

Starting a business can be exciting, but it’s important to consider the right structure to protect your assets and maximize profits. There are three common business structures: sole proprietorship, limited liability company (LLC), and C corporation. 

To choose the best option for your business, consider factors such as your business plan, tax benefits, level of structure and formality, sources of investment, and business goals.

For many small businesses and dropshippers, the decision often comes down to choosing between a sole proprietorship and an LLC. While a C corporation is also a viable option, it’s generally best for larger businesses with a more complex structure. 

No matter what structure you choose, it’s important to understand the pros and cons of each option to make an informed decision that aligns with your business goals.

Below is a brief overview of these three business structures:

  • A Sole Proprietorship is the simplest structure to set up and has very few filing requirements. However, it does not offer much protection from personal liability, meaning you risk losing your personal assets if your business is sued.
  • An LLC, on the other hand, is set up as a separate legal entity from you, offering better protection for your personal assets. But this increased protection comes at a cost, as you’ll need to submit additional documentation, and pay incorporation fees, and ongoing charges.
  • The C Corporation offers the most comprehensive protection from liability, but it’s also the most expensive to form and subject to double taxation.

If you’re located outside the United States but still want to form an LLC or C Corporation under U.S. laws and jurisdiction, you’ll need to follow several steps. 

  1. Choose your desired business structure and a state to incorporate or file your LLC in. 
  2. Get a registered agent, and an employer identification number (EIN).
  3. Open a U.S. business bank account.
  4. Consider getting the advice of a business consultant or knowledgeable professional, and always stay compliant with the rules and regulations.

If you want to start a dropshipping business in the US or its territories, don’t forget to apply for an EIN (Employer Identification Number) from the IRS. Think of it as your business’s social security number – you’ll need it for taxes, opening a bank account, and working with dropshipping suppliers. Most reputable suppliers require an EIN.

To get started, head to the IRS website and download form SS-4, the EIN application form. Fill out the form and answer all questions. Need help? Consider reaching out to a business consultant or lawyer.”

7. Get your finances in order

Starting a dropshipping business requires careful planning and consideration of various factors that impact the amount of money you need to invest. 

Some of the key factors include the size of the business, the cost of the products you sell, the location of your supplier or manufacturer, the software and programs you use for your dropshipping website, and the overhead costs you anticipate. 

To ensure you have a realistic estimate of your finances, take all of these factors into account and project your costs and expenses for at least a year.

It’s important to establish a clear separation between your personal and business finances from the outset. This can be done by opening new accounts specifically for your business. Keeping business expenses separate from personal expenses will make it easier to track your finances, and it will protect you from liability for business debts. Your business should have separate accounts for:

  1. Business Checking Account: This account should be used for all your business finances and be the main checking account for your business. All expenses should be withdrawn from this account and all profits should be deposited back into it. This setup makes bookkeeping much easier as it provides a clear picture of your expenses and income.
  2. PayPal Account: When signing up with PayPal, choose a business account, as opposed to a personal or premier account. You can also set up a personal account that is separate from your business account but make sure to keep the finances separate.
  3. Business Debit/Credit Card: Using a personal debit or credit card for business expenses is not recommended, so it’s best to set up a business credit or debit card exclusively for your business expenses. Capital One, American Express, and Fidelity Visa are good options for dropshipping businesses.

Taxes on goods sold through dropshipping can be more complex than expected. The process is impacted by the location of the dropshipper, the location of the customer, the product source, and the sales tax nexus. Nexus refers to the fact that companies doing business in one state must collect and remit taxes on sales in that same state.

Here is a brief overview of what you need to know about collecting and remitting sales taxes in a dropshipping business:

  1. If you have nexus in the state where the sale takes place, you must collect sales tax from the customer unless the transaction qualifies as tax-exempt.
  2. If neither you nor your supplier has nexus in the state where the transaction took place, the customer is responsible for remitting the tax unless the sale qualifies as tax-exempt.
  3. If you do not have nexus in the state where the sale occurs, but your supplier does, the supplier may be responsible for collecting the sales tax. This varies by state, with some like Hawaii, Florida, Connecticut, and California requiring the supplier to collect the sales tax, while others do not. It’s important to check the tax laws in your state.

The requirements for renewing business licenses for dropshipping businesses, many of which operate from home offices, can vary depending on local laws and regulations. Check your local laws to determine if there are any specific requirements.

8. Market your dropshipping store

It’s time to talk about marketing your new store now that you know how to start a dropshipping business. As you build your dropshipping business plan, you may want to put extra effort into your marketing and advertising efforts. 

Dropshipping automates so much that you can spend your time focusing on marketing and promoting your business.

1. Paid ads (Facebook and Google)

The average cost per click for a Facebook ad is about 97 cents, which isn’t bad for someone who is new to advertising on Facebook. In addition to being scalable, Facebook ads can perform well and play to people’s desire to impulse buy.

Shoppers are more likely to make purchases when you target long-tail keywords with Google Shopping Ads. It’s typically more expensive to run Google ads, but it may be worth it to test it out.

In addition, you can consider TikTok ads. Globally, TikTok has over 1 billion monthly active users. It is a great social media site for dropshippers and marketers to establish credibility and increase conversions with their target market.

2. Influencer marketing

Dropshippers often have limited marketing budgets. The benefits of influencer marketing are cost-effective because people trust them more than traditional advertising because they tend to trust influencers. Negotiate an affiliate fee rather than a flat rate with the influencer if you choose this route. Since they will be making money off of each sale, and you will be saving money, it’s a win-win situation. 

3. Content marketing

Create a content marketing plan for your dropshipping business if you want to build a long-term stream of traffic for your store. You can start a blog around your dropshipping niche and create content that entertains and educates your target audience. To get the word out about your brand, you could also start a YouTube channel, make infographics, or create a podcast.

4. Communities

Join groups of passionate people in your niche. On Reddit, Facebook groups, or online forums, you can start conversations with potential customers. Just don’t be too salesy. Build relationships with potential customers so they trust you and want to buy from you.

5. Mobile marketing

In mobile marketing, companies connect with their customers through their mobile devices. For example, you can set up a VIP text club and visitors to your site can sign up to receive exclusive offers. Shoppers can get customer support through Messenger Live Chat. With a mobile marketing platform like ManyChat, you can create automated lead generation, retention, and abandonment campaigns to increase sales for your dropshipping business. 

Keeping an eye on which channels are working and which are not is key to running a successful online business, especially if you are investing money in those channels. You can always adjust your marketing strategy as your business grows and improves, so you can reduce costs and maximize sales.

9. Evaluate and improve your offering

After some time, you can see the results of your hard work after you’ve been marketing and running your dropshipping business. Using Shopify analytics, you can answer some important questions about your store, such as:

  • Sales. Which channels perform best? Where should I put more advertising budget? What are my top-selling products? Are there any returning customers?
  • Shopper behavior. Are people buying more on mobile or desktop? Which device has the highest conversion rate? 
  • Profit margins. Which products or SKUs have the highest profit margin? Are monthly sales and gross profit rising or falling? 

Google Analytics and Search Console are tools you can use to measure search traffic over time and improve your SEO. You should also check the reports monthly if you use a third-party app to manage your social media or messenger marketing. 

Create a data-driven analytics system if you are opening a dropshipping e-commerce store. Make sure you measure your store’s performance over time using clear KPIs and stay consistent with your analytics. This will help you make smarter business decisions and take your small business to the next level.

Final Thoughts

Starting an online business is a cost-effective and simple process. All you need to do is log into your business account and you’re ready to go!

However, as a new business owner, you should be aware of potential challenges in the first few days. Your website may crash, have accessibility issues, or customers may experience problems with features or completing orders.

These problems are common for new online entrepreneurs, but you can be prepared by keeping your technical team and customer support ready.

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