How To Start A Dropshipping Business

eCommerce has become a major business, so you’re considering joining the 7.9 million online businesses that sell products via the web. Research published by Statista in March 2021 showed revenue from eCommerce in the United States reached $431.6 billion in 2020 and is expected to reach $563.4 billion by 2025.

Dropshipping can provide a route into online selling. It’s a business type that minimizes risk and allows you to operate remotely without managing stock. In this guide, you’ll learn the pros and cons of starting a dropshipping business as well as how to start a dropshipping business in five steps.

What is dropshipping?

A dropshipping business purchases inventory from an external manufacturer or distributor who fulfills and delivers orders directly to the customer.

Your role as the dropshipping business is to market products and manage the customer and sales process. Your dropship supplier will handle inventory, packing, and delivery.

Here’s what you need to know before getting started.

What are the benefits of dropshipping?

Low startup costs and less risk

One of the biggest attractions to the dropshipping business model is its low capital intensity, as you don’t need to purchase inventory up-front. This means you can start a dropshipping business with relatively little investment, other than creating your website and marketing.

If you’re starting a business on a low budget, then dropshipping could be a viable option for you. The startup risk is significantly less than a traditional eCommerce business that purchases and stores its inventory prior to sale.

Success is not guaranteed. You still need to invest time and effort into creating your website, refining your sales funnel, and marketing your business.

Simple to start

Dropshipping is a popular business model for those looking to start an eCommerce business. It has a low barrier of entry and is relatively easy to operate, most of which can be done remotely.

You won’t need to store or handle physical products, so you won’t require storage facilities. You also won’t need to:

• Pack and post orders
• Handle returns (other than customer service)
• Manage inventory for stored products

This removes complexity from the operational side of the traditional eCommerce business model, allowing you to focus on sales and service.

Work remotely

Your dropshipping business can operate from anywhere in the world with an internet connection because you won’t be holding stock or requiring a retail premises.

You’ll spend time working on your website, marketing, and delivering customer service by email. The dropshipping business model has become incredibly popular due to this flexibility.

Scalable

The dropshipping business model can be scaled to meet customer demand and expectations as your business grows.

Unlike a traditional eCommerce model, you won’t need to scale your warehouse, sales, and service operations. Your suppliers handle much of the work, so extra resources may not be necessary for your business.

Drawbacks of dropshipping

Tight profit margins

Dropshipping has become a popular business model for those hoping to make a quick profit. Fierce competition has led to a race to the bottom in pricing strategy, reducing profit margins.

Many commodity-type products easily available to drop shippers have saturated the market, reducing profit margins.

Inventory and supplier problems

Dropshipping businesses lack control as inventory is managed by a third-party supplier.

Communication breakdowns or lack of inventory management systems can disrupt the supply chain, causing delays or incorrect deliveries.

Possible delays due to holidays from foreign suppliers may affect customer satisfaction.

Shipping and delivery issues

Shipping costs may increase and delays may occur, especially during busy times of the year. Customers hold you responsible for these issues.

Ensure you have customer service processes in place to keep communication open with customers.

Success is not guaranteed

The success rate of dropshipping businesses varies, but some common reasons for failure include:

• Selecting the wrong niche, resulting in high competition or low margins
• Lack of investment for effective marketing
• Choosing the wrong advertising platforms
• Poor customer service
• Delayed shipping
• Unattractive website design resulting in low sales volume

How to start a dropshipping business in 5 steps

Now that you’re aware of the pros and cons of starting a dropshipping business, and what it takes to be successful, here’s how to get started in five simple steps.

1. Identify your product niche

Select a niche that meets an unmet need, solves a problem, or has a unique value proposition.

Consider viable profit margins, shipping costs, market demand, and competitors when choosing your niche.

2. Find your supplier

Choose a supplier who ensures quality products and timely delivery. Check certifications, lead times, refund policies, and order samples for testing.

Popular dropship suppliers and websites include Alibaba, AliExpress, and Oberlo.

3. Create your website

Your website is critical for your dropshipping business. Choose a website builder that is easy to use, has marketing features, and offers effective website templates.

Popular choices include Shopify, BigCommerce, WordPress, Magento, and Weebly.

4. Market your business

Devote effort to attracting customers and making sales by creating a customer acquisition plan.

Use short-term marketing strategies such as pay-per-click adverts and social media adverts. Adopt long-term marketing strategies including SEO, email marketing, and engaging social media content.

5. Track everything and optimize

Track and analyze customer metrics to optimize your website, understand consumer behavior, and market effectively.

Important metrics to track include cost per acquisition, conversion rate, average order value, customer lifetime value, and cart abandonment rate.

Use data from your website shopping cart, web hosting provider, and platforms like Google Analytics to track metrics and make necessary adjustments to improve your sales funnel and conversion rate.

Should you start a dropshipping business?

Starting a dropshipping business requires hard work and dedication. Business basics still apply, and success comes from meeting an unmet need, solving a problem, or having a unique value proposition. Don’t expect instant success by selling anything online.

Ask yourself if your business can:

• Solve a problem better than anyone else
• Meet an unmet need or demand
• Offer a unique value proposition

If the answer is yes, follow this guide and start your dropshipping business. Good luck!

Andrew Brooks

Hello!

I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.

My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.

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