Starting a dropshipping business is one of the easiest ways to make money online in 2021.

The growth of Amazon, eBay, Etsy, Shopify, and other online marketplaces and platforms means that anyone can start an online store for as little as $20.

But with the barrier to entry being so low, dropshipping has exploded in popularity over the past decade, meaning that many markets are highly competitive.

If you’re thinking of starting a dropshipping business – either as a side hustle or a means to leave your full-time job – you can save yourself time and set yourself up for success by following the simple steps outlined below.

But first, what is a dropshipping business?

A dropshipping business is where you are able to sell merchandise to your customer without holding any inventory. A customer purchases an item from your store at retail price. You then forward the order to your supplier, which you pay the wholesale price. Once your supplier receives the order, they ship the item directly to the customer under your business name while you earn the profit margin. All you have to do is set up the retail website, find customers, and handle customer support.

There are thousands of people around the world who make five-, six-, and seven-figure incomes from drop shipping and there’s no reason why you can’t do the same.

How Does the Dropshipping Business Model Work?

There are three key players in the dropshipping business model: the manufacturer, the retailer (you) and the customer.

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The manufacturer’s role in a dropshipping business model includes creating products, carrying inventory, shipping products to customers on behalf of the retailer, replacing defective products, and restocking them. They sell products to the retailer at wholesale prices assuming the risk of unsold inventory.

In the dropshipping business model, the retailer (you), sell the manufacturer’s products on your website under your own brand. You’ll be responsible for choosing and marketing those products. Plus, you’ll also be responsible for their shipping costs and setting prices that make you a profit.

Lastly, in the dropshipping business model, the customer buys the products directly from you, the retailer. If questions or issues arise, they contact the retailer they bought the product from.

How Profitable is Dropshipping?

That’s a dropshipping FAQ we hear quite often. Dropshipping can be the most profitable business model of all, as you are not responsible for the costs of shipping and manufacturing. Because of this profits can quickly be reaped once you have found the right suppliers. You can calculate your profit to ensure you are on the right track to success with our dedicated Profit Margin Tool.

Is Dropshipping Worth It?

Yes and no. Dropshipping is worth the time and money you invest in it. If you don’t invest time into your online business you will never reap the rewards. One of the reasons why people quit dropshipping is the lack of consistency and perseverance. Dropshipping takes time as you need to set up a store, import products, decide your pricing strategy, and starting selling. Nothing can happen if you don’t put in the effort.

How to Start a Dropshipping Business: The 6 Step Dropshipping Business Plan.

1.Commit to starting a dropshipping business

As with any other business, dropshipping takes significant commitment and a long-term perspective. If you’re hoping for a six-figure income from six weeks of part-time work, you’re going to be sadly disappointed. By approaching your business with realistic expectations about the investment required and your potential for profit, you’ll be much less likely to get discouraged and quit.

When starting a dropshipping business, you’ll need to invest heavily using one of the following two currencies: time or money.

Investing time in your dropshipping business

Bootstrapping and investing sweat equity to build your business is our recommended approach, especially for first-time dropshipping entrepreneurs. We favor this approach over investing a large sum of money for numerous reasons:

You’ll learn how the business operates inside and out, which will be crucial for managing others as your business grows and scales.
You’ll intimately know your customers and market, allowing you to make better decisions.
You’ll be less likely to spend large sums on vanity projects that aren’t critical to success.
You’ll develop several new skills that will make you a better entrepreneur.

Realistically, most people aren’t able to quit their job to spend six months ramping up their new online store. It may be a bit more challenging, but it’s definitely possible to get started with dropshipping even if you’re still working a 9-to-5 position, assuming you set appropriate expectations regarding customer service and fulfillment times for your customers. When you start to grow, you can transition into working full time on your business as much as cash flow and profitability allow.

All businesses and entrepreneurs are unique, but it’s possible to generate a $1,000–$2,000 monthly income stream within 12 months working approximately 10 to 15 hours per week building your business.

If you have the option to work on your business full time, that’s the best choice to improve your profit potential and chance of dropshipping success. Focusing all your efforts on marketing is especially helpful in the early days when building momentum is crucial. Based on our experience, it will usually take at least 12 months of full-time work with a strong emphasis on marketing for a dropshipping business to replace an average full-time income of $50,000.

That may seem like a lot of effort for a relatively small payoff, but keep these two things in mind:

Once your dropshipping business is up and running, maintaining it will likely take significantly less time than a 40-hour-per-week job. Much of your investment pays off in terms of the efficiency and scalability offered by the dropshipping model.
When you build a business, you’re creating more than just an income stream—you’re also building an asset you can sell in the future. Make sure you consider the equity value you’re accruing as well as the cash flow generated when looking at your true return.

Investing money in your dropshipping business

It’s possible to create and grow a dropshipping business by investing a bunch of money, but we advise against it. We’ve tried both approaches to growing a business (bootstrapping it ourselves versus outsourcing the process) and have had the most success when we’ve been in the trenches doing most of the work.

In the early stages, it’s crucial to have someone who is deeply invested in the success of the business building it from the ground up. Without understanding how your business works at every level, you’ll be at the mercy of expensive programmers, developers, and marketers who will quickly eat up any profits you’re generating. You don’t need to do absolutely everything yourself, but we strongly recommend being the primary driving force at the outset of your venture.

You will, however, need a small cash cushion in the $1,000 range to get your business launched and operational. You’ll need this for minor operating expenses (such as web hosting and dropshipping suppliers).

2.Choosing a Dropshipping Business Idea

Truth is, what you sell matters. You should take some time to find the best dropshipping business ideas. Most people tell you to pick a niche you’re passionate about. But that’s only a half truth. It’s about a combination of profit and passion, skewed towards profit. The reality is the best dropshipping business ideas are usually the profitable ones. It’s a lot easier to be passionate when you’re actually making money.

The good news is, your niche can be almost anything. You can pick any sport or recreational activity and sell to enthusiasts. Or sell products related to fitness, food, fashion, home improvement, electronics, entertainment — the list can go on forever.

Each niche also has sub-niches. Hats can be narrowed down to outdoor adventure hats, women’s hats, sports hats, hats with funny messages on them, and more. The rising popularity of dropshipping means it’s becoming harder to find niches that aren’t already saturated. But new products and niches are emerging every week, so the opportunities are almost endless. A common misconception about dropshipping is that you can be successful and profitable in any niche, but that’s simply not true. If you choose a niche that’s already saturated with sellers or dominated by major brands, you’re going to face an uphill battle with your new business.

Fitness, fashion, jewelry, beauty, tech, purses, and backpacks are some of the evergreen niches that we keep seeing top online stores enter and succeed in.So, spend some time looking into different dropshipping business ideas.

Here are a few guidelines to help you choose a dropshipping niche that will make you money online in 2021:

Seek attractive profits. When you are running a drop shipping business model, your focus is on marketing and customer acquisition, so the amount of work required to sell a $20 item is essentially the same as it would be to sell a $1,500 item. Select a niche with higher-priced products.
Low shipping costs are very important. Even though your supplier or manufacturer will handle the shipping, if the cost is too high, it will act as a customer repellant. Find something that is inexpensive to ship, as this also gives you the option of offering free shipping to your customers and absorbing that cost as a business expense in order to attract more sales.
Make sure your product appeals to impulse buyers with disposable income. When you are focused on driving traffic to your website, you want to experience the highest conversion rate possible because most visitors will never return. The products you are selling should trigger impulse buys and appeal to those with the financial ability to make a purchase on the spot.
Make sure people are actively searching for your product. Use Google’s Keyword Planner and Trends to check some common search terms related to your potential niche. If nobody is searching for what you are planning on selling, you are dead in the water before you even begin.
Create your own brand. Your drop shipping business will have more value if you can rebrand whatever it is you are selling and pass it off as your own. Look for a product or line you can white label and sell as your own brand with custom packaging and branding.
Sell something that isn’t readily available locally. Pick something your customer can’t find down the street. That way, you become more attractive to a potential customer.

The most profitable dropshipping business ideas aren’t trends. Instead, they have trends within them. For example, denim apparel is a trend within the fashion niche. Artificial eyelashes is a trend within the beauty niche. Marble phone cases is a trend within the phone case niche. You’ll want to have the trends as products but not as the entire store, especially if you’re building a long-term business. So keep that in mind when you’re working on your dropshipping business plan.

3.Do competitor research

Now that you know what you’re going to sell in your store, you want to look at who your competitors are and understand the way they work. Your competitors may hold great clues to success and can help you build a stronger marketing plan for your dropshipping business.

If your market has a lot of competitors (which is a good thing in dropshipping), limit your research to about five other dropshipping companies, including one or two big players like Walmart or Amazon. It’ll help you keep focused and plan your next steps.

Some ways to go about your competitor research are:

Run a Google search. Search engines are an obvious starting point. Use Google to build a list of your top five competitors. Start with key search terms in a simple search, like “ear plugs.” The top 10 results will show you who your top competitors are and how they are promoting their products. If you want to focus on a specific country, you can use a third-party tool like Ahrefs or SEMRush to find keyword data in those areas.
Use competitor spy tools like SimilarWeb and Alexa. Online tools like these are great for finding (and keeping track of) your competitors’ online activity. They give you a list of competitor website information, such as their social media profiles, top traffic sources, number of visitors, and who their competitors are.
Browse social media. Search for Facebook ads in your niche and check out the top brands in the market. Look at how the business communicates with its customers, how its feed is designed, how much engagement it gets—you can even follow its feed to never miss a beat. Use this information to find ways for your business to stand out and improve your social media marketing strategy.
Subscribe to competitors’ email lists. Want competitors’ updates straight to your inbox? Sign up for their email list and get a look inside their marketing strategy. You can also learn more about the promotions and deals they use to entice customers to buy.

Learn everything you can about your top competitors: their website, prices, marketing methods, product descriptions, reputation, etc. Keep your research organized in a spreadsheet so you can easily refer to it when making decisions for your store. For example, if you want to use email marketing to promote your business, you can look to your spreadsheet to see if competitors are already doing it and the tactics they are using, all in one place.

4.Find a Supplier

For many aspiring eCommerce entrepreneurs, finding a reliable supplier is the hardest part of starting a dropshipping business.

You rely on suppliers to keep your product in stock, to uphold product quality, and to ensure orders are shipped to your customers in a timely manner. As a dropshipper, your supplier is your most important business partner.

Partnering with the wrong supplier can ruin your business, so it’s important that you don’t rush this step. Conduct proper due diligence. Most drop shipping suppliers are located overseas, making communication extremely important, both in terms of response speed and the ability to understand each other. If you are not 100 percent confident in the communication abilities of a potential supplier, move on and continue your search.

Alibaba has become one of the largest online resources to identify and communicate with potential manufacturers and suppliers. Make sure to ask a lot of questions and learn what their production capabilities are in the event that your business grows exponentially. You want to be certain they have the ability to scale with you.

Try to learn from other entrepreneurs who have walked this path in the past. There are plenty of information sources available, from business and tech blogs to this subreddit about dropshipping. It’s a popular topic that can help you avoid costly supplier mistakes.

When you have a list of five or six potential suppliers to choose from you can move onto the next step which is contacting these suppliers to ask important questions like minimum order quantities and shipping times.
By now you probably have reduced possible suppliers from a list of 5 suppliers to 2-3. The best way to make the decision now is to place a sample order with them for a product and compare the results. Compare eCommerce shipping times, product quality, and packaging while making a decision, keeping your customer in mind and what they will expect from you when placing an order.

What to Look for in a Dropship Supplier

A good dropship supplier should:

Actually be a dropshipper: Not all product suppliers offer dropshipping as a service. Some are simply wholesalers or manufacturers. Before you make contact, make sure the supplier is a dropshipper.
Have experience (+ helpful staff): You want a supplier that has years of experience with dropshipping. Suppliers take on a lot of responsibility with dropshipping so you want to be sure that you can count on them at all times. A good sign is if the sales rep you’re in contact with seems helpful and well-informed. If you suspect they’re not experienced, go elsewhere.
Not charge huge order fees: It’s quite normal for dropship suppliers to charge a small fee for their services. After all, they’re holding onto stock and organizing packaging and shipping for you. These fees should only a few dollars ($2 to $5 usually). If a supplier charges you more than that, you should let them go.
Provide fast shipping: Most dropship suppliers are located in China so you can’t expect overnight shipping. However, you do want to make sure your customers will get their items as fast as possible. Check their shipping times to the countries you service. One-two weeks is acceptable for dropshipping. Any longer than that could result in negative customer feedback.
Have quality products (+ product photos): You should always request product samples to test quality prior to committing to a supplier. The supplier should ideally have high quality images that you can use in your product listings.
Provide referrals on request: A good supplier should willingly connect you with businesses that can verify their service. Ideally, you want word-of-mouth referrals, but failing that you might be able to make your mind up based on customer reviews online (although be aware that online reviews can be manipulated).

5.Build your ecommerce store

The next thing you need to start a dropshipping business is an ecommerce platform. This will be the home where you send traffic, sell products, and process payments.

With vendors, products, and a marketing and business plan in place, all that remains to launch your dropshipping business is your website and technology.

Building your dropshipping website on WordPress with WooCommerce offers two distinct advantages.

You own all the web content and assets you create. Some other platforms charge you money to start an online store, so it’s more like renting.
WooCommerce offers hundreds of extensions that allow you to customize your store, speed up your administrative and business processes, and improve your marketing.

A lot of dropshippers take the route of starting their own online store. While it requires more investment up front, this is really the ultimate long-term option for making money and building a business online. There are plenty of online tools, like Shopify and wordpress, that make it really easy to get started.

PROS

You have complete control over branding, design, layout etc.
You’re building a business independent of a third-party platform
No fees and higher profit margins
No direct competition from other sellers on the same platform

CONS

It costs money to set up and design your own store (web hosting etc)
You miss out on the guaranteed traffic (customers) from established platforms
It takes time to rank on Google and you’ll have to invest in SEO and digital marketing

If you have the time and money to invest in your dropshipping business and you’re planning to be in it for the long haul, then starting your own store is a good option, especially with established platforms becoming more and more saturated every year.

6.Optimize

Once you have spent time building your website, brand, and marketing you can start to analyze the results of your hard work. You may find that certain marketing activities are hugely successful while others are not so much. Or you can look at your pricing against competitors and see if you could change things up a bit to make things more competitive.

You can use tools like Google Search Console or Analytics to evaluate your online traffic to make sure that traffic is increasing, not decreasing. If you are using third-party tools for email marketing or social media reporting, set up weekly or monthly automatic reports so that you will be reminded to analyze this information regularly. Even a quick snapshot of data from a tool can be enough to decide if a campaign is working or not.

Overall the most important part of a successful online e-commerce store is to test and optimize in order to increase the revenue that you generate online. This makes sure that your website will not fall behind best practices and keeps you ahead of your competitors too.

You need to track all of the data and metrics available to grow your business. This includes Google Analytics traffic and Facebook conversion pixel data if that is your main customer acquisition channel. When you are able to track every single conversion — to know where the customer originated from and what path they took on your website that eventually led to a sale — it enables you to scale what works and eliminate what doesn’t.

You will never have a set-and-forget advertising or marketing solution. You need to constantly test new opportunities and fine-tune current campaigns, which allows you to know when to optimize or shift campaign spend.

7.Choosing a selling platform

So you’ve decided on a product and you’ve lined up a supplier – now you need a place to start selling and making money.

Choosing the right selling platform or online marketplace is crucial to the success of your business – but which platform is best for you?

You need to decide between selling on an established platform, or starting your own independent online store.

Let’s take a look at the pros and cons of the different selling platforms and online marketplaces.

Most dropshippers use a well-established online marketplace like Amazon or eBay, especially when starting out. Why?

It’s easy to set up an account and start selling
They already attract huge amounts of traffic (potential customers)
Consumers trust these platforms
You can make significant money through them

However, there are some cons to be are of:

You will be charged fees for every sale you make
You have limited control (branding, customer service, product photography etc)
You’re in direct competition with sellers on the same platform
Consumers have a huge amount of choice in one place

That said, here are a few of the most popular online marketplaces for dropshipping businesses.

Amazon: The most well-known of the online marketplaces, Amazon is said to have 300 million active users. In 2016, more than 100,000 sellers made more than $100,000 on Amazon. Amazon offers additional services such as Fulfillment by Amazon and Amazon Prime. Fees vary a lot, but it’s estimated that most sellers will pay about 15% of their sale price to Amazon. It’s a popular option for dropshippers.
eBay: eBay is said to have 171 million active users with about 1 billion products listed across 190 different markets. eBay charges listing fees (but offers a limited number of free listings) and sale fees, which are generally less than 10%. eBay has an auction option and also operates as a standard online retail platform.
Etsy: Etsy is said to have 54 million members, about 2 million active sellers, and about 32 million active buyers. It’s extremely popular with women (84% of sellers are female). Etsy has established itself as a more trendy online marketplace with a focus on arts, crafts, homeware, and handmade goods.

Marketing begins with knowing your audience and your niche. Who are you marketing to, and why? Good marketing divides people; it grabs the right people while repelling or disinteresting others.

To reach your audience, you have to figure out where they are. Are they best reached with online marketing, through the mail, in person, or somewhere else?

Marketing mainly consists of four parts:

The ad, which could be a free social media post, a boosted post, a paid ad, an email, a webinar, a direct mail letter, etc. The ad exists for shoppers to click on or respond to.
The response, which exists to make a sale on the spot or earn permission to continue the conversation. It depends on the product you’re selling, your industry, and the needs and expectations of your customer. A response could be an ad click or website visit.
The sale. It makes you profit and ideally leads to another sale, good reviews, testimonials, and positive word of mouth. You want your customers to be your marketers.
The conversation, which results when a response doesn’t lead to an immediate sale, but instead gives permission to nurture a relationship (eventually leading to a sale).

For a dropshipping business, this process might occur as follows:

You create a Facebook ad that promotes one or more of your products.
Someone clicks the ad and lands on your product page.
That person purchases the advertised product.
They follow you on Facebook or ask a question about your products.

That’s marketing. You’re either making a sale from someone clicking, calling, or mailing, or you’re getting permission to continue a conversation with them.

Apply that basic framework to your dropshipping business, and you’ll have the blueprint for a marketing plan.

8.Watch your expenses

Though you don’t have to create packaging, acquire materials, manufacture anything, or ship products, your dropshipping business will still have expenses.

Your primary expenses will be for marketing and customer service. Customer service is essential to standing out from the competition. And since you won’t control shipping, you must have a plan and a team in place to keep customers informed and happy if anything goes wrong — even though the mistake is your vendor’s, customers will look to you to make it right.

That costs money. So as you set prices, consider the margins you’ll need to earn to pay for the marketing and customer service required to run your business.

9.Customer Acquisition Strategy

Having a great product and a website is great, but without customers looking to buy, you don’t have a business. There are several ways to attract potential customers, but the most effective option is to start a Facebook ad campaign.

This allows you to generate sales and revenue right from the start, which can contribute to quick scaling. Facebook allows you to place your offer directly in front of a highly targeted audience. This gives you the ability to compete with the largest brands and retailers immediately.

You also have to think long term, so search engine optimization and email marketing should also be a focus. Collect emails from the start and set up automated email sequences that offer discounts and special offers. It’s an easy way to leverage your existing customer base and generate revenue without additional advertising and marketing spend.

Now that you have a selling platform for your dropshipping business, you need to attract customers to your store. This is where a customer acquisition strategy comes in.

Customer acquisition is the art of persuasion. You can think of it as advertising and marketing. Sounds expensive, right? But it doesn’t have to be. You can take the fast (paid) path or the slow (free) path to gaining new customers. Let’s take a look at both strategies in more depth.

Fast Results (paid)

Facebook Ads for Dropshipping

Facebook is the world’s largest social media platform. It’s a great place to advertise your products as you can tap into a huge audience. This is how Facebook makes its money, so every customer you acquire through this method comes at a cost. Facebook ads are a good option for the following reasons:

It’s easy to get started
You control how much you spend each day
You can target highly-specific demographics (location, interests, relationship status etc)
It can yield fast results
It helps to increase brand awareness
A good ad or boosted post can go viral

Google Ads for eCommerce

Google is the world’s most popular search engine by far. If you have an online store, you want it to rank on the first page of Google. You can achieve this organically, or you can buy ads for your store to appear at the top of the page for the keywords you want to rank for. Google ads are a good option for the following reasons:

You can achieve great exposure in search results
It’s the largest advertising platform in the world (Google search, Youtube, Gmail)
You can target highly-specific demographics (location, language, device etc)
Maximise exposure to your ads with high volume keywords related to your niche

Social Media Influencer Marketing

Influencer marketing has become a huge part of customer acquisition for retail brands in recent years. It could play an important part of any customer acquisition strategy in 2021. It can be particularly effective if you are in a trendy niche. For instance, if you’re selling a new style of handbag, you could reach out to an Instagram model and ask if she will share a post of her with the bag, tagging your business. One post can result in a bunch of new fans and customers. The cost of influencer marketing depends on how famous the influencer is. A post from Kim Kardashian might cost $250,000, while a post from a model with 10,000 followers might only cost a few hundred dollars.

Slow Results (free)

Blog or Forum Marketing

This involves finding blogs or forums that are related to your product/niche and actively participating in discussions. By positioning yourself as an authority in your niche and including a link to your website, you can increase traffic and acquire new customers.

Content Marketing

This most commonly takes the form of a blog on your store website, a Youtube channel, trendy Instagram posts, or witty posts on Twitter. Content marketing is meant to involve the creation of valuable content that helps to build an audience that you can then convert into customers. It’s not as explicit as advertising and should always be more about serving your audience than your brand.

Social Media Marketing

It’s getting harder and harder to achieve organic reach on social media, but it is still possible. If you can consistently create and share great content on your social media channels you’ll eventually build a following, which you can then convert into customers.

Email Marketing

Building an email list is still one of the most effective ways of acquiring customers. You need a way of capturing email addresses, such as a request to sign-up at checkout, or an offer or competition that requires an email address. Once you have a decent list of email addresses you have a way of reaching a large group of people regularly, for free.

Poll

As you can see there are several strategies to attract customers to your store. What is your preferred method of growing a new dropship business?

Conclusion

There you go! We’ve got you covered on how to start a dropshipping business. By applying some of the advice from this article into your own online store, you work towards building an online empire of your own. If you have questions along the way, feel free to leave a comment or reach out to the Oberlo team on social. And remember, the best way to learn how to start a dropshipping business is by taking that first step to build it.

Huzzah! We’ve reached the end and, by now, you should be well on your way to starting an eCommerce dropshipping business from scratch.

The work is far from over, though. Now you have to successfully run your business.

But don’t worry! As long as you follow these next few tips, you’ll have a successful eCommerce drop shipping business for years to come.

Continue to update your website. Work on your SEO and create high-quality content to bring in traffic.
Maintain your relationship with your supplier. Keep tabs on the products you’re offering and, when you’re ready, look into adding more.
Keep up with your customer service. Answer emails and questions, and update your FAQ page (if you have one)
Stay on top of your social media. Refine your ads, run contests, and promote like crazy.

We hope you’ve enjoyed this article on how to start a dropshipping business. Did this inspire you to create one? Don’t forget to share this article with your entrepreneurial friends.

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