Dropshipping is a popular online business model that’s often glamorized and promoted by online gurus. It’s one where you can potentially earn huge profits, but also one where many people fail.
In this post and video I’ll be sharing how you can start your own dropshipping business in 6 steps.
You can also watch this video about how to start a dropshipping business in 6 steps on YouTube.
What is dropshipping?
Dropshipping is a method of fulfilling retail orders where the seller does not keep the product in stock at their physical location. Instead when the store makes a sale of a product using the dropshipping model, the seller then purchases the item from a third party who directly ships it to the customer. With this method the seller never handles the product directly.
Dropshipping is popular because not handling inventory and fulfillment cuts down on many of the negative aspects of selling physical products. This allows you many benefits like lower capital to start your business, lower overhead to run the business, and location flexibility. It also makes it easier to test things and scale your business when things work.
For these reasons and many others, dropshipping is a popular online business method.
Dropshipping is not a get rich quick plan despite what some gurus or YouTube videos might tell you. Like any other business idea it will take a lot of work and a long term perspective to see success. If you are hoping for six figures in six weeks then you’ll need to readjust expectations to avoid being very disappointed.
However, once you create realistic expectations about the work and results you can achieve, this can be a great business with huge potential profits. This is a great business idea for someone working a 9-5 job to build on the side and many dropshipping stores can generate over $1,000 per month within 12 months from part time efforts.
Now let’s look at the steps you’ll go through in order to start a dropshipping business.
Step 1: Choose Your Dropshipping Business Idea
When setting up your business you’ll need to invest into choosing the right business idea and setting it up for success.
For people setting up a dropshipping business for the first time it’s always a good idea to invest time so you understand how it works and build up a knowledge base for making improvements. Investing your time into building a dropshipping business will teach you how the business works, how your customers and markets operate, and new skills to make you a better entrepreneur.
Choosing your dropshipping business idea will determine what products you actually sell so it’s necessary to do market research.
You’ll want to look at trends, competition, and profitability in various potential niches in order to pick your idea. That idea will determine which products you actually sell in the store.
Picking products to sell can be difficult but you can draw inspiration from trending product lists, browsing product ideas on Google Trends, and doing keyword research on sites like Keywords Everywhere.
With dropshipping the most successful stores tend to focus on specific niche areas like small dog lovers or overnight campers where you are selling products to a very specific customer.
Step 2: Source Your Products
Once you have done the research and selected a business idea with a specific niche and target market, you’ll have to decide what products to sell and where to source them from.
There are several options for this with the leader being Alibaba.com. If you haven’t heard of Alibaba.com before, it is the world’s leading global business to business trading e-commerce marketplace where you can find and source products from more than 100 thousand suppliers across the globe in 40 major categories.
Alibaba.com is a marketplace that makes it easy to find products to sell online from dropshipping suppliers. Whether it’s electronics, fashion, toys, or other trending items, you can find products with good profit potential from dropshipping suppliers around the world. You can evaluate the product quality, shipping times, supplier info and further vet each supplier by contacting them directly.
Choosing your dropshipping supplier will be critical to your business success. A supplier will be the backbone of your business. Your business will fail without a good supplier constantly shipping products to your customers on time as promised.
On Alibaba.com you can connect with and find the right supplier for your dropshipping business. For every product you might potentially sell you can reach out to suppliers across the globe to make sure they can provide the high quality service you will need to grow. Alibaba.com offers helpful tools for this like Verified Sellers and Trade Assurance.
On Alibaba.com you can also evaluate potential products you may want to add to your store based on their lists of top products and trending products.
Once you’ve decided on the products you plan to sell and the supplier who will ship them, it is then time to build your e-commerce store.
Step 3: Build Your E-Commerce store website
Building an e-commerce website is the next step.
I highly recommend you use an e-commerce platform like Shopify for this step as you’ll save yourself a lot of headaches instead of trying to use other services that you’ll have to mold to make fit this business type.
The video above shares a few reasons why Shopify is great for beginners and a good option for anyone starting an e-commerce store.
The video below shows you how to start a Shopify store start to finish.
This e-commerce store you will build will be where you send all your traffic, take orders, and process payments. Shopify makes all of this a breeze and it’s super easy to build and launch a new e-commerce website. Since Shopify is a complete commerce platform it makes it easy to then manage products, payments, and make sure orders are fulfilled.
Shopify offers a free 14 day trial so you can build an online store and familiarize yourself with the platform to see if it will be a good fit for you.
Step 4: Get Your Finances In Order
Before you start marketing your store and receiving sales you’ll want to make sure you have your finances in order.
This step includes deciding on your business structure. You can definitely start a dropshipping store as a hobby but if you are serious you will want to set up a legitimate business entity. I’m not a lawyer and this is not legal advice so you’ll have to look into which is best for your situation from a sole proprietorship to a limited liability company (LLC) to a C corporation. Most small businesses are either a sole proprietorship or LLC but you’ll need to do your own research and consult with a professional to make a decision for your business.
Along with the business type you will also apply for an employer identification number (EIN) that is like a social security number for your business. That number is what you’ll use to file your taxes, open a business bank account and more.
Opening a business bank account is actually once of the first things you’ll want to do since blending your personal and business finances is a common new business owner mistake. Keeping these separate makes life much easier and opening a new bank account in your business name is one of the easiest ways to keep things separated. It will also make your business accounting much easier.
Another recommended step is to apply for a business credit card that you use for business expenses only. Because you’ll use a card to place orders with the supplier after you make sales you’ll want a credit card that offers both protections and serious rewards. You can find many business cards that offer great promotions and I’ll leave a link in the description for my favorite business card that I use for my business.
Other things you’ll want to consider as you are setting up and getting ready to make sales are learning about and collecting sales tax, getting local business licenses, and any other legal or financial requirements that may apply to your location.
Step 5: Market Your Store
You’ve done all the behind the scenes work and the final step is to market your dropshipping store. Standing out in any online space can be difficult so this step will be the hardest and also take the longest to find success. And as a dropshipper you’ll want to put in extra effort to the marketing and advertising efforts since they will be what sets you apart from others who may sell the same products.
There are many different ways to market an online store. Some of the most successful for dropshipping include:
- These ads on Facebook & Google are scalable and products perform well on both platforms since they tap into the desire to impulse buy.
- Facebook and Google both have perfected advertising on their platforms and this work can help you market your store.
- This is a very successful method for most businesses but it does take time to test and refine your ads and campaigns.
- This method is a more affordable method to reach a larger and often more targeted audience.
- Partnering with an influencer can help you reach a niche market and many people trust influencers more than traditional advertising.
- You can negotiate either a flat fee upfront or an affiliate model where they get paid per sale they bring you.
- Long term strategies will include content marketing and it’s one of my personal favorites.
- You won’t see success immediately but it will build a trust factor around your store and is a great addition.
- Some examples include creating a YouTube channel, making a blog around the niche you chose, starting a podcast, growing a Pinterest account, or creating shareable infographics.
There are many other ways to market your dropshipping store but these are some of the most effective based on successful dropshipping case studies.
As with any business plan you’ll want to keep an eye on what is working and what is not working and then work to adjust your marketing strategy as needed to lower costs and increase your revenue.
Step 6: Keep Testing and Refining
The previous five steps are all you need to get started but the final step is what you will be doing ongoing:
Testing. Analyzing. Refining your business.
After marketing for a while and making sales you’ll be able to look at results via your analytics and see what is working and what needs more work. Constantly asking questions and trying to evaluate better ways to do things will help you reach higher levels of success over time.
Make sure you look at and track the same statistics over time to measure your store’s success. Dropshipping is very much a numbers game and making sure you are measuring things will be key to your store growing over time. It will help you make smart decisions and get to the next level.
This method of online business is a great option if you are wanting a low-risk, low-cost way to start. Thanks to sites like Shopify and Alibaba.com it’s easier than ever to get this type of business up and running.
I hope this guide to getting started with dropshipping has been helpful and inspires you to create your own store and path to succeGss. Dropshipping can definitely lead you to financial freedom and the life you’ve always dreamed of as it has many other ecommerce income creators.
Remember that you don’t have to be perfect, you just have to get started.
Mary is the founder of Pennies Not Perfection where she shares her journey to build wealth through online income. She quit her day job in 2021 after she paid off her debt and doubled her 9-5 salary.
Mary's favorite free financial tool is Personal Capital. She uses their free tools to track net worth and work toward to financial freedom.