Many people believe that running a dropshipping business is a great idea to get into the eCommerce industry. But do you know most dropshippers fail during their first month, after realizing that their business is not making enough money?
Most of the time, the answer to those failures is simply, because people don’t know enough about the dropshipping business!
So, to avoid this mistake and know how to start a sustainable dropshipping business from scratch, give our article a read!
But first, what is dropshipping?
Dropshipping is an order fulfillment method in which sellers don’t need to handle the products themselves. Instead, when an order comes in, you – as a retailer, transfer the customer’s order and shipping information to a third party, such as a manufacturer, wholesaler, or another retailer that then ships the product to the customer.
Below is a graphic illustration of how dropshipping works:
So, this means you can curate and market products but never actually keep any items that are sold. However, you still reap the lion’s share of the profit by marking up the items you sell. It makes dropshipping very appealing for new and small entrepreneurs.
Why is launching a dropshipping business a good idea?
Dropshipping is a great business model, especially for first-time and inexperienced online business owners, because it requires a quite low entry barrier.
There are some major reasons to explain why starting a dropshipping business is a good idea:
- Smaller initial investment: Probably the most appealing point of dropshipping is that you don’t need a lot of initial investment to get started. You pay for the product only when it’s been purchased and the buyer has already paid you. This means lower initial costs and lower risk levels compared to traditional business models.
- Low overhead costs: Purchasing inventory or managing a warehouse is not your concern, so your overhead expenses will be pretty low. In fact, many dropshipping stores operate as home-based businesses, which requires little more than a laptop connected with the Internet.
- Wide range of products to sell: You can sell as many different items as you want because you don’t have to keep any product inventory.
5 steps to starting your dropshipping business from scratch
Define a dropshipping niche
It seems that most guides about launching anything begin with “Find your niche,” and yeah, dropshipping is no different.
Identifying your niche is so important because it helps you narrow down your target customers, and the types of products you’ll be focusing on.
There are many ways to approach niches; you can either jump into hot trends or choose more steady and long-term options. Hot-trend items are fine for short-term strategy, but they’re super competitive and don’t last very long. You’d better off choosing a niche that consistently delivers, and brings you repeated customers.
Once you’ve found your niche, you can start sourcing products. You can find the perfect products for your dropshipping business by:
- Identifying any current trends: Are there any hot products in your niche recently?
- Conducting product research: Research is very important in business. Online resources like Google Trends or Google Keyword Planner are helpful for exploring what people are interested in.
- Adding value: By adding value to your products, you can beat other competitors. This could be a unique guide to using or installing the product, for instance.
- Thinking about your audience: Which groups of people feel attracted to your products? Will they want to come back to your store again and again if you sell that product?
Analyze your competitors
In order to launch yourself in the market, you have to understand who your competitors are, what they are selling, and how they are selling their products.
An easy way to find and analyze your competitors is entering the name of products you want to sell into Google, and conduct a quick search about the website on top. The top ten results from Google or any other search engines will show you a good indication of your competitors in a certain location.
Besides, you can hunt around on social media channels to answer different questions about your competitors. How many people follow their page? How do they market their brand? How can you learn from them? And how can you do differently to stand out?
Find a dropshipping supplier
Suppliers are the backbone of your dropshipping business. Without a reliable supplier, there won’t be any product for you to dropship.
A good dropshipping supplier should be:
- Have experience in the dropshipping business
- Have quality products
- Not charge huge order fees
- Provide fast shipping
- Have helpful and enthusiastic staffs
However, it is not such an easy task to find a good supplier. According to research, 84% of online sellers believe that building a relationship with a dropshipping supplier or wholesaler is the number one roadblock to setting up their online business.
In fact, there are many credible sources for you to find a good dropshipping supplier:
- Google: Using Google to find suppliers may seem obvious. However, not all high-quality suppliers are good at marketing and promotion, and they’re definitely not going to top the search results. So, dig deep and try different modifiers such as “distributor,” “reseller,” “warehouse,” “wholesaler,” “bulk”, instead of stopping at just “[product name] supplier.”
- Online directories: There are many database sites that provide valuable information about suppliers and their business types. However, most are run by for-profit companies that charge a fee for access to their directory.
- Trade shows: Major manufacturers and wholesalers gather in trade shows to showcase what they do best. It is a great way to make contacts and research your products and suppliers all in one spot. However, it isn’t feasible for everyone. But if you have time and money, it’s a good idea to do some networking!
Choose a selling platform
Once you’ve decided on your product and supplier, now it’s high time to find a place to start selling and making money. But which selling platform is best for you?
The common platforms for dropshipping are:
- Selling through an online marketplace (like Amazon or eBay)
- Creating your own online store using an e-commerce builder (like Shopify or BigCommerce)
To make it objective, we will go through both the advantages and disadvantages of two platforms. Base on that, you can make your own decision and choose a suitable selling platform.
|Online marketplace||Online store|
|Advantages||– Easy to create an account and start selling
– Available huge amounts of traffic (potential customers)
– Consumers trust these platforms
|– Fees charged for every sale you make
– Limited control (branding, customer service, product photography,…)
– Tough competition with sellers on the same platform
|Disadvantages||– Complete control over your store (branding, design,…)
– No fees and higher profit margins
– No direct competition on the same platform.
|– Investment to set up and design your own store
– No guaranteed traffic (customers) from established platforms
– Time, money and efforts to invest in SEO and marketing
Marketing your products
It’s finally time to get into the best part: making sales. However, once your store and products are live, you can’t just sit back and hope that people will come to buy from you. You need to give your store and products the attention they deserve. Marketing is key to growing traffic and driving sales.
Some possible means of online marketing include:
- Search Engine Optimization (SEO): As millions of people choose Google search results as a source to buy products, you need to optimize good keywords for each product that will easily rank on search engines. You can make sales from that organic traffic if your product appears on Google’s top page.
- Social media marketing: It’s advisable to run ads on social media channels, especially Facebook or Instagram.
- Email marketing: You can get a list of email addresses of those interested in your niche and send them promotional offers.
Dropshipping is a very lucrative business, and once your business off the ground and gains publicity, it can quickly transform into a money-making venture that only requires minimum input.
Of course, to build up a dropshipping business might be challenging and tedious, especially when you are just starting as an e-commerce entrepreneur. But don’t worry, as you get more experienced, you’ll quickly gain newfound confidence even though it’s not easy. The Internet has created many more opportunities for everyone, so go ahead to take yours!
Haley is a content creator at Avada Commerce. When not working and learning about eCommerce, she gets hung up on travel adventures, food tasting, and books. As growing up, she wants to read, learn and experience more and more up-to-date things to adapt herself to this ever-changing world.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.