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Now that you want to learn the basics of Starting a Dropshipping business, this guide will show you the Dos and Don’ts of running a successful dropshipping company in 2021 as it is with every other business form.
If you look to launch a new Dropshipping business, consider the business and financial measures outlined in this comprehensive Dropshipping tutorial.
Others you’ll find necessary right from the start, whereas others are just a fine idea, but dealing with them now will save you time and spare you the headaches down the road.
The business model of Dropshipping and how it works
What is the business model of Dropshipping? Dropshipping provides a process of order fulfillment that allows store owners to sell directly to consumers without stocking any inventory.
Whenever a client orders something from a Dropshipping store, it is delivered directly to them by a third-party supplier. The consumer pays the retail price you set, you pay the wholesale price set by the suppliers, and the difference is profit. You’ll never have to deal with products or stock up on inventory.
Simply register an account with a supplier to sell the best Dropshipping products.
The following are two conventional platforms for finding a supplier for your Dropshipping store:
- By using a supplier database such as Dropship Direct, Alibaba, or AliExpress.
- Using a supplier directory built into the backend of your shop, such as Oberlo.
Oberlo provides the most user-friendly Dropshipping solution for Shopify stores. With a click of a button, you can access millions of products from the Oberlo marketplace via AliExpress and import them directly into your store.
Oberlo automatically fulfills orders whenever a customer purchases something in your store. And all that’s left on your part involves double-checking the order info and then hit the Order button. The product then ships from the AliExpress Dropshipping supplier to the consumer, regardless of where they are in the world.
In the Dropshipping business model, designing a website, building your own brand is all on you, and selecting and promoting the items you want to sell.
Your business also incurs the shipping costs, and you’re charged with setting rates that result in a healthy profit margin.
Steps to Launching a Successful Dropshipping Business
- Decide to start a Dropshipping business.
- Select a Dropshipping business concept.
- Conduct competitive analysis.
- Identify a Dropshipping supplier.
- Create your eCommerce store.
- Select business structure.
- Organize the finances.
- Promote your Dropshipping business.
- Analyze and refine your product or service.
Decide to start a Dropshipping business dropshipping, like any other business, necessitates considerable dedication and a long-term outlook. If you expect to earn a six-figure income from six weeks of part-time labor, you will be sorely disappointed. You would be much less likely to leave if you approach your business with reasonable expectations about the investment needed and the potential profit.
So if starting a Dropshipping venture, you will need to invest heavily in either time or money.
Putting time into your Dropshipping business
Our favored approach for first-time Dropshipping entrepreneurs is to bootstrap and invest sweat equity in developing your business. For several reasons, we prefer this approach to spend large amounts of money:
- You will have a thorough understanding of your clients and industry, helping you make more informed decisions.
- You’ll understand how the business works from the inside out, which will help handle others as the business expands and scales.
- You’ll be less likely to waste significant amounts on non-essential vanity ventures.
- You’ll learn a variety of new skills that will help you become a more successful entrepreneur.
Most people aren’t willing to leave their jobs and devote six months to building their online store. It might be more difficult, but you can get started with Dropshipping even if you’re already working a 9-to-5 job, as long as you set reasonable standards for your customers about customer service and delivery times.
As your business expands, you will be able to work full-time on it as your cash flow and profitability warrant.
Every business and every entrepreneur is different, but it is possible to even have a revenue stream of $2,000 monthly in 12 months by working 10 to 15 hours per week on your Dropshipping business.
If you are willing to work for your company full time, that’s the perfect way to increase your profitability and your chance of success. It is beneficial in the first days when building impetus is essential to focus all your marketing energies.
Drawing from our experience, at least 12 months of full-time work is typically required to replace an average full-time income of $50 000, focusing on marketing a Dropshipping business.
It may seem a lot to make a relatively small contribution, but don’t forget that:
- If your Dropshipping business gets fully operational, it will most likely require much less time to manage than a 40-hour-per-week work. The efficiency and scalability that comes with the Dropshipping model repay a large portion of your investment.
- When you start a business, you create more than just a source of income; you also create an asset that you will sell in the future. When calculating your true return, make sure to consider both the equity value you accrue and the cash flow generated.
Putting money into your Dropshipping business
It is possible to start and expand a Dropshipping business by spending big bucks, but we advise against it. We’ve tried both approaches to growing a business bootstrapper vs. outsourcing the process and have found the most success when we’ve done the bulk of the work ourselves.
In the early phases, everyone involved must prioritize the company’s growth from scratch. Unless you understand how your company functions at every stage, you will be at the mercy of expensive programmers, developers, and advertisers who will easily take advantage of any profits you make.
You do not have to do it yourself, but we strongly advise you to be the main driving seat at the start of your undertaking.
However, you will have to have small cash in the $1,000 range to start and operate your business. You will need a cash buffer for nominal operating costs such as web hosting and Dropshipping supplier and pay any incorporation fees that we address herein. Keep it here!
Select a Dropshipping business concept.
The next step in the learning curve on how to start a Dropshipping business involves conducting market research. You can explore a niche you’re interested in and decide how lucrative it can be, much as you would if you were opening a retail store and researching different locations, rivals, and trends. However, it is difficult to come up with product concepts that would sell.
While eCommerce’s growth is a boon for those looking to start a Dropshipping business, it also brings a lot of competition. That means you’ll need to conduct competitor research while creating your Dropshipping business plan if you want to sell your products successfully.
Shopify curates a list of trending products focused on the top-selling product categories on the platform, thus inspiring the next Dropshipping business idea.
Shopify powers you to attract buyers’ interest and build traction while avoiding competition from larger, more developed businesses by focusing on more niche and trending items.
Niche products frequently have a more enthusiastic consumer base, making marketing to particular demographics easier by raising product recognition.
Fitness, fashion, beauty products, phone accessories, electronics, and yoga-related stuff can be an excellent place to start Dropshipping without spending any money.
The following are some examples of niche Dropshipping stores:
- iPhone cases are available for iPhone users.
- For dog owners, there are dog bow ties.
- Fit people’s workout equipment
- Camping gear for campers.
You can also try out your Dropshipping business ideas using the following tools:
Google Trends: Google Trends will help you decide whether a product is up or down and the seasons in which it tends to trend. Please note that the search volume does not appear for Google Trends. If you use it, make sure you use a keyword tool such as Keywords Everywhere to cross-reference your data to decide your products in the search.
Keywords Everywhere: This keyword analysis tool displays the monthly search volume for your product as well as its competitiveness. This data can be used to evaluate your Dropshipping business concept’s success and encourage new product concepts in the future.
Oberlo order volume: To assess your business concept’s viability, you can use Oberlo to check for products based on order volume.
- Conduct competitive analysis.
Now that you’ve determined what you’re going to sell in your store, you can investigate your rivals and learn about how they function. Your competitors can have valuable success tips and help you develop a more effective marketing strategy for your Dropshipping business.
If your market is a competitive-a positive thing in Dropshipping, limit your research to only five other Dropshipping firms, including one or two major players like Amazon or Walmart. It will aid in your focusing and planning your next move.
Study everything you can about your principal competitors’ websites, costs, marketing strategies, product descriptions, credibility, and so on.
Keep your study in a spreadsheet so that you can conveniently refer to it when making store decisions. For example, if you want to use email marketing to promote your business, you can use your spreadsheet to see if your competitors are already doing it and the strategies they are using, all in one place.
You may conduct competitor research in a couple of respects, including:
Search on Google: A good place to start is with search engines. Create a list of the top five competitors by using Google. Start with a basic search using key search terms.
The top ten results will reveal to you who your main competitors are and how they promote their products. You can use a third-party tool like Ahrefs or SEMRush to narrow your search to a specific country, and the tool enables you to find keyword data in that country.
Investigating social media:
- Look for Ads in your niche and study the market’s top brands.
- Examine how the company interacts with its clients, the nature of its feed, the amount of engagement it receives—you can also follow its feed never to miss a beat.
- Use this insight to help the brand stands out and develop your social media marketing strategy.
Using competitor research tools such as SimilarWeb and Alexa: These online resources are excellent for locating (and monitoring) your competitors’ online operation. They provide you with valuable data about your competitors’ websites, including their social media accounts, top traffic sources, user counts, and who their competitors are.
Subscribe to your competitors’ email lists: if you want to receive alerts from your rivals directly in your inbox, sign up for their mailing list to get a sneak peek into their marketing campaign. You will also learn more about the discounts and offers they use to entice consumers to make purchases.
- Identify a Dropshipping supplier.
Selecting a Dropshipping supplier is an essential step in starting a Dropshipping business. A Dropshipping company would be unable to operate without suppliers because it would have no products to ship to customers.
You’ve evaluated the products you want to offer and determined that they’re profitable; now it’s time to find a Dropshipping supplier who can provide you with the high-quality service you need to expand.
By linking Oberlo to your online store, eCommerce platforms like Shopify offer a plug-and-play style alternative to finding potential suppliers.
Oberlo is a platform that makes it easier to access products to sell online. You can find products with high-profit margins from Dropshipping suppliers from across the world and add them to your store with a single click. Be it electronics, apparel, toys, or other popular pieces.
The app handles routing orders to your Dropshipping supplier, so you never have to think about packing, delivery, or inventory management. And it costs nothing to get started.
To help you find and add items to your shelf, the Oberlo app makes use of AliExpress. On the Oberlo product page, you can learn more about product quality, delivery times, and supplier background checks.
When you click a supplier’s link, you are taken to its AliExpress page, where you can find reviews, top-selling items, and other stuff.
NOTE: If your supplier is from China, try and sell items that offer ePacket delivery. ePacket is a low-cost shipping alternative for Dropshipping products from China to countries like the United States, the United Kingdom, and Canada. Instead of waiting months for a Chinese shipment to arrive, the customers would just have to wait two weeks or less at a small fee.
Create your eCommerce store.
To start Dropshipping business, you’ll need an eCommerce platform like Shopify. It’s on this platform that forms your primary location where you’ll send traffic, sell products, and process payments.
Shopify simplifies the process of creating and launching an eCommerce store. It is a full-featured service marketplace platform that enables you to sell in multiple locations, including online, in various currencies, and manage products and accept payments with ease.
To use Shopify, you do not need a designer or a developer. We have resources that support everything from domain name suggestions to logo design, and with the shop builder and store themes, you can easily change the look and feel of your store.
If you need a hand with creating your online store, first you’ll have to sign up and read How to Shopify 14-days free trial. Also, check with our resource on A-Z Guide to starting a Shopify Store (Here).
We build custom stores you can browse through our stores here
Select business structure.
You’ll want to set up a legit business entity if you’re committed to your venture. We are not legal professionals and unable to provide legal counsel, but we can offer you an overview of three typical business structures. Consider the following:
The sole proprietorship makes for the most basic business framework to set up, but it provides no personal liability insurance.
As a result, if the business gets sued, your personal assets could be at risk. The filing requirements are limited, and your corporate profits are simply reported on your personal taxes. What’s more? No need for additional state or federal business filings with this business structure.
Limited Liability Corporation (LLC)
By incorporating your company as a separate legal entity, you can better secure your personal assets with an LLC. Although the liability insurance isn’t complete, it’s better than a sole proprietorship. You’ll need to satisfy additional filing conditions and pay both the incorporation and recurring fees.
Many large corporations are structured as C corporations, which have the best liability insurance when executed right. Since revenue does not transfer directly to shareholders, C corporations] will potentially prove more costly to incorporate given it’s subject to double taxation.
And how do you decide on the business structure that works the best? Again, we are not legal professionals and will urge that you seek legal counsel before continuing with any incorporation plans.
The majority of small business owners choose between forming a sole proprietorship or forming an LLC. You can use LLC for all of the Dropshipping businesses because it provides the best balance of liability insurance, financial autonomy, and costs.
Note that the details about the business structure and EIN (employer identification number) mentioned herein only apply to entrepreneurs in the United States and may not apply to entrepreneurs in other countries. For in-depth details on forming a US-based business outside the US, check with our resource (Here).
An EIN for your business
The IRS mandates that all businesses obtain an EIN, which functions as a business’s Social Security number. This is the number you’ll require to file your taxes, apply for wholesale Dropshipping accounts, open a bank account, and virtually everything else relevant to your business.
Thankfully, obtaining an EIN is simple and free. You can get an EIN by filling out an online application.
- Organize the finances.
Failure to separate personal and business finances is typical blunder entrepreneurs make when they start a business. This mistake poses a challenge, makes accounting more complex, and can lead to personal liability for business obligations. It’s also a major red flag for the IRS if you ever get audited.
As much as possible, you’ll want to maintain your personal and company finances separate. Opening new accounts under the business’s name presents the perfect way to do so. You should open the following documents:
Business Checking Account
You can manage all of your company’s finances through a single principal checking account. All business revenue gets paid into it, and all business expenses are also withdrawn from it. Business checking account simplifies & tidy accounting.
Collect Sales Tax
Only if any of the following conditions are met should you have to pay sales tax:
- Sales tax is levied by the state in which you do business.
- Someone residing in your state places an order on your store.
You would not be required to pay sales tax on any orders made by residents of other states even though those states levy their own sales tax. There is a high likelihood that these laws will change in the coming years, but the tax laws for small online retailers are immensely beneficial for the time being.
If your state levies sales tax, you’re legally mandated to collect it on a limited number of orders from consumers in your home state. To register as a retailer and learn how frequently you must submit the tax you collect, contact your state’s Department of Commerce.
Entrepreneurs can have a business credit card used exclusively for business expenses and Dropshipping inventory transactions. Since you’ll be purchasing many supplies from vendors, the right rewards travel cards will help you earn some serious points. According to our results, Capital One has the best travel rewards system, and Fidelity Visa/American Express has the best cash-back program.
Local Business Licenses
Businesses in most cities and towns will need to get a business license, which business owners must renew regularly. Dropshipping businesses, many of which would likely operate from home offices, may have a different set of requirements. To see what, if anything, is needed, check with your local laws and regulations department.
Foreign Merchants Incorporating from Outside the US
It can prove complex, but foreign merchants can incorporate a business, thereby granting them access to Dropshippers and consumers in the United States. The merchant must travel to the United States to complete the requisite paperwork and have a trusted business associate in the United States who operates on their behalf or employs an agency to do so.
While the 21st century provides many helpful resources to get started by understanding this entire process, we strongly implore that you consult with a legal professional before making any decisions.
- Promote your Dropshipping business.
In this section, we’ll look into marketing your new store, given that you’ve learned how to start a Dropshipping business already. When developing your Dropshipping business plan, you may want to focus more on marketing & ad efforts to stand out in your market.
And because so many aspects of Dropshipping are automated, you can focus on marketing and promoting your business in the ways mentioned below:
Influencer marketing is a term that refers to the use of personalities. As a new Dropshipper, you can only have a modest marketing budget to commercialize your business.
Seeing as people trust influencers more than conventional ads, influencer marketing proves a cost-effective way to reach your target demographic.
You want to negotiate an affiliation fee with the influencer instead of a flat rate if you opt to go down this course. It’s a major boon for both parties as they’ll benefit from each sale, and you’ll incur less.
Paid ads-Facebook & Google: The average cost per click on a Facebook ad dance below a dollar, and that’s good music to the ears of newbies on the social media network.
Facebook ads allow scalability. Advertisers do well on them and appeal to people’s urge to buy without much forethought. You may use Google Shopping Ads to target long-tail keywords with a higher likelihood of conversion. While Google ads usually synonymize with more price competition, it might merit your time giving them a shot.
Communities: Actively take part in groups of people that love your niche. On Reddit, Facebook Groups, or online forums, you can start conversations with prospective clients.
Strive not to sell too much to a community. Try to be supportive and establish ties with potential customers to trust and buy into your brand.
Content marketing is a term that refers to the process of incorporating content marketing into your Dropshipping business strategy if you want to create a long-run traffic stream for your store.
Create content that captivates and empowers your core demographic by starting a blog dedicated to your Dropshipping niche. To help spread the word about your brand, you might start a YouTube channel, make infographics, or start a podcast.
Mobile Marketing is a general concept that points to a business’s mobile phone users to communicate with consumers. You may, for example, launch a VIP text club and invite website visitors to sign up for exclusive offers and promotions.
Alternatively, you can provide customer service in a live chat conversation with shoppers via Messenger. Also, you can accelerate sales and revenue for your Dropshipping company by creating automated lead generation, customer retention, and cart abandonment campaigns using a mobile marketing platform like ManyChat.
Keep track of which channels work and which don’t, as would any other successful online business. This bit is overly important when you spend money on them, such as paid ads.
You can always tweak your marketing strategy to optimize costs and increase revenue as your company grows and improves.
- Analyze and refine your product or service.
After a while, since you began marketing and managing your Dropshipping business, you will start to see the fruits of your labor. It’s at this juncture, Shopify analytics come in handy in answering some critical questions about your online store, such as:
Sales: What are my most profitable sales channels? Where can I spend more money on ads? What are the best-selling products in my store? Who are my most loyal customers?
Purchasing Patterns: Do people choose to shop on their computers or their smartphones? What is each device’s conversion rate?
Profit Margin: What are the most profitable items and SKU variants? What is the trend of my monthly sales and gross profits?
Resources like Google Analytics and Search Console help monitor search traffic and refine the search engine optimization (SEO) efforts over time.
Furthermore, suppose you use a third-party app for social media or Messenger marketing. In that case, you can review the reports monthly to ensure that your overarching framework is effective for your business.
When developing a Dropshipping eCommerce store, you can build a data-driven analytics framework, Maintain consistency in your analysis over time, and benchmark your store’s results against specific KPIs. This will help you make better choices for your store and eventually propel your small business to the next level.
Marketplaces to purchase a Dropshipping company
Suppose you don’t want to start your store ground up. In that case, you can buy Dropshipping businesses on Exchange, Shopify’s marketplace for buying and selling online stores—from ready-to-go stores, Dropshipping eCommerce businesses through to existing empires. With over 10,000 online stores for sale, you will quickly find a Dropshipping business that aligns your needs and budget.
You can see details about a potential Dropshipping business for sale on Exchange, including traffic and revenue data. The data source directly from Shopify cannot be altered, so you know exactly what to expect when purchasing your Dropshipping store.
If you’re interested, you can check our resource on How to Buy Business on Exchange (Here).
Get started with your Dropshipping business today.
So, how do you get started with your Dropshipping business right now? Good question. Well, Dropshipping offers a perfect low-risk, low-cost way to start selling online, regardless of you being a first-time entrepreneur or an eCommerce veteran.
It’s no longer a challenge to run a business online, thanks to the rise of third-party apps and marketing automation software. Ideally, this Dropshipping guide ought to provide you impetuous to build a path to success and financial independence so you can live the life you’ve always desired like so many other eCommerce entrepreneurs,
FAQs on Starting a Dropshipping Business
The FAQs section forms a critical element of this guide as it lends me the capacity to deal with specific queries that you, the beloved readers, may have about Starting a Dropshipping business. And therefore, FAQs also present another way to reach out and connect with you. So let’s get straight to FAQs, shall we?
How difficult is it to get started with a Dropshipping company?
Starting a Dropshipping business can prove incredibly difficult. As you can create a Dropshipping business for free, you may find that many companies offer the same product at the same price.
As a Dropshipper, how much can you take home?
With a profitable Dropshipping store, many Dropshippers can rack up over $100k per year. If you target to make $100k annually as a Dropshipper, you’ll need to find suitable suppliers and create a brand.
Is it profitable to Dropship?
Because you are not responsible for shipping or manufacturing, Dropshipping can be a lucrative business model for merchants. It’s a low-risk business model that doesn’t have the same high overhead as a wholesaler, and with suitable suppliers, you can make a good profit margin.
What is the best way to start a Dropshipping business?
- Pick a niche.
- Evaluate competitor products.
- Locate a reliable Dropshipping supplier.
- Develop your online store.
- Promote your Dropshipping business.
- Analyze and enhance your store’s efficiency.
How do I find the best Dropshipping products?
The popularity of your niche determines the success of your Dropshipping store. The niche you pick will affect how successful your Dropshipping business ideas are.
Find a niche with low competition and a substantial search volume to find the best items for Dropshipping.
Dropshipping allows retailers to sell directly to customers without having to hold inventory on hand. The customer pays the retail price you set, and you pay the wholesale price set by the suppliers, with the difference being profit.
Designing a website and establishing your own brand is all on you in the Dropshipping business model. Your company is also responsible for shipping costs, and you are in charge of deciding prices that generate a reasonable profit margin.
On Exchange, Shopify’s platform for buying and selling online stores, you can purchase Dropshipping businesses.
With tens of thousands of online stores for sale, you will be able to easily find a business that suits your criteria and matches your budget.
With the emergence of third-party apps and marketing automation tools, running a business online is no longer a challenge.
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