How to start a dropshipping business

If this flexible business model intrigues you, here are the steps you need to take to get started.

Step 1: Find a dropshipping niche

In order to successfully start a dropshipping business, it’s important to first identify your niche. A niche is a specific area of the market that you can specialize in and advertise to a targeted audience.

To find your niche, ask yourself:

• What are you passionate about? Look into your favorite hobbies or causes you’d want to support. Think of how you could become a bigger part of that with your business.
• Are you an expert in something? Maybe there’s an area of retail, life, or an industry you know much about. See if you can foster a community there and sell them merch. For example, as a content writer, I know a lot about writing and content marketing. I could design and sell merch with copywriting inside jokes, puns, and inspiration.
• What’s something you want to buy but can’t find? One of the best places to look for unsupplied demand is within your own shopping desires. Think of the last time you were scavenging the internet for a specific gadget, clothing item, home decor, or topical merch but couldn’t find it. Other people might be in the same boat as you are.
• What’s trending? You can also find ideas by checking out what’s currently gone viral. For example, water bottles/tumblers are notorious for having frequent trend cycles. Every few months or so, an influencer will share the hottest new drinkware that “literally changed their life.” That means most, if not all, lifestyle and home & living stores should have a drinkware collection.

Step 2: Name and register your business

Now that you know your dropshipping business area, it’s time to give your company a name. Think of something short and easy to remember that perfectly describes your dropshipping business.

Afterward, turn your business from an idea into reality by registering it. There are different business structures that depend on the country you live in. Here are the three most common ones for dropshipping businesses: sole proprietorship, partnership, and limited liability company (LLC). Find out what they are and their pros and cons in this dropshipping business guide.

Step 3: Find a product and supplier

Now you’ve got a niche, name, and business registration. Let’s find you a product to sell.

Chances are, the moment you figured out your niche, you also thought of a product. You should now find a dropshipping supplier that:

• Offers your product
• Provides related products (because you might want to expand in the future)
• Has good reviews
• Has the best product and shipping price offer
• Has multiple fulfillment and warehousing locations (for your global expansion)
• Bonus point: offers some form of customization

If you don’t have a clue about what product you should sell, don’t worry.

Think about how you can create products that align with your niche, such as items with designs that resonate with your audience or products that are directly related to your niche. For example, if your niche audience is book lovers, consider selling items like bookmarks and stationery, or creating t-shirts with book-related designs. This helps to ensure that you’re offering products your audience will be excited to buy.

Step 4: Set up shop

To sell your dropshipping goods, you need a store. The choices are:

• A storefront on an ecommerce marketplace
  Pros: an already established large audience and low costs (listing costs are mostly under $1)
  Cons: constantly competing with other sellers who sell similar goods
• A standalone store website
  Pros: highly customizable, visually better-looking than a marketplace, you’ve got the whole place to yourself
  Cons: high monthly costs, you have to gather an audience from scratch

Before deciding, check if your dropshipping supplier supports your chosen platform. Why’s that important? Keep reading to find out.

Step 5: Connect the store to the dropshipping supplier

This is an important process for dropshipping. Warehousing and logistics, as well as other fulfillment processes, can only be automated if your store can be integrated with your supplier. Otherwise, you’ll have to spend a lot of time manually forwarding orders from your store to your supplier. With 10 orders a week, that’s manageable. But imagine if you ever reach 500+.

If you can connect your store with your supplier (this is usually called “an integration”), your orders will be automatically transferred to your dropshipping supplier. After receiving the orders they’ll start working on the products and ship them directly to your customer. All without you having to interfere.

After you’ve set your eyes on a product and prepared your store, it’s time to put it all together. Most ecommerce platforms and marketplaces have integrations for top dropshipping suppliers. The integration process can differ between suppliers and ecommerce platforms, so check both websites for instructions and requirements.

Step 6: Add products to your store and choose a pricing strategy

Pick products from your supplier’s catalog, customize them if possible(customization will set you apart from other sellers), and add them to your store. Then, you need to price them.

There are multiple ways to price your products, but this one’s the easiest to start with:

product costs + profit margin = your retail price

Figure out how much you’d like to make per product sale, add that to your product cost, and you’ve got your retail price. Remember that product costs include more than the product price. You should also factor in your ecommerce store costs (platform subscriptions, marketplace commission) and any outsourcing costs (hiring designers, accountants, etc.).

I also recommend adding some room for future discounts.

Source: Printful

Step 7: Prepare product photos and descriptions

This is the most creative part of the process. Your product descriptions and visuals should give your brand a personality. For persuasive product descriptions, do this:

• Go back to your niche. Use words, slang, and jokes related to your niche and audience.
• Provide all the details. Be transparent about your product qualities, fit, and sizing.
• Use SEO keywords. Include common search phrases so your potential customers can easily discover your products.

Finish off with picture-perfect product photos:

• Get up close. Show off closeups of fine details like embroidery, pockets, zippers, etc. Closeup images help online shoppers appreciate product quality without touching it.
• Add a person(ality). Photos with humans in them make products sell better and feel more natural.
• Show it in its “natural habitat.” Photograph your product where and how it’s supposed to be used. This helps customers visualize the product in their life and make a buying decision.

If you don’t have the resources to buy and shoot products, mockups will do just fine. Mockups are digitally generated images of your product in various settings. A few suppliers offer built-in mockup generators, but you can also buy blank product mockups on stock image sites.

Step 8: Market your business

As I mentioned, most integrations between a supplier and an ecommerce platform provide automatic order fulfillment.

Automatic fulfillment means that your orders will be instantly sent to your dropshipping supplier, who’ll then prepare your products and send them for shipping—all without your involvement.

Automation saves you time on the manufacturing, packing, and shipping processes. You can then spend that time on growing your community and recognition through your chosen marketing channels. But let’s not get ahead of ourselves. You’ll find out more about marketing in just a few sections.

How to choose a dropshipping supplier

I already touched upon this in Step 3: Find a product and supplier, but finding an excellent dropshipping supplier will make or break your business.

There isn’t one dropshipping supplier to rule them all—each has perks tailored to different customers. That’s why I’ve listed the main criteria you should look at to find a supplier most suitable for your needs.

Fast fulfillment times

Fulfillment time means how long it takes to make your product (from receiving the order to getting it ready to be shipped). The faster the fulfillment time, the quicker the product will be ready for shipping. And faster shipping ensures happier customers.

Important: even though fulfillment time directly affects how soon the order will be delivered, it doesn’t include the shipping time.

Fast shipping times and multiple fulfillment locations

Even if a supplier promises quick fulfillment, their shipping time could significantly impact the delivery time. Look for an average shipping time on your supplier’s website.

Shipping times depend on the shipping courier and order destination. This is why it’s best if your supplier has:

• Partnerships with different shipping couriers
  Different couriers can ensure a better shipping rate and security if one courier’s operations are delayed.
  
• Multiple fulfillment locations
  More than one fulfillment center, on the other hand, can lead to a shorter shipping destination between the product and the customer. It also gives you more room to expand your business globally when you’re ready for that.

Good customer reviews

To ensure customer satisfaction, it’s crucial to work with a reliable supplier. One way to do so is by checking the suppliers’ customer reviews. Look into their product catalog, testimonials page, and social media to get a good sense of their reputation.

An honest dropshipping supplier will let you see the negative reviews as well, so don’t be too frightened if it’s not all five stars.

You can also check Reddit forums, Yelp, and other sites to find what others have said.

Product samples

Even if there are thousands of product reviews, it’s still important to see the product for yourself before committing to a dropshipping supplier. A product sample order will help you discover:

• If the delivery process is fast and simple enough
• The unboxing experience
• What the product will look like

Sample orders help you see what your customer experience will look like. Plus, seeing your goods in real life can inspire you to write more precise product descriptions.

Check out if the supplier has any sample order discounts. You can always place an order without a discount, but the sample order deal is a friendly and reasonable gesture on their side.

As you can see, the dropshipping process is quite straightforward. But, to ensure it’s the right business choice for you, let’s evaluate some of the pros and cons.

Pros and cons of dropshipping

Now that you know what’s what in dropshipping, the question arises: if dropshipping’s so great, why doesn’t everybody do it? Sure, it’s time-efficient and money-saving, but the traditional fulfillment and manufacturing model is still going strong.

Let’s look at the positives and negatives of dropshipping to determine if this business model suits you.

Dropshipping pros

Easy setup process

One of the most alluring factors for new business owners is that dropshipping doesn’t require an ecommerce experience. Of course, it helps if you know a few business tricks, but it won’t put you at a disadvantage if you’re just starting out.

You only need to create an online store and choose which products to sell. After connecting your supplier to your store, the rest of the operations are taken care of.

Low financial risk

Starting a business is scary since you must usually go all in. Traditionally, the most significant commitments include:

• Spending a lot of money on products and equipment (that you have no guarantee of earning back)
• Hiring staff
• Buying and storing inventory

Dropshipping businesses are usually successful, but if yours isn’t, then you won’t be losing a crucial part of your investment like you would with a traditional business.

Flexibility

Dropshipping is quick to adapt if you decide to take your business in a completely new direction. With a few clicks and no extra financial investment, you can completely change your product catalog or entire business niche.

All this would be a hassle to do if you had hundreds of products sitting in a warehouse somewhere.

Fast speed to market

Not only does dropshipping make offering new products cost-effective, but it’s also fast.

Since the order fulfillment is done on-demand, you don’t need to wait on large pre-orders. You can go from an idea to a market within the same day. And a fast speed to market increases your chances of turning a profit from emerging trends.

Dropshipping cons

Of course, such a lucrative business model comes at a cost. Let’s see what that is.

Low profit margins

While dropshipping can make you money, you’ll have to work at it to get there. 

First, since it’s such a simple business model, many dropshipping businesses compete with you and sell similar products. You might have to lower your prices to win over the customer, which means less profit.

Second, when you fulfill your orders on demand, you only pay for the products you sell. On one hand, every product you pay for is guaranteed to turn a profit. On the other, paying for each product individually creates higher product costs as you can’t get the usual wholesale price.

With comparatively higher base prices and competitors already trying to undersell you, there’s little room left for a good profit margin. However, with careful marketing and strategy, you can still succeed in the dropshipping business.

Limited product choices

Dropshipping allows you to switch between different niches, products, and designs easily, but there’s a small catch: you’re dependent on your supplier’s product selection.

Let’s say you sell necklaces and bracelets using dropshipping. You decide to add earrings to your catalog in response to customer demand. But then you find out that your dropshipping supplier doesn’t offer any earrings, or if they do, the earrings don’t match your jewelry brand.

You have three choices:

1. Give up on the earrings and miss out on a business opportunity
2. Wait for your supplier to offer earrings, and risk losing customer interest 
3. Add a new supplier to your store with the exact earrings you want to sell

The third option doesn’t sound as bad as the other two—you get to sell a product you want, and your customers are happy. However, collaborating with multiple suppliers complicates things.

As soon as you source products from more than one dropshipper, you’re dealing with various shipping ETAs, pricing and billing processes, return policies, etc. The more suppliers you collaborate with, the more important information you must keep tabs on. This can get exhausting and even lead to potential inventory issues and bad reviews.

Lack of control over production

Most people don’t like putting their business’ fate in others’ hands. But that’s exactly what you’ll have to do when running a store with dropshipping.

Your business depends heavily on your dropshipping supplier’s integrity and quality of work. If their shipping times get longer, their products become faulty, or their customer support starts slacking off, it’ll directly reflect on your business.

At the same time, you can’t micromanage the supplier and hang around their fulfillment centers to ensure they get everything right. What you can do is perform thorough supplier research before starting a business to make sure you won’t have problems in the future. Once you start working with a supplier, check product quality by regularly ordering product samples and following your customers’ reviews.

A lot of responsibility

Even though you’re not in control of what goes on in the manufacturing process, your customers still hold you accountable if something goes wrong. In the end, it’s going to be your reputation that’ll take the hit and not the supplier’s.

Your customers put their trust in you, not your manufacturer. So when a dropshipping supplier sends your clients a damaged product or delays shipping, your customer will blame you. Take ownership of your products and reply to customer concerns and reviews. If the feedback gets too negative, consider switching to another supplier.

While the cons of dropshipping might seem tough, they’re manageable, so I hope you’re still motivated to start your online store with dropshipping.

If you’re still up for it, let’s get to the rewarding part—making money.

Is dropshipping profitable?

Yes, it is. But it’s not a get-money-quick scheme, so you’ll still need to do the work to succeed. Here’s what you can do to ensure your dropshipping business thrives.

Increase product value

How do you stand out from the competition and become customers’ first choice? Make a better offer. You can do so by:

• Offering free shipping
• Adding freebies to each order
• Including a discount code for the next purchase
• Customizing products

While the first three may add extra costs to your dropshipping business, they’re valuable perks for customers that can be deal-breakers for them. You may need to raise product prices to cover these costs, but it’ll put you above your competitors.

The fourth option—product customization—will let you sell the same product but better, at little to no extra cost. Some dropshipping suppliers, like Printful, let you add your design to their products. This way you can elevate dropshipping products with your art.

Pick a specific dropshipping niche

While you may be tempted to please everyone and sell all the dropshipping products available, you’ll be spreading yourself too thin. When trying to appease all possible audiences, you end up somewhere in the middle and getting lost in the crowd.

You need to think hard and find your niche. Figure out what’s an untapped market that matches your own interests and values. Then, find a suitable product for this niche and market it in an audience-friendly way. Here are just some ideas:

• Custom fanny packs and bandanas for new dog owners and trainers
• Sturdy travel mugs, backpacks, and other gear for hikers and travelers
• Inclusive activewear for workout enthusiasts
• Personalized journals and cards for stationery geeks
• Aesthetic and motivational decor for those working from home
• Decade-inspired merch for those born in the wrong era

To find your destined niche, take a minute to evaluate what matters to you, what message you want to send out to the world, and who are your people.

While profit is a massive part of what makes a dropshipping business successful, you need to feel connected to your brand on a personal level as well. The hard work will seem way easier if you like what you sell and the people you sell to.

Lay out a strong marketing plan

“Accidental” success stories usually aren’t that accidental. In reality, every leading brand has a powerful marketing strategy behind it. The marketing strategy begins with your target audience.

For your brand to reach its target audience, you need to find the channels your audience hangs around the most. Are your potential customers visual shoppers and love checking out products on Instagram? Do they find their inspiration on Pinterest? Or does your audience need detailed video content on YouTube?

Wherever your customers are, be there.

Once you lay out the must-have marketing channels for your dropshipping business, do a little audience stalking (sorry, I mean market research). Explore their interests, main pain points, and vocabulary. Use your findings to create your brand tone and communicate in a relatable way to your audience.

Learn More: How to Develop an Effective Marketing Strategy

Don’t skip SEO

Marketing often includes setting aside a budget for paid ads and promos. While you can’t completely escape opening your wallet for advertising, there’s still a way you can get some recognition for free. And that way is the art of SEO. I won’t lecture you about all the ins and outs of SEO, but here’s a crash course on what you need to know.

SEO (search engine optimization) means optimizing your content so that it gets picked up on search engines. Once you’ve performed some SEO magic on your dropshipping store, it’ll appear in more and more search results. In other words, search engines will give you free traffic from potential customers interested in your business.

Stay relevant

Keep your brand fresh by regularly monitoring trends and adding new products—surprise customers with new product lines, limited-time offers, and holiday specials. Remember that expanding your catalog and experimenting with product collections is fast and easy with dropshipping. Take advantage of this to optimize your store’s product range.

What are the legal aspects of dropshipping?

Many new entrepreneurs wonder: is dropshipping legal? Yes, of course, it is. It’s as much of a business as any traditional retail setup. But as with any business, there are also legal requirements for dropshipping. You need to:

• Register your business
• Comply with your state’s laws on dropshipping tax
• Be honest and transparent about where your products come from

If a customer asks more about the origins of your products, don’t lie. Explain the product supply chain to them in a transparent manner.

As for tax and dropshipping business registration requirements, the rules are vastly different depending on your location. So, before setting everything up, get to know your country’s laws regarding dropshipping, taxes, and business management.

Dropshipping with Printful

Printful is a print-on-demand company that specializes in creating customized dropshipping products and fulfilling orders for brands across the world.

The difference between Printful and other dropshipping suppliers is that Printful allows you to customize products with your own design. As I mentioned before, customization can be a competitive advantage in dropshipping.

Here’s how it works: when your customer orders from you, Printful picks the product blank and customizes it according to your desired fulfillment method and design. Then, Printful packs the order and hands it over to a shipping courier who delivers the product directly to your customer.

Printful’s most significant benefits include:

• Product customization
• High-quality product sourcing and fulfillment services
• A well-thought-out shipping process
• Free product design tools and graphics
• Life-like product mockup photos

Thanks to thorough logistics research and years of successful partnerships with its carriers, Printful offers the best rates among its competitors, which can significantly cut your shipping costs (and make more room for profit margins).

On top of adding custom product designs, you can also elevate your merch with unique branding: custom packaging, labels, pack-ins, and packing slips.

Is dropshipping worth a shot in 2023?

Yes, definitely! Dropshipping makes opening your own ecommerce store more effortless than ever. In just 24 hours, you could be the owner of an ecommerce business. All you need is a dropshipping business idea and an internet connection to start selling products.

In fact, dropshipping’s not only alive and well, but it also proves to be more profitable than running your own inventory management.

Currently, businesses supported by dropshipping report earning over 50% more profit than those who keep their own inventory.

And with ecommerce revenue skyrocketing year after year, starting your business with a dropshipping supplier is more than worth the effort. But to ensure your success, remember to invest time into:

• Researching your niche
• Picking a good product
• Marketing your business and connecting with an audience

Just to make sure your dropshipping journey is as smooth as possible, here’s a list of some of the top dropshipping FAQs. Check it out to find answers to your burning questions, or ask away in the comments section!