Starting a new dropshipping business is one of the quickest and easiest ways to make income online in 2022. The growth of Amazon, eBay, Etsy, Shopify, & many other online marketplaces & platforms means that now anyone can start their online store for as little as $25.
But with this barrier to entry fee being so low, dropshipping business has exploded in popularity over the past few years, meaning that many international markets are pretty competitive.
If you are thinking of starting a new dropshipping business – either as your side hustle or for leaving your full-time job. You can save yourself time & set yourself up for success by following these amazing simple steps we’ve discussed below.
How Profitable is Running a Dropshipping Business?
The profitability of your dropshipping business will depend on the products you sell, the wholesale costs offered by your suppliers and manufacturers, the prices customers will be willing to pay for your products, the volume of products you sell, and all of the other costs associated with starting and running your business.
Some of the expenses that companies face when starting a dropshipping business face include the following:
- Computer
- Website development, web hosting, and maintenance
- eCommerce software platform
- Phone
- Internet access
- Product and shipping costs (to suppliers or manufacturers)
- Taxes
- Marketing and advertising
These are just a sampling of what to expect! Before jumping into starting a dropshipping business, I recommend doing a thorough feasibility study to assess profitability.
Here’s how to start a dropshipping business in six steps:
Choose a Business Concept
A business concept describes what you are selling and to whom. Because there are so many options with dropshipping, you want to start with a limited number of products that you feel will really sell to a specific demographic.
For example, you might develop a business concept that says you’re going to sell graphic T-shirts to skateboarders. The T-shirts will have specific designs that appeal to this demographic and be of the quality and style that skateboarders wear.
The concept is the foundation for the products you sell, your website’s design and your marketing, so spending some time on this is crucial. However, it is good to note that because there are limited costs to implementing a trending dropshipping product line, you can change things up if you feel that you made a mistake or your product passion changes.
Source Products
A business concept doesn’t guarantee that you’ll be able to get the products to serve your demographic. Take the time before you develop a website to research products. Look for multiple distributors that sell the same products to find the best wholesale price of the product.
You might also search for print-on-demand apparel, home goods or books. Print-on-demand apparel companies print a custom graphic onto various brands and styles of clothing, including T-shirts, socks and jackets.
Choose a product that you get excited about, has a good margin for profit and displays nicely in the images shown on the website. Many of these suppliers also provide statistics of popular items so that you can choose things that are more likely to sell because there is already a market for them.
Select Suppliers
Once you find the products you want to offer, it’s time to choose the supplier that will be the actual company to ship the products to your customers. There are a few things to consider with the supplier you choose:
Quality: Choose a supplier that offers the quality you want your company to represent. One business model is to charge more for better quality products. This is in contrast to being a discount provider of goods that might not be the best quality. How do you want to position yourself?
Profitability: You should be able to make a reasonable profit on the product. Consider shipping and transaction costs in your calculation. Most dropshippers look to get 15% to 20% in profit margins. Of course, if you can generate higher profit margins, that’s great.
Reliability: You want to choose a supplier that sends products in a timely fashion with reasonable shipping expenses and times. Many suppliers are overseas, and you’ll have to determine whether or not you want your customers waiting for products. You also need to have a supplier that actually keeps a product in stock since it is frustrating for you and your customer to have an order that can’t be filled. The best way to check for reliability is to order a few products from the supplier and note the process.
Return policy: When possible, find a supplier that offers a return policy. Many don’t, so you need to check on this before making any final decisions. You need to think about how you state your own return policies based on what the supplier offers.
Build an Online Store
You’ll need to build an e-commerce store to sell your products. An e-commerce store is a site that is designed to help you display the products for sale in a pleasing way while possessing the shopping carts necessary to run the purchase transactions.
Building the store can be tricky for a newbie. The reason is there are a few moving parts.
To build a website you will need:
A content management system (CMS), such as Shopify
- A domain name
- Integrations with your chosen dropshippers
- A built-in payment gateway to accept online payments
The best e-commerce websites automate the sale of the product with the order to the supplier. If this step is not automated, you’ll be manually entering in orders every day, which can be cumbersome and lead to errors. Shopify is one of the leading choices for those building a dropshipping business. Hustle Got Real offer the Auto Ordering feature to automate all your orders easily! Register now for free, and try it!
Additionally, you may also want to consider selling your products through other platforms, such as eBay, Amazon or even social media (i.e., Facebook or Instagram). Multi-channel selling helps your business gain exposure and drive more sales, so it’s generally advisable to do so. That is, if you have the bandwidth to manage multiple selling channels.
With the help of our software you can manage all your stores in one place, and one subscription. So you are able to “add channel” in your account to set up eBay, Amazon and Shopify stores.
Register Your Business
You need to set up the company as a business, separating it from your personal assets. This means creating a name (usually the domain name you choose) and filing for an LLC or corporation with your secretary of state.
You’ll get a tax identification number (TIN) from the IRS after successfully submitting your online application. Use this TIN number to open a bank account that is linked to your payment gateway. This bank account will take in all deposits and pay the company’s expenses, including web hosting and maintenance. It will also be the account that pays the supplier for the product when ordered.
You should also get a sales tax ID, or reseller’s permit, from the state tax office. Most states require you to pay sales tax on goods sold. You may also need to pay sales taxes in the states where you sell your products.
Market Your Business
You can’t just set up a website and expect thousands of people to find it. You need to market the new business. Because it is online, you will likely go beyond the word-of-mouth marketing that you’d do with other businesses in your community.
Join social media groups that are relevant to your business and start participating in a productive way. Don’t just try to sell; actually help people with questions that they may ask. Become an expert in the community to be seen as a resource. People will find your business through this. Have specific business pages on Facebook, Instagram, TikTok and other social media platforms. Post regularly about new products, sales or tips and tricks in your focus industry.
On top of your social media efforts, you may want to invest in actual ads and sales. You can run Facebook Ads on small budgets that target specific demographics.
Bottom Line
The dropshipping business model is a highly accessible solution for sellers seeking low-cost and low-risk entry into ecommerce. It’s flexible enough to work for part-time entrepreneurs and has the potential to earn a steady stream of real income. However, it often takes a few months for dropshipping stores to gain traction and be sufficiently profitable.
Most dropshippers use online marketplaces because they tend to have a better inventory of products with reliable suppliers. It is possible to get a direct source supplier if you have a specific product in mind. This requires some extra work to see who is distributing the product for the manufacturer and often requires a minimum number of sales per month to be eligible.
The initial investment of time can be hefty, but your store’s success relies on proper research, site building, marketing, and management.
