How to Start a Dropshipping Business

What is dropshipping and how does it work?

Dropshipping is a business model in which the seller markets products and takes orders while the manufacturer consolidates and ships them. Amazon was among the first companies to use this model. Today, more than one-quarter of all online retailers use dropshipping to fulfill customers’ orders.

Dropshipping divides the responsibility between the partners: while the manufacturer focuses on production, warehouse management, and delivery, the dropshipper takes care of marketing and promotions. A model like this is a good fit for many online businesses: dropshippers can display products on their websites and social media pages and accept payments via online payment services.

Keep in mind that it’s the dropshipper’s responsibility to settle customer complaints concerning late shipments, damaged goods, etc. Plus, you’ll have to deal with returned goods and refunds. In this context, choosing a reliable supplier is essential. If you value your time and nerves, be sure to approach this issue with seriousness.

Finally, take a look at our break-even calculator. It can help you figure out when your dropshipping business will become profitable.

How do I start a dropshipping business?

The minimum budget for starting a dropshipping business depends on a number of factors, although some dropshippers manage to start their businesses for $1,000 or less. If you have some experience in online marketing, you may have a head start over many competitors.

This means you won’t have to spend your entire budget on marketing specialists. Your expertise will be your main asset in promoting your dropshipping business. You’ll still have to hire freelancers to do specific jobs, such as website development and design.

If, however, you have zero experience in marketing, there are still options available. The internet offers countless guides on context advertising, social media marketing, etc. By reading a few materials each day, you can educate yourself on all dropshipping-related issues in no time!

Launching a dropshipping project involves five major steps:

1. Choose the right niche.
2. Analyze your market and competition.
3. Search for suppliers.
4. Open an online store.
5. Choose and master promotional strategies.

1. Choose the right niche

Start by asking yourself which products you’d like to sell. Maybe you go crazy for fashion, or you’re a fan of technology and electronics. If you choose an industry you feel passionate about, it’ll be easier for you to relate to the needs and wishes of your target audience. Plus, selling the products you like will make you enjoy your job more.

However, not everyone is guided by passions and interests. If you’re only inspired by statistics (which can be a good trait for an entrepreneur), you can analyze the popularity of different products and select the ones with the biggest revenue potential. Luckily, there’s no lack of tools that can help you with that.

The first tool we recommend is Google Trends which shows popular search results by season. For example, selling mosquito nets in the fall is hardly a clever idea. However, in spring and summer, this business could become a cash cow. On the Google Trends website, enter the product type and see the dynamics of customer demand for that product in your region over the recent year.

Another helpful tool is Serpstat. The first five search results are free. To continue using the service, you have to upgrade to a paid account. You can use the five free search results to complement the picture obtained through Google Trends. Along with the most frequent searches, the service will show you:

• Trends and search request variations
• Competitive ads
• Related search requests

Our tip is to analyze all related search requests and collect as much data as possible. For example, if you’re considering the idea of selling bed linens, analyze such requests as pillows, blankets, duvets, etc.

2. Analyze your market and competition

The next step will be to do some market research. Using the tools mentioned above, you’ll be able to make a list of competitors’ websites. At this stage, you need to answer the following questions:

• What product range do my rivals offer?
• Which products are the most popular among customers?
• What’s the price range for the same product across existing sellers?
• What special offers do my competitors have?
• What are the standard terms for payment and shipment? What does the typical return and exchange policy look like?
• How user-friendly and functional are my competitors’ websites?
• Which pages on competitive websites generate the highest traffic?
• Are my competitors active on social media? Are they using Google context ads?

Before continuing, take a closer look at your competitor list and remove major wholesale platforms, such as AliExpress, eBay, etc. Competing with these market giants isn’t realistic for a startup, so it might be better to ignore them at this stage.

3. Search for suppliers

Now you have a general idea of the market you’re about to enter. You know how the typical business in your niche works, what products your competitors offer, and how the prices vary from vendor to vendor. Your next task is to find the companies that will supply you with your selected products on favorable terms.

When choosing the best supplier, consider the following factors:

• Language. Keep in mind that some offshore suppliers may not speak English, which means you might need a translator.
• Geography. While shipments from overseas can take weeks, some local suppliers can deliver the order within a day or two.
• Shipment and delivery terms.
• Easy access to information on available inventory. Your website must display relevant and accurate information on which products are in and out of stock.
• Prices and payment policy.
• Supplier pricing. Does the supplier have fixed monthly charges regardless of the sales volume?
• Minimum order size. Some suppliers oblige dropshippers to pay for a certain amount of goods in advance.
• Unit price for dropshipper.
• Payment methods.
• Marketing materials. This can include product photos and specifications, along with advertisements and social media marketing.
• Possibility to order product samples.

To find suppliers, search for “suppliers dropshipping,” “supplier base dropshipping,” and similar search requests. There are websites where suppliers are categorized by type of product, geography, customer ranking, etc. Plus, you can find dropshipping-themed pages on social media and in messenger apps. For example, in Telegram, there are channels with exhaustive information on working with different suppliers.

4. Open an online store

Before creating a website that will serve as a “shopping window” for your business, take the time to answer these important questions:

• What products will you be selling? What’s your pricing policy? This will help you understand whether a small landing page will be sufficient or if you’ll need to build a fully-fledged website with dozens of pages.
• Who’s your target audience (age, gender, geography, lifestyle, expectations, etc.)? How are you going to catch the attention of your potential customers?
• What’s your budget? How much time do you have for launching a website? Do you have enough money to reinvest in your project during the first months?

Once you’ve got these questions sorted out, you can start working on your online store. You should come up with a catchy name, logo, and corporate colors. When it comes to creating a unique brand identity, there are plenty of professional logo-making services, including us at ZenBusiness.

The next step is to find a seasoned web developer and layout designer. Alternatively, you can use website builder tools like the one we have available.

Once your website’s ready, fill it with information on your products, shipping terms, refund policy, etc. Make sure your content is written in basic English and avoid industry-specific terms that may be confusing for common users. Add your phone number, email address, social media handles, etc. Don’t forget to add the times and days when customer support will be available.

5. Choose and master promotional strategies

To make your business known to your target market, explore the world of online marketing. This can be a challenge but we’re here to help. There are several strategies for promoting an online store:

• Search engine optimization. Optimize different elements of your website (images, texts, headers, links, etc.) so that popular search engines consider it more relevant and useful for visitors. As a result, your online store will be ranked higher in search results. While this is a relatively cheap promotional strategy, the first results can take a few months to surface. Plus, you’ll have to make so-called “SEO audits” every few months.
• Context advertising. This can be done by pay-per-click (PPC) specialists. First, you need to pay to set up an advertising campaign suited to your goals and needs. Then, you pay each time someone clicks on your ad and gets redirected to your website. The first results arrive pretty fast, but it’s a good practice to wait a few weeks before measuring the performance of your ad campaign.

• Advertising on social media. If you’re selling products via your Facebook or Instagram page, you can attract customers by placing targeted ads. For example, if you’re selling children’s toys, you can set your ads to be displayed to mothers with young kids. If your main product is sneakers, your ads can target adults who enjoy sports and jogging.

• Promotion via forums, blogs, business directories, etc.
• Promotion via price comparison websites and e-commerce platforms.

Popular Product Types for Dropshipping

Don’t be afraid to sell trendy products. It’s easier to launch a business in an established niche than start from scratch. To help you make the right choice, we’ve put together a list of the hottest goods for today’s dropshippers.

On top of our list, there are clothing and shoes. Keep in mind that women’s and children’s clothing tend to sell better than men’s clothing. The most popular items include jeans, shirts, underwear, handbags, socks, sportswear, and casual clothing.

Watches are another profitable product category for dropshippers. Focus on high-end models with advanced features, like water and shock resistance, timers, several straps to choose from, etc. The sales peak in December. However, a watch is a common gift not only for Christmas but also for birthdays, anniversaries, and other important events.

Scooters are another intriguing product category. Your target audience will be young people of 18-25 years and parents who buy scooters for their teenage kids. With that in mind, be sure to find a supplier with reasonable prices. At the same time, avoid cheap and unreliable devices unless you want to be buried under an avalanche of refund claims.

Bed linen is a product that will always find its customers. The target market for this niche is essentially limitless, as nearly everyone uses bed linens. Launch special offers on the eve of major holidays to skyrocket your sales.

Another popular dropshipping category is cosmetics made of natural ingredients. Target your audience based on their age and offer several categories of products: budget-friendly makeup for young girls, premium beauty care products for middle-aged women, anti-aging skin products for seniors, etc.

A market with trendy children’s goods is another potential goldmine. Many purchases in this niche are made by parents and grandparents. If you’ve got your eyes on this market, you should create a special environment on your website. The design of your online store should convey feelings of serenity, peace, and relaxation. The most popular items include teddy bears, dolls, and baby accessories.

Like any other business model, dropshipping has its strong and weak sides. Here are some of the drawbacks to opening a dropshipping business.

• You have little control over the quality of your products and their shipment times.
• It may be hard to get product info (high-quality photos, descriptions, specifications, etc.) from the supplier.
• You may have to deal with complaints about damaged goods, late shipments, etc.
• Finding a reliable supplier who is easy to work with can be tricky.

At the same time, there are plenty of advantages that make dropshipping a successful money-making strategy:

• Low level of risk because you don’t need to worry about production, storage, logistics, etc.
• Low upfront investment.
• Great opportunity for testing business ideas.
• Great business for people with online marketing experience.
• You can launch a dropshipping business within a couple of months.
• You can combine your dropshipping business with your main job.
• You can make up to 500% profit on each unit.