5 Essential Steps for How to Start a Dropshipping Business
Get The Print Version
Tired of scrolling? Download a PDF version for easier offline reading and sharing with coworkers.
Have you ever dreamt of starting an online business but were confronted with a few small problems?
Having no time, little startup investment, and most importantly, no products to sell seem like major hurdles holding you back from that poolside office.
However, that didn’t stop Amazon, Wayfair, or even Etsy from becoming the ecommerce giants they are today. They all started off by selling products that they didn’t produce, and managed to scale by offering a unique value proposition with aggressive marketing strategies.
Ecommerce has seen tremendous growth since 2017 with projected sales to be 4.9 Trillion by next year alone. With online purchasing becoming a new norm, it has created a once in a lifetime opportunity for entrepreneurs like you to start an online business by dropshipping.
This is not your run-of-the-mill guide on starting a dropshipping business. With this guide, you’ll not only be fully knowledgeable on starting a dropshipping business, but you’ll know where to find products, how to pick them, and most importantly; how to be successful.
Before getting started, you might be asking yourself: What is dropshipping?
How Does a Dropshipping Business Model Work?
Dropshipping was born from the pains entrepreneurs face when wanting to start an online business. Dropshipping is a business model that removes the inventory aspect of retail. A customer’s order is sent directly to the dropship supplier to be fulfilled and delivered.
Here’s the dropshipping model in three simple steps:
- Your customer purchases a product on your store
- The order is sent directly to the supplier for processing
- The supplier ships the product to your customer
You’ll never have to worry about holding inventory and dealing with the products yourself. You’ll only have to focus on marketing your store and products, and building a customer experience unlike any other. In other words, the fun stuff.
Dropshipping Statistics: Numbers You Need to Know
Times are always changing, and staying on top of trends to making data-driven decisions are critical to staying in the game. We wanted to share five facts on what’s going on in the world of ecommerce, and give you a heads up on your research.
With these five facts, you’ll have a general idea of consumer trends, and how you can stay relevant and competitive while starting your dropshipping business.
- 61% of millenials and 55% of Gen X say that they would pay more for products that are eco-friendly.
- By the end of 2020, mobile sales are projected to be 45% of all ecommerce sales, totaling in a $284 billion segment.
- 80% of sales and marketing leaders say that they already use chatbots in customer interactions or plan to do so by the end of 2020
- 85% of millenials make a purchase after watching a video of the products
- 54% of social media users browse a brands products on their social pages
5 Reasons to Start a Dropshipping Business
So, why should you start dropshipping?
We’ll be honest with you. There is a lot of competition in the world of ecommerce. Starting a dropshipping business requires a lot of work, patience, and failing fast in order to succeed faster.
But just like other small business ideas, it’s worth it. We know that starting a small business takes a leap of faith, so we’ve outlined five reasons why you should consider starting a dropshipping business.
1. Limited capital needed.
The days of saving up to start a business are long gone. The great thing about ecommerce and dropshipping is that you don’t need to save up a lot of money to make it happen!
You can still keep your day job as you start your business, and eventually transition from side hustle to a full-time business owner when you’ve established yourself.
The initial capital you need is the subscription fees to your domain, an ecommerce platform, and any dropshipping platform you may choose to use. It may take lots of time to really build yourself up, but if you devote yourself to growth, the outcome can be financial and remote freedom. The cost of starting a dropshipping business is much less than the initial costs you would need to build an inventory of items and sell them. The inventory aspect is completely erased.
2. Scalable business model.
Scaling your business means having a business model that easily molds to increasing sales as well as customer inquiries and demands.
Dropshipping is easily scalable. You only need to worry about your inventory and supplier relationships, as well as keeping your customers happy and informed. Thanks to emerging technology trends, your customer service can be easily automated, and there are tons of options for automating different aspects of your business.
3. Low business overhead.
Before dropshipping, you would have had to scour the internet and wholesalers for products, order them in bulk, and store them in your home in hopes of selling them all. You’d have to do inventory, manage delivery for each customer, and create a system for keeping track of it all.
With dropshipping, the process is simplified, as you only manage the orders that come through, and your relationship with your supplier. You’ve eliminated the upfront cost in both time and money of storing and organizing these items, and dealing with the delivery of each product to your customers.
All you need to start is the fee you pay for your domain and your ecommerce platform, and your advertising costs to start. If you’ve got a dream and some grit, you can get started right away.
4. Can find new markets with low risk.
In December of 2019, the trend for face masks and self-care items started rising consistently.
By the beginning of March 2020, it became a fortified necessity, with face masks becoming absolutely essential to everyday life.
By dropshipping, you’re able to adjust your online store to suit the needs of your customers easily, and build a versatile product catalogue that’s relevant, unique, and high quality. Adapting is easy, and you won’t have to restructure your business to tailor to changing needs.
5. Start selling faster.
With dropshipping, you would have been able to add face masks (and other new essentials) to your product catalogue overnight, and started running ads and campaigns immediately. This would have won you thousands of new customers, and tons of leads for potential marketing and recurring customers.
Trends like these happen consistently over time, and with dropshipping, you’re able to start selling items as you see them rise in popularity. More on how to discover these trends later.
How to Start Your Dropshipping Business
The beginning of something great always starts out small. Getting started on your dropshipping store requires that you first enter a state of mind that embodies learning, entrepreneurship, and positive growth.
There will be failure, there will be fear, but there will also be an opportunity to grow because of them. Like most successful entrepreneurs, you’ll need to learn how to fail fast and use failure as the fuel to making better decisions. Be positive, be proactive, and be bold in pursuit of creating the best possible online store for your niche.
To start dropshipping, you’ll need an ecommerce platform that supports your growth, a reliable supplier and something to sell. Once you’ve ironed out the details of your business registration and sales tax ID, we’ve outlined the following five steps you need to take in order to hit the ground running.
Get your notepad ready, these 5 steps will help you build a solid foundation for a successful dropshipping business plan.
- Iron out your business operations.
- Determine your niche.
- Find the right supplier.
- Choose and build your ecommerce business.
- Promote your dropshipping business.
Iron out Your Business Operations
Build a solid foundation for how you’re going to run your dropshipping business. As a fairly new and non-traditional method of doing business, you have to be diligent and make sure your details are all ironed out.
1. Decide on your business structure.
To build, or not to build
Will you be creating your own website, or relying on an ecommerce platform?
Will you be finding and vetting dropshipping suppliers on your own or will you use a dropshipping platform?
Do your research in terms of time spent and the cost of having these services done for you. If you choose to use BigCommerce as your dropshipping business platform, you can start your business today.
On the other hand, building a converting ecommerce website from scratch requires a lot of time and technical know-how. Not to mention researching high converting tips for website design. In the end, the choice will be yours, but don’t forget that your time and energy could be spent on marketing and building a product catalogue.
Choose your dropshipping structure
In terms of dropshipping, the concept of spending time and energy applies heavily.
Finding these potential suppliers and building relationships with them is not easy, and it takes time. Vetting them for quality products and communication is another critical criteria to meet.
Platforms like Spocket seamlessly integrate with your BigCommerce store, and allow you to browse products from the US and Europe with reliable suppliers. All that leaves for you, is to find products within your niche that you’d like to sell, and from there, you’ll be one click away from a one-of-a-kind product catalogue.
2. Select and register your business name.
Your business name will be a critical part of your brand, and it’s important to spend a lot of time and thought picking something that resonates with you, your niche, and your potential customers.
The elements of a good business name are somewhat scientific, and revolve around aesthetically pleasing lettering, lengths and syllables.
Make sure to consider including an SEO keyword that makes it easy for your customers to find you. For example, if you’re selling beautiful handmade jewelry, include the word “jewel” or “jewelry” in your business name. For example: “The Rebel Jewel”
It’s not a must, but it sure helps in marketing efforts on google. In fact, it could save you a lot of money and effort in the future!
Next, make sure you pick and register your domain name as soon as you’re certain. You can do this through BigCommerce, or you can transfer an existing one you’ve already purchased. Try aiming for a .com domain, as it’s known to be more trusted and used in search. Discoverability is important for a burgeoning online store!
3. Acquire an EIN (depending on your location).
Getting an EIN is both a legal obligation and a free way to secure your business. This can be easily done through your government’s application portal that prompts you through the necessary steps.
This is also a great way to build trust with your customers, and let them know that you’re a legitimate small business and that you’re local.
4. Apply for a business license and permit (depending on where you are located).
Depending on your location, you may be required to get a business license in order to operate.
Before you can start on the fun stuff of building and running a dropshipping business, make sure your legal obligations are covered, so that you can sail smoothly into a successful small business.
This not only protects you, it gives your small business legitimacy and fortifies your stance as a small business in your country. Make sure to mention these on your website, so potential customers are aware that you’re legitimate and completely safe.
Determine Your Product Niche
We’re not trying to be corny when we say to choose something you love. Choosing a niche you love means that you’re already a part of this audience, and that you’re passionate and experienced in what people like yourself want.
This gives you an edge over everyone else, and a jump start into choosing the right products and the right marketing strategies.
Let’s say you’re a new mom. Motherhood is an exciting time that can always do with products that make raising curious little people easier. From hip seats to potty training tools, you’ll always find new moms looking to simplify life with kids.
For the new dog owners, you can build a store on gadgets and tutorials on training and “puppy-proofing” your home. No one likes to see their shoes chewed to shreds, and that’s where you come in with amazingly durable dog toys!
1. Look at google trends.
Google trends is a free tool that gives you a leg up on market research and insight into what people are looking for. Naturally, when we want answers or solutions, we turn to Google.
This tool will be one of the first things you turn to when looking for popular niches, trends and products. Simply plug in a keyword someone in your niche might be looking for, and see the results for yourself. This keyword can be anything related to your niche.
For example: “dog collars” for the pet niche or “bath bombs” for the self-care niche.
As an example, let’s take a look at “Dog Collar” for the pet niche:
There are a few important questions you should ask when looking at the results.
- Is the search demand steady? Search demand should always be steady for your niche of choice. In the example above, it’s evident that people love their pets, and they will always love their pets. It’s never going out of style, and it’s not a temporary fad. Great news for the pet niche!
- Are searches increasing or decreasing? Important to note if the searches for products in your niche are increasing or steadily decreasing. This gives you insight into the future of your niche, and the stability of your customers and revenue. Choose products and a niche that have a steady search volume, or even better, an increasing one.
- Who’s searching for this? When starting a dropshipping business, the hardest part of marketing is pinpointing the perfect target market segment. Some of them convert into sales, and others don’t. With Google Trends, you can see who searches the most for these items and you can target them specifically. West Virginia seems to have the most searches, so why not direct your social campaigns to people from that area?
All in all, keep in mind that trends and times are always changing. Keep your eye on the news and on what’s happening in the world of your customers. With the help of google trends and social media, you can make data-driven decisions about what to sell, and who to sell it to.
2. See what is selling online.
Use ecommerce giants like Amazon, Etsy, Pinterest and eBay to see what people are buying the most. In the case of Amazon, you can check out their “Most Wished For in Pet Supplies” to get an idea of what people want, and how you can carve out a place for yourself there.
As for Etsy, you can filter by “Top Customer Reviews” and discover products customers love, and most importantly, why. Take a look at the top sellers for “dog collar” and make sure to look at what people are saying about why they love these products.
You’ll gain insight into why these products are successful, and how you can leverage this for your own store.
This is by no means a one-time task. You have to constantly check what’s selling to stay competitive and relevant in your respective niche. If you can’t do it every day, do it once a week at least. This way, you’re always in the loop on best sellers.
3. Conduct a competitor analysis.
Conducting a competitor analysis is critical for a small business that hasn’t established itself yet. Think about it, no one has heard of you yet, and you’re trying to break into an industry that already has some key players taking the market share. Ask yourself:
- How will you compete?
- What will be your value proposition?
- How can you be better than your competitors?
Start off by conducting a SWOT analysis and identifying what your strengths, weaknesses, opportunities and threats are. For this part, you’ll need to focus on your weaknesses.
From there, you’re one Google and Facebook search away from finding your competitors. Or better yet, them finding you.
Look up “dog collars” and see the vast amounts of online stores competing for your attention. Pick the top 10, and make sure you keep a tidy spreadsheet of their names, links, top products, and sales propositions along with their ad campaigns.
Then, move your search to Facebook.
Look up your competitors on Facebook and then look up dog collars in Facebook Marketplace. You won’t have to do much work, as shortly after, you’ll notice Facebook is displaying ads of your competitors to you. Make sure to note them all and keep track of their offerings and marketing strategies.
This way, you’ll always have the advantage of knowing exactly what you’re up against and how you can compete. This step needs constant work, and should be an integral part of your marketing strategy. As Don Corleone said: keep your friends close, but your enemies closer.
Pro Tip: When conducting competitor research, look up the reviews for their store and specific products, and look for the worst ratings. Take a look at what people are complaining about, and make your store stronger in those aspects. This way, you’ll be directly offering what your competitors can’t.
Find the Right Dropshipping Product Supplier
Finding the perfect dropshipping suppliers is a do or die part of running your business. Even if you get every aspect of running your dropshipping business right, you need the right product supplier in order to succeed.
Your dropshipping suppliers must be reliable, communicative, and have high-quality products with decent shipping costs and fast delivery time. Make sure to test order a product before deciding on a supplier, you need to know the process from start to finish to understand your customer journey better.
1. Places to find suppliers.
You can find dropshipping suppliers by searching for wholesale suppliers of your specific niche. You can use directories such as Wholesale Central to find suppliers and start your process of weeding out the ones you want to work with. It’s a long and time-consuming process, but it’s in your best interest to find suppliers that are worth working with. Otherwise, you could set yourself up for disappointed customers, bad reviews, and a suffering business.
You can also bypass the process and sign up for a dropshipping platform that has already done all of the work for you. For a subscription feel, you’ll instantly be able to push products to your store, and discover new products and suppliers without any effort.
2. Evaluate suppliers.
Once you have a healthy list of wholesale suppliers, it’s time to test order products, and document your journey from start to finish in terms of communication, tracking number, shipping time and quality of the delivery and product. Rate them based on the following criteria:
- Product Selection
- Shipping time
- Wholesale Prices
Order their products and test their entire process. This way, you’ll know what expectations to set and you’ll be able to work with this supplier from one order, to thousands. Make sure to keep an eye out for the wholesale prices as well.
Ideally, you’d like to make a 30% profit margin on each product and still be able to offer affordable pricing for your target market.
Choose and Build Your Ecommerce Site
1. Ecommerce marketplaces.
Using the dropshipping model for your ecommerce store can save you time, effort and a lot of upfront costs when starting your business.
But what would dropshipping look like in an ecommerce marketplace? If you’ve ever looked at Amazon and eBay, the products are listed in an uninspiring, and simple grid that makes them easy to find. There are no marketing tactics and no value proposition. The items are similar, with few ways to differentiate which one to buy other than customer review filters.
There’s no denying that ecommerce marketplaces like Amazon or ebay are great for getting your product out there. But if your product isn’t one of a kind and incredibly unique, how will you appear as a suggested product to your customers? You become another brick in the wall, and have very little opportunity to build a brand, share a story, and really differentiate yourself. To top it off, you have to compete for similarly (or cheaper) priced competitors from Alibaba on a daily basis.
This approach can work if you have a one of a kind product with an incredible value proposition, but keep in mind – your marketplace competitors are working night and day to outperform you and build a product that will trump yours in both price and function.
2. Ecommerce platforms.
Ecommerce platforms were built to help small business owners like yourself jumpstart their online business and create an incredible brand with your own unique story.
With built-in high converting website templates and an already secure payment portal, your customers won’t be hesitant to easily pay with their credit card and sign up for your offers. The benefits of using an ecommerce platform include:
- You can build your own brand.
- You can offer unique value propositions.
- Your payment portal is already secure.
- Website templates are already available to you.
- You can easily adapt to changing times and trends.
- You don’t have to be dependent on an ecommerce marketplace.
BigCommerce boasts a comprehensive suite of tools from marketing to analytics, high caliber design options, and plenty of support from the pros. You can always use free website builders such as WordPress, but you’d be putting yourself through the school of design for high converting features.
If you don’t have the time or expertise, choosing an ecommerce platform is an easy and quick way to save time and money in the long run.
Promote Your Dropshipping Business
Now that you’ve built a beautiful website, added incredible products and solidified the small details of your dropshipping business, it’s time for people to see it. Promoting your dropshipping business is one of the most important aspects of running a successful online store.
You’ll need to use all of the information you learned from your competitors and build a marketing strategy that excels. You can start off with these four critical steps:
1. Send emails.
You’ll want to start off your email marketing by getting a solid email list from the people that visit your website. Capturing emails from the people that visit your online store is critical to developing leads – and sales. An amazing way to do this, is by offering a one time “40%” off banner or pop-up if they sign up for your email promotions. Another great tidbit is offering a free t-shirt with every first time purchase. This is a great way to have people do the marketing for you.
This way, your visitors will not only be enticed to make a purchase, but they’re giving you their email, so you can continue nurturing the relationship. This means creating an amazing email campaign that uses their information to personalize the content.
For example, if someone purchased baby clothes for a newborn, why not email them a few months later with clothes for a 6-month-old? Same goes with purchases of clothing. If a customer bought a sweater dress in the winter, why not email them with spring picks and promotions a few weeks later? Personalization matters.
2. Create social posts.
If you haven’t noticed, social shopping is now a full-blown trend on all social media platforms. In fact, 87% of ecommerce shoppers believe social media helps them make a shopping decision.
Facebook, Instagram and Pinterest all have the capability to create a “Shop” with products in-app. This means you have a breadth of opportunity to create incredible content, and build your own brand through these platforms. You can start making sales right on your social profile!
But before the excitement can begin, you need to create a content marketing strategy and social posts that really draw your viewers’ attention.
- Choose a brand color palette: Make all of your images and aesthetic uniform. You can do this by either always using the same filter, or by making sure the images you take have that same simplicity and color palette. Don’t be afraid to use photoshop otherwise!
- Create a lifestyle: Share the lifestyle your store and niche embodies. Are you selling minimalistic clothing? Create a story with your images around the simplicity of life. Show customers how clothing can bring clarity and peace. Show them how you can change their lives.
- Use hashtags, location and tags: Once you’ve created some beautiful posts, you need to make sure that people can see them. You can run ads, and you can also make sure you add appropriate hashtags and tag lifestyle accounts to your page.
You can use this opportunity to also announce promotions, sales, as well as a discount if they sign up for your email newsletter.
3. Advertise on Facebook and Google.
It may sound like a no brainer, but advertising on Facebook and Google is tricky, and requires a lot of adjusting and retargeting.
Be patient, and keep running ads until you have a good idea of who your exact audience is. Don’t be discouraged when you don’t make a sale right away, it takes time to collect enough data from your segment to actually target a high-converting group of people.
Don’t make the mistake of cutting Facebook ads short because you aren’t seeing many conversions. When making changes and retargeting, it can take your dropshipping business 14 to 30 days before you start seeing conversion rates changes.
Realistically, your ads need to make 4+ impressions on a single viewer before they are convinced to buy something from your online store. Make sure your ad copy and images are appealing.
4. Optimize your ecommerce store.
We’ve said it before and we’ll say it again: Search Engine Optimization.
From your landing pages to your product descriptions, you need to think about using search engine friendly terminology when it comes to any form of writing on your website.
If you sell jewelry, make sure the language you use to title and describe your products and categories are a direct reflection of your SEO research. You can use Google Keyword Planner to find these keywords and incorporate them.
Lastly, make sure that you create a FAQ page so that your visitors know that you’re legitimate, and you avoid the same redundant questions that your customers ask. It’s a simple way to build trust and make your life easier when managing customer support inquiries.
So there you have it! A complete step by step guide on starting a dropshipping business, and taking life by the horns on your journey to entrepreneurial freedom.
With the resources available through BigCommerce and our integration with Spocket, you’ll be able to start dropshipping in a few hours, and build an online store that you can be proud of. We’re here to support you every step of the way, and provide you with the right tools to be successful. Ecommerce shows no signs of slowing down, so it’s time to hit the ground running and build a business that services your niche and community.
Want more insights like this? We’re on a mission to provide businesses like yours marketing and sales tips, tricks and industry leading knowledge to build the next house-hold name brand. Don’t miss a post. Sign up for our weekly newsletter.
Want more insights like this?
We’re on a mission to provide businesses like yours marketing and sales tips, tricks and industry leading knowledge to build the next house-hold name brand. Don’t miss a post. Sign up for our weekly newsletter.
Less Development. More Marketing.
Let us future-proof your backend. You focus on building your brand.
BigCommerce + Spocket Dropshipping Made Easy
Open an online store without the hassle. No inventory, no packaging, no shipping—just profits. For a limited time, enjoy 30 days free on Spocket.