Dropshipping can be a great way to launch an ecommerce business when you don’t have the resources or space to invest in a lot of stock upfront. It’s a good business idea if you want to test out the ecommerce market or set up a side hustle to run in your spare time.
In this guide, we’ll go through everything you need to know about how to start a dropshipping business, from the pros and cons to the steps of starting up. Read on to find out more:
What is dropshipping?
The dropshipping business model is where you sell products on your website but don’t physically have the stock with you. When a customer purchases an item from your online store, you then place an order with a supplier or manufacturer who ships the products directly to the shopper.
As a dropshipping retailer, you don’t own or send out the items that you’re selling — you’re effectively advertising the products that a supplier has and marking up their price so that you make a profit.
What are the advantages of dropshipping?
There are a number of advantages that make dropshipping businesses a potentially lucrative opportunity.
It’s easy and cheap to get started
Starting a dropshipping business is relatively straightforward and doesn’t require any advanced technical skills or expertise. You’ve just got to find the right products, suppliers, and set up a website to sell products on.
Unlike most other ecommerce business models, you don’t need a lot of money to invest in stock to get started. You also don’t need a warehouse to store your stock or hire staff to help with packing and shipping — some big bonuses.
It’s really flexible
You can run a dropshipping business from pretty much anywhere in the world. All you need is a laptop, an internet connection, and a good relationship with your suppliers.
And if you’re stuck at home due to various COVID lockdowns, it’s easy to set up a dropshipping business working from home too. You can even run it on the side while you work full time.
It’s easy to scale
With most other ecommerce models, scaling up the business requires a bigger warehouse to store the stock, and hiring more staff to deal with orders and fulfilment. Dropshipping businesses are easier to scale because the extra work generated by more orders falls to your supplier to deal with. Plus, without committing to huge volumes of stock you can experiment with different products and grow your product range effectively.
What are the disadvantages of a dropshipping business model?
There are a few downsides to consider before you start a dropshipping business.
Narrower profit margins
As a dropshipper, you make a profit on the difference between what you charge customers and what you pay to the supplier.
However, because you’re buying products individually, you don’t get any bulk discounts — and you have to keep your prices competitive, which means the profit margin is pretty slim on a lot of products.
Once the order is placed with the supplier, the rest of the process is out of your hands. You don’t get to check the quality of the products sent over and you have little control over packaging and shipping.
While this can be quite freeing in some aspects, if there are any problems with the product or delivery, then your customers will be complaining to you.
Reliance on suppliers
When you don’t physically have the stock yourself, you’re reliant on suppliers having them available. There’s a chance that you might sell something and then discover your supplier has run out of stock, which means you’ll have to disappoint your customer.
How to choose the right products for dropshipping
When you’re dropshipping, it’s essential to find products to sell that are in demand and profitable. There are a few ways that you can find products to sell:
- Look at trending products: This is one of the easiest ways to pick your products as you can just pick out popular products that people are already looking for. However, it’s worth considering there’ll be a lot of competitors already selling them, which can mean that you won’t be able to mark up the price as much.
- Go for niche products: Rather than selling anything that’s popular, you can focus on a particular niche. Selling specific products to a targeted niche audience is often one of the best dropshipping ideas — it’s a good way to increase your profit margins as there’s less competition. However, you will need to do some thorough market research, and ensure there’s enough demand to make it worthwhile selling in that particular niche.
- Find a gap in the market: Do some research to find out what products people are searching for online but can’t buy as readily, or look at popular products for inspiration for gaps in the market.
Use these as a base when you’re deciding on your product and your dropshipping concept — they’ll serve you much better than going on personal preference, and mean you’re much more likely to make money.
How to find a dropshipping supplier
It’s important to choose your dropshipping suppliers carefully. You need to work with ones that are reliable, sell high-quality products, and are easy to get in touch with.
Many dropshippers will work with more than one supplier or manufacturer so that if there’s an issue or a product is out of stock with one of them they have another supplier they can order from.
To get started, you can search on Google for wholesalers and suppliers of the products you want to sell. However, it’s worth noting that you may need to use a range of different search terms, as the suppliers might not come up in the search results immediately. Their websites often look quite outdated, so don’t assume they’re not a legitimate business and get put off.
Sign up to supplier directories
You can also sign up to supplier directories to get access to a list of vetted wholesalers and suppliers. These usually require paying a fee for access, but you know that the suppliers have been screened before they’re included.
Look up product manufacturers
Another method for finding dropshipping suppliers is to look up the manufacturers for the products you want to sell. They’ll have a list of wholesalers that sell their products and you’ll be able to get in touch and ask if they dropship. You can also find a lot of products on sites like AliExpress, which many other dropshippers will use to source their products.
Before you start selling products though, it’s important to make an order yourself so that you know exactly what they are, how good the quality is, and how long the shipping takes. You should also consider doing test orders on a regular basis just to check the quality is consistent.
Set up an ecommerce website
With suppliers lined up, the next step is to set up an ecommerce store for your dropshipping business. You can either set up your own website using a platform such as Shopify to sell your products or use eBay and Amazon.
Running your own website for your ecommerce business provides you with more control and freedom, but you also have to be able to attract customers to your website.
On the other hand, eBay and Amazon already have a lot of shoppers looking to buy products — but you do have to pay fees, and it can be harder to establish your own brand and scale a business on third-party platforms.
Market your dropshipping business
Marketing is key to making your dropshipping business stand out from competitors and increasing sales. If you’ve set up your own website then you need to use digital marketing tactics to drive traffic to your store and convert visitors into customers.
Here are a few tips to get you started:
- Start by ensuring your website is search engine optimised, and targeting relevant keywords so that it can start to appear in search results.
- Detailed and optimised product descriptions and high-quality images are going to be essential to gaining traffic and will boost your conversion rate.
- Setting up a blog for your ecommerce store and publishing relevant content can also improve your ranking in search results and increase traffic.
- Social media marketing is a good way to build up your online presence. When you’re just getting set up, paid advertising is a valuable channel to reach your target market and get shoppers on to your website. Consider running Facebook ads and Google shopping ads to target shoppers looking for certain products.
Use these marketing tactics, and you’ll soon see an increase in site traffic and sales.
Overall, setting up a dropshipping business is a lucrative idea for an entrepreneur or anyone considering online retail as a business opportunity. With a bit of research, the right products and right suppliers, and a clear dropshipping business plan, it’s a good way to set up a scalable ecommerce store.