How to Start a Dropshipping Business in 2022
If you’ve been looking into options to create an extra source of income online, dropshipping is one of the options you’re likely to come across. Dropshipping forms a big chunk of ecommerce and is spurring the rapidly growing ecommerce industry.
With 2.14 billion expected online shoppers in 2021, online shopping or ecommerce is slowly taking over the global retail industry. Dropshipping is the easiest way to get started with building an online store and needs zero inventory on-hand or warehousing.
All it takes is a website with good web hosting and/or an all-in-one ecommerce platform like Shopify and you’ll be ready to get started with your dropshipping business. But what else do you need to know before you start a dropshipping business?
How do you choose best-selling products? Where do you find the right suppliers? How do you find customers so your store gets repeat sales? We’ll cover all these and more below, but first let’s start with the basics.
What is Dropshipping?
The traditional retail business model (both online and offline) demands that you either create a new product or buy someone’s else’s products in large quantities to resell. Both of which come with some obvious setbacks in terms of start-up financing and warehousing costs.
Dropshipping solves these setbacks by letting you ship directly from the wholesaler or supplier to your customers. A customer will order the products from your storefront, but your supplier or merchant will handle everything from stocking up, warehousing and order fulfillment.
You’ll only need to market and sell the vendor’s products online to your customer base, while they handle everything else related to stock and shipping.
So basically as a dropshipper, you market your choice of products online with the aim of attracting online shoppers to make a purchase. Next, you’ll pass on your buyer’s information and order details to your supplier for order fulfillment and shipping.
Your customer will have no idea that you shipped products from a third party and this is even harder to tell if your supplier adds packing slips to each box.
Because a lot of dropshipping merchants know this, most have white-label products which you can brand and sell as your own.
So in effect you literally can build a brand and following without having to create a new product from scratch, physically purchase stock to resell or handle any shipping.
Since you’re the seller, the customers will deal directly with you, so you’ll still have the number one asset when it comes to retail, your customer base.
You’ll be amazed at how many of your favorite online stores are dropshipping from vendors half-way across the globe.
Pros and Cons of Dropshipping
Dropshipping is arguably one of the simplest ways to get started in ecommerce. It requires little start-up capital and tech experience. This makes it easy for anyone with a little time and determination to build a great business in the niche.
But as it is with any business, dropshipping also has its own downsides and may not be a good fit for your medium to long-term business goals.
That said, let’s take a look at the good sides and down sides to running a dropshipping business.
1. Minimal Startup Costs
Starting a business can be a costly venture. A traditional retail business needs hiring staff, renting space, stocking up on inventory plus other business overheads which all require a lot of capital.
Even if you decide to run an online store with the traditional retail model, it would still mean bulk purchasing inventory and paying for storage space. This also means in case the inventory doesn’t move quickly, you may end up with a lot of locked up funds in inventory.
The dropshipping business model cuts down on these start up costs and the hassle of managing inventory and shipping. All you need is good web hosting and a domain for your dropshipping store.
You can also choose an all-in-one ecommerce site builder like Shopify, Wix or Squarespace which all come with hosting. All you need to do is purchase a custom domain (or get one for free). No need to pay extra for hosting or worry about managing a website by yourself.
2. Low Business Risk and High Flexibility
The reduced capital requirements of a dropshipping progress naturally makes it less risky than starting a traditional retail business. You won’t have to worry about purchasing, packaging or labeling inventory up front or worry about storing products.
This means you can easily switch to a new product if your current selection isn’t bringing in the needed sales. Also the fact that you’re not purchasing inventory up front, means you can have more cash on hand to handle other pressing business needs.
You also get the added benefit of product flexibility from your supplier. Most dropshipping vendors offer a variety of products and product variations so you can quickly swap to something that your market appreciates better, with no loss of revenue or inventory.
Finally when it’s time to expand and scale your business or product offerings, you’ll be able to do so with minimal capital investment or hassle. You can either switch vendors, add new suppliers or partner with new distributors all with little to no cash input.
3. Less Operational Hassle Involved
Finally, starting and running a dropshipping business requires a lot less in terms of expertise and experience compared to traditional retail. A traditional store would require you to shop around for an affordable space plus hire staff to help with managing inventory and shipping.
Dropshipping on the other hand, simplifies the process of running your store all from the convenience of your store’s back end. Most ecommerce platforms come with a comprehensive and beginner-friendly dashboard on the backend that lets you see how your store is doing.
Everything is visible at first glance, from your store’s weekly bestsellers, store visits, new orders and outstanding orders. No need to painstakingly enter that data into a spreadsheet or system just to track your store’s performance.
Again most ecommerce platforms also come with reports and analytics. These reports will help you see which part of your business operations is doing well and which part needs more support.
Dropshipping is a great way to get into the ecommerce space with little capital. With time and dedication, you can build an additional stream of income that almost runs on autopilot. But it’s not without its downsides. Here are a few.
1. Lack of Branding
The dropshipping model involves getting your inventory from a dropshipping distributor or wholesaler. Often you’ll find that these merchants all exist in specific marketplaces like AliExpress or Oberlo.
That means that it's likely they’re also supplying other dropshipping stores with the same or similar products with similar packaging which goes against your business.
This would make it difficult to make your products standout. A good example is items that fall within the consumable or everyday accessory space like phone cables or cases.
Some vendors may offer to sell white-label products which you can request for custom labeling but that’s as far as it goes. You’ll have no control over the design, type or quality of packaging materials used for your products.
2. Lower Profit Margins
In recent times, the dropshipping niche has become very competitive. Because of its low barrier to entry, more entrepreneurial hopefuls are taking advantage to start an online business. The problem now becomes the possibility of commoditization in multiple niches.
In other words, because there are lots of people selling similar products using the dropshipping model, consumers consider such products to be almost the same. Hence the only differentiating factor becomes price which drives prices (and profit margins) down.
This may be worsened by the fact that most dropshipping suppliers/vendors exist within the same marketplaces. For example, Oberlo and AliExpress have built a reputation for having a large variety of dropshipping suppliers.
Thus chances are a large number of existing dropshipping stores are probably sourcing their inventory from the same pool of suppliers. In effect, most product offerings will seem similar and shoppers will automatically choose the cheapest option.
Now you can solve this problem by switching to the traditional retail version of ecommerce where you actually stock physical products. You’ll be able to better negotiate things like branding and packaging this way and hence compete on something else other than price.
But this solution only becomes viable if your store is already generating a sizable amount of revenue (think 100’s of thousands of dollars monthly). That would afford you the luxury of locked up capital in stock.
3. Limited control over customer service and order delivery
One thing that can make or break any online business is poor customer service and how quickly orders are shipped and delivered.
The traditional retail model gives you more control over the entire order fulfillment process. So although it may be more work on your end, you can at least be sure of orders being shipped out on time and in good condition.
Dropshipping however means the merchant or your supplier will be in charge of the entire shipping and order delivery. That may not seem like a bad thing initially, but if your supplier is unable to deliver orders on time and in good condition, that can badly impact your business.
On the other hand, customer service will still entirely be your responsibility with your dropshipping business. Since you’re the link between the customer and the merchant, you’ll have to handle all customer enquiries, complaints, returns and refund requests.
Customer service on its own can be a lot of work. Add that to unreliable shipping and/or order fulfillment processes your revenue and business will suffer. You'll also end up with bad customer reviews and a poor business reputation which can lead your store losing sales.
Who is Dropshipping For?
Dropshipping as a business model is pretty appealing to anyone interested in earning an income online. For the complete beginner who is experimenting with their first online store, dropshipping is a low-risk/ low investment option that requires little experience.
If you’re an existing store owner looking to test out new product ideas, dropshipping is a great way to experiment with potential product offerings. Here are a few more groups who can benefit from dropshipping as a business.
1. Entrepreneurs with Little Cash to Invest (Beginner-friendly)
The biggest perk of dropshipping is its low cost to start with. To start a dropshipping store, all you need is a domain name, web hosting and an ecommerce site builder. Registering a domain name can be free or cost just under $100 depending on the domain registrar you use.
Cheap web hosting can start from as little as $2.95 per month (with Bluehost for example) and that would be all.
If you prefer a ready out-of-box solution, then Shopify is the perfect ecommerce builder for a dropshipping store. It comes with built-in integration to dropshipping wholesalers and manufacturers via Oberlo and AliExpress.
The best part is you can test Shopify with its 14-day free trial and its cheapest plan starts from just $29.95 per month. Either way, a complete newbie can start their dropshipping store with a little over $100 and little-to-no prior sales or online business experience.
This affords beginners the option to spend more on driving and converting traffic to their new store, rather than having that capital locked up in inventory.
2. Sellers with Multiple Product Niches
If you already have an online store but are looking to sell items in a different niche, dropshipping is a great way to diversify your business at little cost. With standard retail, selling products in multiple niches would need stocking up on each unique product.
That could lead to many bits and pieces of different inventory which all need storage, sorting out and organization. It would also mean you’d have to keep tabs on how each product is doing which by itself can be a handful.
Dropshipping can simplify this entire process by providing you with a unified hub where you can simply order multiple unique products. Because you won’t have to physically stock up, you can sell different products in as many niches as you like with little overheads.
Again, since everything is managed from your ecommerce store’s dashboard, you can track each product's performance and decide whether to maintain or discontinue a product.
3. Retailers Looking for Validation
For existing brands and online stores that are looking to add a new product, dropshipping is a great way to test out new product ideas with your current customer base.
Introducing a new product usually involves first ordering small quantities of the new product as samples. After reviewing and approving the samples, you then place the bulk order and wait for inventory to be shipped to you.
Dropshipping eliminates that hassle by allowing you to start marketing and selling your new product of choice without having to stock up on inventory.
You’ll be able to test your customers’ response to the new product and decide whether to keep expanding that product line or move on to something else. If you’re able to get a manufacturer who dropships custom orders, you can specify what product variations you’d like to have.
This cuts down the stress and cost involved in the whole product development process. Plus, you’ll be more confident in your new product before you invest heavily in stocking up.
4. Side Hustlers
Perhaps you have a 9-5 job, but are simply looking to generate an extra source of income. Owning and running a dropshipping business is a good way to generate extra revenue in your spare time.
This is an especially great idea if you already have a blog or some kind of social media following. In this case, you don’t need to have a ton of different products in your dropshipping store but just a handful related to what you do online.
Even without an online following, you can still launch and build a dropshipping store as a side hustle. All that matters is testing out multiple products until you figure out which ones have the best conversions.
5. Instagram Celebrities or YouTube Influencers Who Want to Make More Money Online
Finally, the dropshipping business model has a huge potential for social media influencers who are looking to make more money online.
Whether you’re looking to monetize your Instagram or have a thriving YouTube channel, owning a dropshipping store is a good way to further monetize your content.
You could create a niche specific store that promotes products linked to what you do. For example, a clothing store if you’re a fashion influencer. You could also partner with other non-competing brands to have their products on display in your store while they fulfill orders.
You can review related products or simply use your own products in your everyday posts. Posting product videos is another good way to make money with your dropshipping store. All you’ll have to do is simply put a link to your store in your bio, post caption or profile.
Finding Profitable Dropshipping Products to Sell
Setting up your dropshipping store is the easy part of starting a dropshipping business. The most critical part is finding profitable products to sell in your store. The truth is that, usually your first few products may not do as well as you expect, without proper research.
Thus it helps to take time when selecting products to market and sell in your store. The right products have the perfect balance of competitiveness, uniqueness and good profit margins.
Here are some important points to consider if you want to pick profitable products for your store.
1. Criteria to Choose the Perfect Dropshipping Product
There are no guarantees when it comes to choosing dropshipping products, but there are key criteria that any product you choose eventually should meet. A good place to start would be with a list of your preferred product niches and then drill down to product ideas.
Your list should be informed by sales numbers, customer reviews and dropshipping statistics. After building this list, you can further narrow it down based on the following points.
The price point of your product can make or break your entire dropshipping business. You don’t want to fall into the bargain-bin pricing trap. In other words, competing for the lowest price simply because you believe it will make sales easier.
Ideally, you want to find a balance between your price, minimum number of sales you need to be profitable and keeping your customers happy. This means that your wholesale price should allow you to retail at a comfortable 15 – 45% profit margin at least.
Some store owners may choose to sell low-ticket items (anything less than $200) because they assume those products will move faster. Others may choose high-ticket items ($500 or more) because they feel it may take less sales to hit their revenue goals.
However, low priced items may not have a high profit margin and need a high volume of sales to keep your business profitable. Conversely, high-ticket items may require advanced marketing tactics and enough repeat sales to achieve the same goal.
Ultimately, you’ll have to figure out a price point that is both profitable and offers enough value to your customers so they willingly pay it.
Product Dimensions for Shipping
Your product’s size and weight directly influence packaging and shipping costs. The bigger, heavier and more delicate your product is, the more expensive it will be to ship. You should also keep in mind the risk of the product getting damaged during shipping especially when you’re not sure of the wholesaler’s handling.
For example, shipping breakable products may cost more. They may also require more labor to pack and could reach your customer damaged. That will give your business a bad reputation and hurt sales.
Shipping large high ticket items may cost more, but usually the profit margins for such products are high enough to afford the cost. If you’re just starting out and testing products, then smaller items are a better option.
Cross-sells and Upsells
Another way to make more per customer is to sell related products or have higher-end options available. These methods of getting more sales are known as cross-selling and upselling respectively.
Cross-selling helps you provide your customers with more value while raising the average sale per order. Doing in-depth product research beforehand will help you find out more product verticals so you can increase your offerings and serve your customers better.
For example, if your store dropships camping tents, you can also have other outdoor camping gear available for shipping. Be sure to choose a pricing strategy that makes buying an add-on item almost a no-brainer.
This could mean lower prices on the main item, but a higher markup on related cross sells so you can make that profit back. If you choose to go the upsell route, you could add some freebies or add something else of value to the upsell so that it provides a higher value compared to price.
Amazon does really well with cross-sells by showing customers what other customers who bought the same product bought in addition to theirs.
Your product’s lifespan here means two things; how often a consumer would need to buy or replace one and whether it is an upgradable or renewable product. Both of these factors will influence your store’s revenue.
Products that are disposable or renewable allow you to generate repeat sales and hence a steady cash flow to support your business. You could create a subscription for such products and offer discounts on quarterly or annual subscriptions.
Another option is the buy two, get one free model which works if your item doesn’t necessarily need to be purchased on a month-to-month basis.
The second factor that influences product lifespan is how often the product itself is upgraded or renewed. The main selling points of any item in an online store are its photos and product copy.
So if your product is upgraded every so often, you may find yourself always spending time to change the photos and copy of each product you list to match any new versions. This may mean you need to hire a freelance copywriter or learn how to write product copy yourself.
2. Know Your Target Market and Target Customer
The next most important aspect of building a successful dropshipping business, is to know who exactly your products are for. Identifying your ideal customer and building other customer profiles based on it will help you direct your marketing efforts better.
One common mistake most entrepreneurs make is to try and target as many people as possible. This is based on the erroneous belief that the wider your customer base, the more you can sell.
While there may be some truth to it, when it comes to dropshipping, targeting almost everybody opens your products to competition based on pricing. This will force you to drive your prices down and eventually affect your profit margins.
It helps to be as specific as possible about your ideal buyer persona and consider points like
- what they like
- what they don’t like
- What their interests are
- Where they live (geolocation)
- What problems are they trying to solve
- What dreams and goals do they have
- Their age, occupation and hobbies
The more specific you can get, the better. This will help you create a crystal clear picture of who you’re selling to and pitch your products as the solution they need. You’ll be able to figure out language that resonates with them and thus drives better conversions.
Another perk of being super specific is you can fine-tune your unique selling point. This will make it easier to stand out from the competition and maintain your price point based on value, rather than being a bargain.
3. Know Your Competition
The next most important thing to know is your competition. It’s one thing knowing what to sell and who to sell to, but it's even more important to know what your competitors are selling and how they are marketing their products.
Your competitors in this scenario would be brands that are selling similar products, solving similar problems and/or marketing to a similar customer demographic as yours. Studying your competition can help reveal what ultimately is working and what isn’t in the market.
You can learn lessons on what not to do from brands that aren’t doing so well and also pick inspiration from what to do right from those that are winning. Social media is a great place to start doing competitor research on brands in your niche.
A lot of dropshipping brands have a presence on Instagram, Pinterest, Tik Tok and Facebook to mention a few. Take a look at what your competitors are posting, what marketing campaigns and promotions they are doing and new product releases.
These would give you an idea of what your potential customers like and are looking for, product trends plus marketing ideas you can modify to suit your brands.
Marketplaces like Amazon and ebay are also good places to do competitor research based on customer reviews and ratings. Customer reviews will tell you what exactly customers love and what they hate, which you can improve on so you can have the winning edge.
Use online tools to investigate competitor websites. You want to know what your competitors are doing in terms of branding and design aesthetics. Do they have a guest checkout option or does everyone have to create an account?
Check their website score and authority in terms of SEO ranking using tools like SEMRush and Moz. These tools could also tell you how much traffic the site gets and from which sources. This will give you a fair idea of what works based on hard facts and data instead of speculation.
Order products from your competitor(s). Much as it may seem straightforward, you’d want to see how your competitor actually fulfills orders. Chances are it may not be as smooth as you’d expect. Perhaps you might notice some loopholes in their order fulfilment process you can improve on.
Better still, you may find their shipping times are too long or costs are too high, thus you can improve both aspects of the delivery process and get better reviews. You may even find that your competitor’s product quality leaves much to be desired.
All these will help you better market your products by choosing better selling points.
4. Finding the Right Product to Sell (e.g. Alibaba, Oberlo)
The last piece of the dropshipping puzzle is finding the right product to sell. The truth is usually the first product you choose to sell may not be the one that helps you achieve success in your business.
It’s better not to get too attached to product or brand ideas simply because you may find later down the line that you have to change your product because it’s not sustainable. In fact, a lot of successful dropshipping entrepreneurs find they have to pivot to a completely different product sometimes.
Thus it’s worth having a good source of lots of product options you can experiment with until you find a winning product. This is where marketplaces like Alibaba and Oberlo come in handy. Both marketplaces stock millions of products in almost every niche imaginable.
It’s good to start with a list of product names and sources from either of these two marketplaces. Thankfully, Alibaba and Oberlo both have scoring systems and customer review options for all their sellers.
Hence, the higher ranked a seller’s response time and satisfaction score is, the more likely you are to be dealing with a reputable supplier. Both Alibaba and Oberlo also allow customers (people like you in this case) to leave product and merchant reviews.
Another good reason to choose a supplier from a marketplace like Oberlo or Alibaba is because it readily integrates with most popular ecommerce platforms like Shopify. This makes it easy to sync your supplier’s inventory to your store’s inventory and also forward any orders to the supplier for fulfillment.
Finding the Right Dropshipping Supplier
The likelihood of your whole dropshipping business succeeding or failing is based on finding the right supplier. Since you’ll not be directly handling order fulfillment and inventory, a reliable and punctual supplier, choosing the right supplier is critical to a smooth running business.
What you want is a supplier that delivers great quality products on time and communicates whenever there’s a new development in supplying inventory. This will keep your business running smoothly and your customers happy.
Conversely, if your supplier doesn’t deliver on time or has poor products, that can make running your business a nightmare. Since you’ll be the one offering customer service, it could mean having to deal with multiple returns, refund requests and negative customer reviews.
1. Vet Suppliers with Screening Questions
Determining whether or not a supplier is a good match for your business goals may not be easy. You may come across a number of less than ideal suppliers before you probably find a great supplier.
However, you can ask specific questions in your first email to help you screen potential suppliers better. It’s best not to ask too many questions right off the bat so the supplier doesn’t get lost in the details.
Some questions you can ask include;
- Can you customize merchandise upon request or do you have white-label options available?
- Do you have an M.O.Q (Minimum order requirement)?
- What are your price quotes? Are they negotiable?
- Do you handle direct sales/ retail your products directly to consumers?
- Are there any hidden or additional costs besides paying for items?
- What are your return and refund policies? Do you offer a warranty or guarantee as well?
- How often do your prices change?
- What’s the average profit margin for this product(s)?
- What’s the best way to reach your customer care rep? Do you have dedicated reps for each client?
Asking these questions lets the supplier know you know your stuff and have done a lot of research. Some suppliers tend to take advantage of new clients/ store owners because they feel they’re new to the dropshipping business.
These questions also help you make sure the vendor is not a fluke. The last thing you want is a vendor who bails on you at the last minute and leaves your orders hanging. The retailer-supplier relationship is supposed to be a long-term one, so you need a supplier who can commit.
2. Lookout for Scam Red Flags
The popularity of the dropshipping business model has brought with it quite a number of scams. To protect yourself from falling victim to them, you’ll need to look out for any potential red flags.
A very common red flag is the absence of an address on their business correspondence or website. Every business is required to legally have a legitimate business address, which should be used in any business correspondence.
If a supplier prefers bank wires over checks and credit cards, that is a red flag. Unless your supplier truly can’t accept domestic transfers because of location restrictions or doesn’t have a payment portal on their website, you should be able to pay with your credit card.
Another red flag is having to pay “membership fees”. This may not be a 100% indicator of a scam but be sure to dig deeply into the background of any supplier that needs membership fees.
Usually, choosing an open marketplace like Alibaba or Oberlo eliminates some of these risks, especially the membership fee type of scam.
3. Do Your Due Diligence
The best thing you can do to ensure you choose the right supplier is to do your due diligence on the supplier. Spend some time digging online to find out more about their business and what people are saying about their products.
Don’t be afraid to directly question a supplier if there are details you’re not clear about. Always have your facts handy and look for any discrepancies between supplier claims and online reviews.
Check the age of their domain. There are lots of online tools to help you crosscheck a supplier’s domain age and authority. If a supplier claims to have been in the dropshipping supply business for years but has an almost new domain, that should raise questions.
Also the older the domain, chances are the more experienced a supplier would be in the business. There are lots of online tools and websites to help you verify the authenticity of a domain like who.is and many more.
Look for online reviews. Reviews are another great way to tell how legitimate a supplier is. The more positive feedback a supplier has, the higher the chances that they are genuine. You also want to make sure these reviews are from multiple sources as opposed to just one site.
Looking for online reviews will also let you know if someone has reported being scammed by a supplier or simply had a bad experience with them. That kind of feedback also tells you which merchants to avoid altogether.
Cross-check the supplier’s address and business registration. You’ll want to deal with a supplier that has a registered business. In case there are any legal issues, it is always easier to deal with a business than with an individual whom you can’t trace.
Apart from being registered, the business address should be their office or warehouse. A business with a residential address online especially may be a front to cover up a potential scam.
Ultimately, doing your due diligence on a business makes it possible to spot loopholes and warning signs that you otherwise may not have noticed.
Once you find a supplier that demonstrates reliable credentials, you can switch your attention to building a system to run your store.
Common Dropshipping Mistakes to Avoid
The low barrier to entry, low start-up costs and potentially high profit margins of a dropshipping business make it easy for complete beginners to set high expectations from their new venture. These expectations often lead to some pretty common yet avoidable mistakes.
Knowing some of these pitfalls beforehand can save you lots of wasted time, money and frustration. Avoiding them gives you a higher chance of being part of the many dropshipping success stories and living the dream dropshipping lifestyle.
1. Expecting Easy Profits Fast
This is arguably the most common mistake many beginners make in their dropshipping business. It’s easy to get swept up by the many success stories flying all over the internet about regular folks who have made a fortune from dropshipping.
Unfortunately, the part most people don’t talk about is the hard work and head scratching you may have to go through to figure out your store’s winning formula. Starting a dropshipping is simple but by no means a shortcut to riches or a get-rich-quick scheme.
Thus you have to be ready for the ups and downs, to go through the learning phase and figuring out how to make your store work consistently. It’s only then that you can begin to grow and scale your revenue to earn the kind of profits that could set you financially free.
It’s also worth considering dealing directly with manufacturers as opposed to middle men/merchants who dropship. Most manufacturers don’t dropship their products themselves but finding some who do in your niche may help you achieve higher profit margins.
2. Not Investing into Marketing and Promotional Activities
The next biggest mistake a lot of new dropshipping store owners make is ignoring or not having a marketing plan. Setting up a dropshipping store is quite simple. You could be done in as little as a few clicks of a button.
But the fact that you’ve set up a store by no means guarantees that buyers are going to beat a path to your store. Think about it. Millions of new stores are probably set up every day but only a few stores manage to gain and build traction. Why?
Because of marketing and promotions. Your marketing and promotion efforts are what will let people know about your online store, your brand and your products. Keep in mind that more and more traditional retailers are switching to the dropshipping model of business.
This makes the competition even more stiff because some of these brands already have an established audience or customer base. If you really want your online store to stand out and be visible, you’re going to have to market your store and brand aggressively.
You could choose paid or organic marketing campaigns via social media and email for starters. Once you start getting your first few orders, you’ll need to keep marketing to your target market to increase your customer base and keep your brand alive in people’s minds.
Two key parts of your marketing strategy include your sales funnel and email marketing. Having a sales funnel for your online business is crucial to your survival and success. A sales funnel is what will keep leads and potential sales coming round the clock.
Other ways to market your brand include adding your contact details to your product packing slips or adding a brochure about upcoming products with any orders you deliver. Be sure to ask for reviews if they enjoyed shopping with you.
3. Selling Goods with Copyright or Trademark
Once you’re dealing in products that are not made by you, you need to be sure you have the rights or necessary permissions to redistribute or sell those items.
In the online space, copyright and trademark issues are pretty easy to run into, even if you didn’t intend to infringe on them.
Thus it’s a good idea to steer clear of branded items from big name brands like Gucci, Versace or even avoid selling lookalike items. The last thing you need as you start your new venture is to get caught in a trademark infringement suit that’ll drain both your time and money.
Always ask your supplier about potential copyright and trademark requirements before selling their items. Another workaround for this problem is to sell white-label goods. White-label goods are basically items that aren’t labeled hence the name white-label.
Thus you can customize and rebrand these items to your specifications and sell them as your own without having to worry about any legal fallout.
4. Not Establishing a Proper Product Return Policy
One of the biggest aspects to consider about running an ecommerce store, is dealing with product returns and refunds. You have to be as clear as possible when it comes to your returns and refunds policy otherwise you could run into serious problems with customers.
It’s common for shoppers to order something and for whatever reason want to return it. The smoother and more hassle-free you make the returns process, the better it will be for business. Your suppliers should make the process of returning and refunding an order prompt and simple.
You also need to have a streamlined collection process for product returns.How does the consumer return the product? Do they pay the shipping costs themselves too? The more details you can give about how to return items, the easier the process will be.
Clarifying all these grey areas in your returns policy will ensure all parties involved in the returns process stay happy. Make your returns policy as visible as possible on your site and throughout the order process.
Running Your Own Dropshipping Business
So now you’ve set up your store either using Shopify or Amazon FBA, found a great supplier and have a strong marketing plan and strategy in place. The next part is to figure out the most efficient way to run your dropshipping business.
Every business has multiple moving parts that you’ll have to keep track of. Customer satisfaction and support, marketing, managing refunds and returns are all parts of your business you’ll need to control.
Ideally, you’d want to create a system that lets you stay in control and manage each of these aspects, just like a big corporation would.
1. Customer Ratings and Reviews for Your Dropshipping Business
As you start promoting your dropshipping business, one of the most important things to build are positive customer reviews. In the online space, customer reviews and ratings of your products and services are everything.
Amazon is a good example of how allowing customers to leave reviews can drive your business. People trust Amazon because most of their product listings have both positive and negative reviews, which helps buyers to make informed choices when purchasing products.
As a new store, you can use positive customer reviews to your advantage and boost conversions on your site. First, you have to make sure your customers have a great experience while shopping on your site.
Right from navigating the site, to placing an order, shipping up until the final product delivery, you’ll want everything to go on smoothly and without a hitch. Keep your delivery times short, respond quickly to customer enquiries and ask for feedback on how to improve your service.
After delivering a great customer experience, make it easy for your customer to leave a review. It helps to leave an obvious “leave a review” button at the bottom of the site or simply ask your customer to rate their overall experience on a scale of 1 to 10.
You can also ask for customer feedback beneath each product as a testimonial to encourage other shoppers to purchase your product. All these serve as social proof which helps to further close sales.
Another great place to display social proof is on your social media pages. Post your top customer reviews on your social media pages. Asking your followers to share their favorite products in the comments is another great way to boost your credibility and reputation.
2. Use Email Marketing to Increase First-Time Orders and Repeat Orders
Email marketing is one of the most effective digital marketing strategies for gaining new customers and retaining old customers. Statistics show that for every dollar spent on email marketing, you make as much as $40 back.
That’s over 1000% return on investment which is staggering. This is why it’s important for you to begin building a mailing list for your dropshipping business. Something as simple as offering a discount to first time site visitors with a pop up window is a good first step.
You could also simply encourage visitors to your site to sign up to your mailing list to stay updated with your new product releases and promotions. All you need is a good email marketing service like ConvertKit, Constant Contact or Active Campaign.
ConvertKit allows you to create beautiful landing pages for emails and newsletters in under 10 minutes with zero coding skills. Plus, you get the first 1000 subscribers free as well as unlimited landing pages and forms too.
Another great way to use email marketing is to retrieve abandoned carts. Sometimes shoppers choose what they want but leave the items in the cart without checking out. Abandoned cart emails allow you to remind a customer to complete an order.
Shopify among other ecommerce store builders offer built-in abandoned cart email sequences which you can link to your email marketing platform of choice.
3. Attract More Customers With PPC Advertising and Marketplace Ads
Social media may be a great way to attract customers and leads organically, but it’s worth incorporating a paid advertising campaign into your lead generation efforts. A combination of paid ads and organic marketing methods will help your store gain traction faster.
Just like how if you had a physical store location you’d print banners and brochures, an online store equally needs ads to drive traffic to the site. There are lots of options when it comes to online ads.
Before you start spending money on pay-per-click (PPC) ads it’s best to first consider which channel would give you the best results. Is it better to go with Facebook or YouTube ads? What about Google ads? Or you’ll be better served using a marketplace ad?
Facebook advertising is a good place to start that lets you run super targeted ads. You can choose everything about your target audience even down to location and occupation. Thus if you know your ideal buyer persona well, you can reach them directly via Facebook ads.
In terms of order fulfillment services, choosing the Fulfilled by Amazon mode of dropshipping, may give leverage with Amazon marketplace ads. The platform itself has competitive offers and free promotional clicks on ads for subscribers on their FBA program.
This would help you to take advantage of the large volumes of traffic on Amazon’s site.
4. Managing Refunds, Returns, and Replacements For Dropshipped Products
Once you choose to sell physical products online, you’ll need to have a return, refund and replacement policy in place. Customers can change their minds or discover that an item doesn’t fit right or is defective.
As long as you’re not directly handling product delivery till it reaches the customer, you have to accept that things can go wrong along the delivery chain. Having a clear and easy-to-follow returns and refunds process in place saves everybody from being stressed out and frustrated.
It will also boost your online reputation and add to your overall customer satisfaction score. You can check out the returns and refunds policies of other brands in your niche to help you craft something that fits your business.
However the general steps for refunding products you have drop shipped are
1) The customer first places their refund request through your business, via email or any means you have indicated.
2) You contact the supplier for a merchandise return authorization number or whatever tracking system they have in place for sold products.
3) The customer mails the product directly back to the supplier and the supplier refunds the wholesale price to your business account.
4) You now refund the retail price the customer paid to the customer.
The entire process takes time and can be cumbersome. Setting a fixed timeframe within which customers can make refund requests helps to streamline the process better. Usually this period is also in line with your supplier’s window for product returns and refunds.
Some suppliers may have a restocking fee, which will become your cost as the retailer although these fees are usually small. Doing your due diligence about a supplier’s returns and refunds process as well as fees will help you know some of these terms and conditions ahead of time.
Then based on what your chosen supplier’s policies are, you can create one that works in line with theirs while allowing room for any potential hiccups in the process. Be sure to communicate all terms as clearly and concisely as possible in your policy.
You’ll also need to make room in your policy for defective product replacement. Sometimes during product handling and shipping, items may get damaged and reach your customer in a defective state.
While this may not be your fault, it is unfair to let your customer bear the cost of returning the damaged product. Not only would you risk losing your customer but it could end up hurting your brand’s reputation. This means it’ll have to be your cost.
Clearly spelling out the conditions of return would reduce the possibility of customers returning products under false pretense and also save you the hassle of processing product shipping.
5. Providing Stellar Customer Support for Your Dropshipping Products
Great customer support makes all the difference between average brands and brands with fiercely loyal followers. When you’re starting your dropshipping business, you may find you have to wear many hats, including the customer care hat.
Making your customers feel important, providing timely and helpful responses to inquiries and being reachable all count towards a great customer experience. The standard ways to provide customer support include phone, email, chat and social media.
Phone support is the ideal way to provide customer care. It’s personal, provides fast resolutions to client issues and is the best way to calm or diffuse volatile situations. Phone support can however become taxing especially if you have a lot of customers calling in.
Social media is a great way to provide customer support and also build a brand reputation for responsiveness and inclusiveness. Unlike other traditional customer support methods, social media allows for two-way communication between fans and your brand.
You can ask for customer feedback, conduct polls, share brand stories and much more. It's a perfect tool for social listening and can give insights into effective marketing and engagement strategies that traditional media don’t offer.
Live chat allows you to respond promptly to customer inquiries and complaints, plus you can easily automate the process using both free and paid chatbots.
Email is the best form of customer support if you have an IT helpdesk system in place or want to streamline customer returns and refund processes.
6. Maintaining Sufficient Inventory
The last part of running your dropshipping business involves making sure you have enough inventory and updating your stock when you run out of items. Although dropshipping means you personally won’t have to stock any inventory, you’ll still have to manage inventory on some occasions.
For example, if your orders are not automatically forwarded to your supplier, you’ll have to manage inventory by making sure what you have listed as available matches the actual stock levels.
Using inventory management software will help make this process less time-consuming. Some dropshippers also have apps that help you sync your store (especially Shopify) so you can forward orders instantly.
In case you run out of inventory at the time of a customer order, first let the customer know the product is unavailable and give them the option to wait or get a refund. Next you’ll need to immediately alert your supplier to put that item on backorder.
Always communicate with your customer and be as honest and straightforward as possible.
How to Grow Your Dropshipping Business Model
Once you get your dropshipping business up and running with a consistent amount of revenue flowing through, it’s time to consider growing your business. Growing your business here involves scaling your operations to increase your revenue, profit margins and your brand.
This would mean creating a system to help automate some other aspects of sales, operations and inventory management so you can focus on marketing and growing your market share. Here are a few tips to consider when looking to expand your dropshipping business.
1. Expand to Multiple Sales Channels
If you’re looking to increase your market share and profits, selling via multiple channels is the way to go.
You may start out with your product's own storefront using Shopify or even on Facebook or Instagram, but you can equally use other channels like Amazon FBA, eBay and Etsy. Often these marketplaces already have lots of traffic which means ready buyers.
Also you benefit from the platform’s built-in system of social proof, which is customer reviews and ratings. Even if you choose to do paid advertising on these platforms, you’re sure to gain much more traction, compared to other spaces online.
The main challenge with expanding to include other sales channels is the potential for order mixups. You may list one item from your supplier on multiple sites and get multiple unique customer orders which may lead to mixups.
If the item is out of stock that means piled-up back orders, delayed shipments and unhappy customers. The solution here is to make sure you have a good inventory management system or software in place or a plan in advance to deal with such situations, if they come up.
2. Setup Your Own Dropshipping Store
If you chose to launch your dropshipping business by selling on other channels beforehand, you should consider setting up your own store in the long term. Marketplaces and other platforms may save you the initial set up costs, but don’t do much for brand growth.
Thankfully there are lots of ecommerce store builders like Shopify and Wix, that make the process of building a storefront easy as most of these platforms are beginner-friendly. Owning your own store front will help you to build and sell your brand.
You can build a loyal following without having to compete for visibility like you would have in a marketplace like eBay. You can also customize your website’s design to suit your business and even have a blog, which is great for content marketing and building a following.
If you’re torn between choosing Shopify alone or going with Amazon FBA, check out our Shopify vs Amazon review.
A good option would be to combine Amazon’s FBA program with your dropshipping store.
Shopify is a great option for integration with Amazon. Shopify has full app support for Amazon via its app market plus lots of other dropshipping friendly apps to help your store run smoothly.
3. Hiring Virtual Assistants and Marketing Experts to Run Your Dropshipping Operations
The last part of expanding your dropshipping business involves hiring more hands. When you’re starting a new business, you’ll find yourself wearing all the hats in the business. But as your business grows and you have more and more customers to handle, you’ll need help,
Traditional hiring may be a little too much for a budding dropshipping business, that’s where hiring virtually comes in. There’s lots and lots of talent online you can hire regardless of your budget to help you get things done around your store.
Whether you need a writer, designer, customer care rep or simply want an assistant, online platforms like Freelancer.com, Fiverr.com and Upwork have all the talent you need. Signing up for these platforms is usually free, and posting a job is often also free.
To make sure you’re getting the best candidates, make sure your job description is clear and concise. You’ll also want to choose a candidate who can demonstrate that they are capable of fulfilling the responsibilities you need done.
Be sure to conduct interviews either via Zoom, Skype, or Google Meet and have at least 2 – 5 shortlisted candidates, so you always have a back-up option in case one fails. Use tools like Asana and Slack to outline tasks in easy to understand language with their due dates.
Examples of Successful Dropshipping Companies to Learn From
Success they say leaves clues. Likewise, there are lots of entrepreneurs from all walks of life with different backgrounds who have all successfully launched and grown a dropshipping company.
Most of these brands started with next to nothing in terms of funding and by folks with no experience or track record in building a business.
Today, they have grown into multiple 7-figure businesses in just about a year, showing you what is possible with dedication and commitment to your business.
You’ll find most if not all of the businesses below are hosted on the Shopify platform.
Men’s luxury boutique is a niche dropshipping store that sells unique-looking mens’ sneakers and outfits. The store’s branding as a luxury brand doesn’t however reflect in its pricing as it's products are quite affordable.
The store sources its products from AliExpress, reselling them for about 3x the price. The company recently took advantage of the colourful sneaker trend in 2018 to 2019. This grew their business by over 100%, increasing their revenue to between $700,000 to over $1.3 million per month.
What Men’s Luxury Boutique Does Well
1. A Large Number of Product Listings
The store has over 500 product listings. That makes it easy for them to have multiple best-selling products thanks to the large variety of products. Given that their average product price isn’t high, having more options helps drive higher sales which is good for their revenue.
2. Good Product Photography
It’s not unpopular for dropshipping stores to use the product photography directly from their supplier on their website in the long-term. Men’s Luxury Boutique took things up a notch by putting the products on white backgrounds and more custom backgrounds.
This gives the impression that the product is unique and can’t be found elsewhere online.
3. Targeted Social Media Campaigns
The brand has some 60,000 followers on Facebook thanks to targeted video and photo ads as well as collaborations with other non-competitive brands.
This Korean dropshipping store has built a solid reputation over the years for selling durable and high quality phone cases and accessories. Spigen’s main focus is constantly keeping its customers happy through high quality, relevant and innovative phone accessory solutions.
Its branding also has a high-end, contemporary feel to it that makes its products feel like premium quality products at a great price. It’s also developed multiple product lines all under the same brand that are still in the mobile accessory niche.
What Spigen Gets Right
1. Premium Branding with Built-In Customer Loyalty.
Spigen’s branding is spot-on and communicates clearly who its products are for. Its products are designed for the consumer who wants a balance between great form and function.
On top of that, each of its product lines are designed to appeal to a different segment of its customer group, which shows how they have nailed their customer segmentation.
It awards points for following its social media platforms, creating a new account and even recommending the brand to others. These points can then be redeemed as discounts on select products.
2. Product Variants Based On Customer Satisfaction
Spigen’s primary focus is over-delivering on customer satisfaction by selling relevant products. The brand always has updated phone accessories to match big brand new phone models as soon as they are released.
Their products are highly rated, even with good reviews coming from as high up as the US Department of Defense for military use.
Warmly’s niche is providing one-of-a-kind home decor items in the mid to high-ticket price range. The interesting thing to note is although they are a dropshipping store, their products are not your typical dropshipping products i.e furniture and decor.
These products are high quality, well-branded and designed items that stand out from other mass produced variants. Some of their most popular items include lighting fixtures, ceiling lights and home accessories like plant holders, tapestry and faucets.
The website’s branding and theme selection is designed to help sell its mid-to-high ticket items.
What Warmly Does Right
1. Right Choice of Social Media Platform
Warmly’s main social media channel of choice is Pinterest, which is perfect for the home decor niche. It gets over 10 million views per month from Pinterest across all its pins. That in addition to its well-targeted Pinterest ads.
That plussome 27,000 followers on Pinterest have helped it grow its revenue to between $500,00 to $1.1 million monthly.
2. Combination of Social Proof and Trust Tools for Higher Conversions
The store’s smart use of conversion boosting tools like trust badges,a sale timer and clear, concise bullet-point formatted product descriptions helps it maximize its product pages.
Notebook Therapy’s store name says it all if you’re curious about which niche it’s in. The dropshipping store specializes in super cute Asian-inspired stationery and gadgets, specifically Korean and Japanese designed notebooks, backpacks and handy gadgets.
In just under two years, the store’s revenue has grown to between $300,000 – $700,000 per month. The store’s design lends to its brand as it uses lots of bright colors that beautifully complement the products it sells.
Notebook Therapy sources its products from Oberlo, which gives it a much bigger variety of products to choose from compared to other dropshippers.
What Notebook Therapy Gets Right
1. Good Use of Social Media
Its unique and visually appealing products have helped the brand build a large following on both Instagram and Facebook. The brand also does quite a bit of paid ads on Facebook and as well as influencer marketing on Instagram which has helped it build a large base of loyal followers.
2. Multiple Customer Rewards Programs Including Email
Not only does Notebook Therapy have a big social media presence, the brand also has different customer rewards programs and promos. They have the standard referral program promo, where you get a discount for referring a new buyer.
They also offer discounts on bulk purchases and custom email pop ups to help convert more sales and get repeat buyers.
5. Born Pretty
Born Pretty is the perfect example of a niche dropshipping store that has scaled and birthed its own dropshipping marketplace for wholesalers and other dropshippers. The brand started in 2009 with the goal of providing a one-stop shop for all things beauty for its customers.
It initially started out selling nail supplies, but has added on makeup and false lashes too. It’s also one of the few stores on this list that wasn’t built with Shopify. Nonetheless the overall website responsiveness and design is still top-notch.
What Born Pretty Gets Right
1. Free Shipping on all orders worldwide
Shipping costs can be quite a put off to some shoppers, especially if shipping costs are higher than expected. Born Pretty overcomes this by offering free shipping worldwide on all orders. This is a smart move considering the fact that the items they sell aren’t large or expensive.
2. Customer Engagement and Rewards Program
Another great strategy the store employs, is to motivate customers to share user-generated content or UGC be it photos or videos. It then offers to reward the top 5 most creative posts with free products or discounts.
This strategy is great for getting social proof and boosting their social following. There’s even an extra prize for videos that get over 50,000 views and for the customer with the single highest order per month.
These are just a few inspiring stories of successful dropshipping businesses. If you’re looking for ecommerce success stories in more niches or stores that sell general items, check out our examples of successful Shopify stores.
Dropshipping for Beginners FAQs
Yes, dropshipping is still a profitable venture in 2020. More and more people are using dropshipping businesses as a means to build a source of extra income. There are lots of stories about successful brands built on the dropshipping business model.
You can start a dropshipping business with anywhere between $100 – $250, if you choose to buy a domain and web hosting. However the price can be much less if you choose an all-inclusive ecommerce builder like Shopify, whose basic plan starts from $29.99 per month.
There are lots of free online resources that provide information on how to dropship. Reading this guide alone will get you 80% ready to start your dropshipping business. Shopify also has a pretty comprehensive free beginner course on how to start dropshipping.
Starting a dropshipping business on Shopify is as simple as first signing up for any of their subscription plans. The next step involves choosing a well-researched product and a dropshipping supplier with a good reputation from a marketplace like Oberlo or Alibaba.
Finally, you’ll need to upload product copy and descriptions to your website after choosing a beautiful theme that’s in line with your site’s branding. Finally, go where your target market or audience is and promote, promote, promote!
You can start a dropshipping business targeting customers in any country as a lot of suppliers ship worldwide, based on your target market and niche. Nonetheless, some of the most popular preferences include the US, UK, Canada, Australia or other EU countries.
In dropshipping there are few important metrics which are critical to the success of your business. The first one being your traffic source followed by sales by traffic.
These two metrics will tell you where you’re getting the most traffic from and which channel is converting to sales most.
The next most important dropshipping metrics include your conversion rate which is the total visitors at any given period divided by the number of sales x 100. This is key in identifying what turns visitors into buyers.
Customer Acquisition Cost (CAC) is what tells you how much it costs you to get one customer within a period and therefore how effective your marketing strategies are.
You can find that by dividing your total marketing costs by the number of customers you acquired in a period.
Customer Lifetime Value is how much your customer is worth to your business over the time they constantly buy from you.
For example, let’s say you sell a subscription-based service/product and your customers averagely unsubscribe after a year. Their lifetime value will be calculated based on how much they spent with your business over a period of a year.
To find this value, simply take your customer’s average order, multiply it by the order frequency and divide it by the customer’s average lifespan.
Total Sales is how much revenue your store is generating in any given period of time. Average customer order value (AOV) tells you how much your customers are spending in your shop and what their buying habits are.
Ready to Start Your Dropshipping Business?
The dropshipping business model is a great way to earn an income online and build a scalable online business that will keep paying you for a long while. With the right product research, target market research and suppliers, you can build a consistent source of income.
The dropshipping business model simply involves you acting as the face that sells a supplier’s products to a customer. You market the products with your markup and forward orders to the supplier so they handle order fulfillment.
Starting your dropshipping business is as simple as buying a custom domain and linking it to your ecommerce store builder of choice. Shopify is a great beginner-friendly option.It’s easy to set-up and syncs seamlessly with marketplaces like Alibaba and Amazon.
Whether you’re looking to try out new business ideas, products or start your own print on demand store, dropshipping is the way to go.