As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.
In the world of ecommerce, there are few business models that are trending like dropshipping. And while dropshipping has been popular for some time, in the wake of COVID—which is forcing many people to work from home—it’s become an even more attractive model for entrepreneurs looking to build a sustainable online business they can run remotely.
But if you’re new to the world of dropshipping, you probably have a lot of questions. What do dropshipping companies do? Why is dropshipping such an attractive business model—particularly now? And what are the steps to take to embrace the dropshipping trend and build your own ecommerce business?
What is dropshipping—and how does the dropshipping business model work?
First things first—before we jump into how to start a dropshipping business, let’s quickly cover what, exactly, a dropshipping business is.
Dropshipping is a type of ecommerce business that allows store owners (also known as “dropshippers”) to sell a variety of products to their customers.
But unlike other types of brick and mortar or ecommerce stores, when you open a dropshipping store, you don’t have to invest in inventory. Instead, when a customer buys a product from your ecommerce platform, the order is fulfilled by a third-party dropship supplier.
Here’s how it works: when you sell dropshipping products, you create the store, market the products, set the pricing, and get the customer to make a purchase. Once the customer makes the purchase, you pay the wholesale price to the supplier, who manages order fulfillment and ships the product directly to the customer. Any difference between the retail price you collect from the customer and the wholesale price you pay to the supplier (minus shipping costs)? That’s your profit.
What are the benefits of dropshipping?
Now that you understand what dropshipping is, let’s cover some of the reasons why you may want to explore starting your own small business in the dropshipping space.
The dropshipping business model offers a number of benefits, including:
Dropshipping is an entirely virtual business
COVID-19 has made conducting business in person increasingly difficult. So one of the major draws of the dropshipping business model—particularly in today’s climate?
The fact that you can run your dropshipping business 100% virtually.
With dropshipping, there’s no in-person activity necessary; you don’t have to meet your wholesalers face-to-face, sell products in a physical location, or go to the post office to ship orders.
Instead, you can run your online store and manage all of your business operations virtually from the comfort of your home office—which, again, is always a benefit, but is especially helpful as we navigate the ongoing pandemic.
Dropshipping requires less capital than other business models
Dropshipping does have some upfront costs; for example, you’ll need to sign up for an ecommerce platform to host your store and invest in building, branding, and marketing your ecommerce website. But those costs are nowhere near the startup costs for other business models.
For example, if you were to open a physical store, you would have to invest a significant amount of capital in inventory. But because dropshipping relies on third-party wholesale partners, when you launch a dropshipping business, you don’t need to buy a single item of inventory—which saves you a huge amount of capital from the get-go.
Dropshipping offers more flexibility and less risk
When it comes to running a successful business, ideally, you want a high level of flexibility and a low level of risk.
And dropshipping offers both.
Because dropshipping doesn’t require you to invest in any product or inventory, it gives you the flexibility to explore new business ideas—without a significant amount of risk. For example, if you get bored with your product category, you’ll have to invest some time and effort into doing market research, finding new products to sell, and pivoting your marketing strategy—but because you don’t have to sell through any current inventory or invest in new inventory, there’s very little risk to your business.
Tips for starting a dropshipping business
Clearly, dropshipping can be a great opportunity. But what does it take to get starting with dropshipping?
Here are a few tips to help you launch your own dropshipping store:
Determine what types of products you want to sell
Before you take any steps towards building a dropshipping business, there’s an important question you need to answer—and that’s what types of products you’re going to sell.
The products you sell are going to play a huge part in fleshing out your business strategy. For example, if you decide to sell iPhone accessories, you’re going to have a different branding, marketing, pricing, and selling strategy than if you decided to build a dropshipping store that sells nutritional supplements. You’ll also explore the profitability of different types of products—and ensure that the products you’re going to sell online are going to generate plenty of profit for your dropshipping business.
Research your competitors
Once you know what types of products you want to sell, it’s time to do some research—and, more specifically, do some research on your competitors.
Researching how other dropshipping stores are marketing, pricing, and selling products can give you helpful insights into what works, what doesn’t work, and how you can differentiate yourself in the market.
A quick Google search can help you identify other dropshipping players in your niche. From there, you’ll want to get as much intel into how they’re selling their products as possible. For example, how are they pricing their products? How are they writing their product descriptions? Do they stand out from the other competitors in the space—and, if so, what makes them stand out?
The more you understand about your competitors, the better equipped you are to develop a dropshipping strategy that helps you best those competitors.
Lock in your suppliers
You can’t run a dropshipping business without a wholesale supplier—so before you get too far into the process of building a dropshipping store, you’ll want to lock in your suppliers.
As a dropshipper, you can either connect with suppliers directly (like AliExpress or Wholesale Central) or use a supplier directly that directly integrates into your ecommerce platform (like Salehoo or Oberlo, which integrates directly with Shopify stores).
Whatever supplier you decide to use, make sure you vet them; you want to work with a supplier that delivers high-quality products—and delivers them in a reasonable time frame. Things like slow shipping times, product quality issues, or fulfillment mishaps can sink your dropshipping business—so when you’re choosing a supplier, make sure to work with a supplier with a stellar reputation in the industry.
Create—and brand—your dropshipping store
Once you know what types of products you’re going to sell—and you know what supplier is going to deliver those products to your customers—it’s time to actually build your dropshipping store.
Obviously, you’ll need to do all the technical things that go along with building an ecommerce store (like building a store on an ecommerce platform and enabling payment capabilities for your customers). But if you want your dropshipping operation to be successful, you can’t just throw a bunch of products on a website, run some ads, and expect to drive business.
Consumers don’t want to shop on random ecommerce websites; they want to buy products from brands they can trust.
Creating a cohesive brand for your dropshipping store can help build that trust—and, in the process, help build your audience, drive sales, and increase your conversion rates. Some branding elements you’ll want to consider include:
- Your business name
- Your brand color scheme
- Your brand voice
- Your point of difference (what makes you different from your competitors?)
Once you’ve fleshed out who you are as a brand—and how you’re going to represent that to your customers—you want to create a consistent brand experience for your customers. For example, if you decide your brand voice is going to be helpful and educational, you should use that brand voice anywhere and everywhere your customers might encounter you—including on your website, on social media, and in any marketing materials. That consistency will help you build trust and brand recognition with your audience—and will ultimately help you take your dropshipping store to the next level.
Build a marketing strategy to connect with potential customers
Once you’ve built (and branded) your dropshipping store, it’s time to start connecting with potential customers—and that means creating and implementing a marketing strategy.
When it comes to marketing your dropshipping store, there’s no one-size-fits-all approach; there are a ton of different strategies you can leverage to drive customers to your website.
For example, you might focus on search engine optimization (SEO) to rank for certain keywords associated with your niche (like “iPhone accessories” or “Vitamin D supplement”) and drive organic traffic to your dropshipping website. You might use email marketing to incentivize customers to shop at your store (for example, by offering discounts). Or you might create Facebook ads around a specific product—and use those ads to drive qualified traffic directly to the product page.
Focus on building a marketing strategy that feels like the best fit for your business and your customers—and then roll out that strategy to start driving customers directly to your store.
Get out there and start your own dropshipping company
There’s a reason so many business owners are getting into dropshipping. It’s a business model that offers flexibility, the ability to work remotely, and the opportunity to make a lot of money. And now that you know how to get started with dropshipping, all that’s left to do? Use these tips to get out there and start your own dropshipping company!