Since the early 2010s, dropshipping has taken off as thousands of people have looked to increase their total income (or replace it altogether). However, most people fail and move on to something else. In this guide, I’ll teach you to succeed.
I think by now, the term “dropshipping” is pretty much a household term. Maybe ten years ago, people would have looked at you sideways when you told them about your business reselling things from AliExpress, but now pretty much everyone knows what you’re talking about now.
It’s not just AliExpress either! There are now many, many different suppliers you can use to start your dropshipping business.
Dropshipping businesses are great for people who don’t want to worry about the complexities involving inventory management and the related shipping costs when starting their e-commerce business.
Don’t let anyone tell you that this is oversaturated! It’s popular, sure, but when done right, this can be a very successful venture.
In this guide, I’ll teach you about dropshipping, how you should get started, mistakes to avoid, and everything else you need to grow a successful dropshipping business.
What is Dropshipping?
Dropshipping is a fulfillment method in retail where stores market, sell and collect payment for products without actually maintaining a physical inventory. Instead, prospective customers purchase products from the dropshipper, who hands shipping down to the actual manufacturer.
This is a big deal because it enables pretty much anyone with a website to open their own online business and make “commissions” off of other people’s products (sort of like affiliate marketing, in a way)! However, the customer has no idea they’re dealing with a third party.
Compare this with a regular brick-and-mortar business with an online aspect, like Target.
When you buy an iPhone from Target, you bought a phone that Target had to order wholesale, figure out logistics, storage, labor, and shipping to make the sale possible.
This requires a massive amount of work and labor that hurts profit margins. So, yes, at the end of the day, Target makes loads of cash, but it’s still a daunting task for anyone looking to get into the business.
Dropshipping skips pretty much all of that.
When a customer orders an item from a dropshipping store, the dropshipper takes their margin and uses the rest of the money from the sale to pay the supplier to handle the order.
You can see how substantially less work that is. To start, all you need is a website and suppliers.
Here’s something to think about:
In 2018, the dropshipping market was valued at about $102B and was expected to more than quadruple by 2025. You’re here in 2021, and there are billions of dollars in potential growth to cash in on.
Here’s how you operate a dropshipping business (in broad steps):
- You start an e-commerce business
- You market products online after establishing a supplier for them
- Once the customer purchases a product, you forward the payment (minus your cut) and shipping information to the supplier
- The supplier ships the product to the customer
In pretty much every case, the customer has no idea they even dealt with a dropshipper (especially if the supplier will let you add branded packing slips to the packages). Cool, right?
1. Starting Your Business
Starting is easy. Businesses like Shopify and Wix have spent billions of dollars creating an easy experience for people of any background to create their own ecommerce business.
It basically comes down to:
1. Deciding your product line
2. Developing your brand
3. Signing up for an e-commerce platform
4. Creating your website
5. Adding products to your store
6. Setting up tax, shipping, and payment processing
There is, of course, nuance to it, but that pretty much sums it up. As I said before, e-commerce platforms have put a lot of effort into making it really easy for you to start your own business.
Many e-commerce platforms, like Shopify or Wix, have native applications that enable you to automatically sync products from dedicated dropshipping suppliers like Modalyst or InventorySource. These services make it incredibly easy to add products to your store.
The actual process of creating your website used to be complicated, but now it’s like putting together one of those puzzles in elementary school. The harder parts come later, but those are the ones that really mean your success. Don’t worry; I’m here to guide you through it.
2. Planning and Research
Don’t just run headlong into your dropshipping business without a plan — carefully research what kind of products you want to sell, and the branding that’s going to tie it all together.
I learned this the hard way completely winging my first couple of businesses that went pretty much nowhere. I may have learned some valuable lessons, but I could have saved myself a ton of effort just taking the time to research, plan, and do things the right way.
I may be drumming it up as something that’s really complicated, but it’s not; it’s actually quite simple.
Now, on my comprehensive e-commerce guide, I talked about how there are generally two types of products: commoditized, and niche.
If you’re dropshipping products, most of the suppliers are going to be offering more commoditized goods for dropshipping. This is because they’re selling things that already exist as opposed to inventing something.
However, that doesn’t mean there aren’t more niche things out there for you to dropship. For instance, I had a friend who used Google Trends to discover steel wrist-watches trending.
He then found a dropshipping supplier for steel wristwatches and actually made over $8,000 in revenue from his store the first couple of months.
You’re welcome to take any path you want in terms of choosing what kind of goods you dropship. However, my personal recommendation is that you try to capitalize off of trends with a small product store, which is a store that only sells a small selection of products (with possible variations such as color or size).
You can even sell a single product! That’s pretty much what my wristwatch friend did.
Why do I recommend this? Well, it’s pretty simple: when it comes to commoditized goods (which are most of the goods available for dropshipping), there’s always a bigger fish.
For instance, let’s say I want to start a luxury fashion dropshipping store. I think this is a great idea because I’ll have a great brand, great customer service, and a selection of some of the finest products.
Sounds good, right?
Well, here’s what I didn’t think about: I’m competing with a lot of people, who have a lot more resources available to me.
My luxury fashion store may be great, but how am I going to compete with someone like Nordstorm who can offer fast and free shipping, physical stores, a rewards program, a broad selection, and much, much more all wrapped up in their established brand?
There’s really no way you or I can compete with that operating out of our garages on budget of a few thousand bucks (if that). You’re pretty much going to run into a similar situation trying to set up any kind of general store for commoditized products in any particular industry.
Now, how about instead of trying to beat huge stores at their own game, I did some research and saw that leather jackets are trending. Then, I created a very refined dropshipping store offering a limited selection of leather jackets.
I would then be accomplishing a few very important things:
1. I would be presenting myself as a premium source of leather jackets since it’s my specialty
2. I would be able to operate as a niche brand, despite selling a commoditized product
3. I only have to worry about developing marketing for a few products
Isn’t that amazing? So instead of trying to be another large fashion store that happens to sell leather jackets, you become the leather jacket specialist.
Your brand can revolve around your excellent taste in leather jackets, your premium standard, and the more intimate relationship with the customer that comes with being a niche brand.
That’s a night and day difference, my friend.
Good presentation is basically 50% of any business’ success. Let me show you what I mean:
Which of those two dishes would you rather eat?
Probably the right dish (bottom if you’re on mobile), even though it’s possible the left dish (top if you’re on mobile) is just as delicious.
The broth could be world-class, but you’d have no idea because it looks disgusting.
That’s the power of presentation.
I think after that little anecdote, it’s pretty obvious you’ve got to get this right. You’ve got to decide on visual branding to match your store’s service and do it well.
Look at Louis Vuitton’s website:
Everything is clean and minimalist, giving emphasis to large contrasting visual splendor. Everything is organized and functional, yet refined. It has the look and feel of a premium product.
Now let’s look at Target:
Bright, inviting colors. Vibrant colors. Happy faces. Functionality. A hint of elegance. It has all the look and feel of a family-friendly, professional brand.
Getting the picture? Your store’s visual identity has to match its product, mission, and goals. If you want to convince people that you are the premium leather jacket destination, you may choose a rustic yet elegant feel with a hint of minimalism.
As a general rule, make sure you provide plenty of functionality yet not to the point of visually overwhelming the customer. Trust me, I’ve seen this plenty of times with people new to the industry.
Designing Your Logo
Though technically an aspect of visual branding, logo design deserves its own subheading just because of how important it can be to the brand identity of any company.
It’s like the cherry on top of a milkshake: small relative to everything else, yet significant in its impact. It somehow ties it all together.
A good logo is simple, yet speaks volumes. You’ll recognize most of these:
Spotify is sound waves. Twitter is a bird (which tweets). Adidas is the three stripes. YouTube is an old-style TV frame with a play button. Target is, well, a target.
Do you get the picture? They say something about the brand in a simple yet unique and instantly recognizable way. There’s room for subtext, but on their own, they say plenty about the company.
You can it to be versatile as possible. When designing your logo, keep in mind that you’re going to use it in emails, on your website, packaging, advertising, and more.
Truth be told, setting up your store is the easy part! The harder part, however, is marketing and getting the traffic you need to make sales.
Most prospective drop shippers set up their store and get super excited about the success they think they’re going to have.
After that, they get hit with a huge dose of reality when they discover that a thousand different stores are doing the same thing they’re doing (and probably doing a better job).
If you’ve followed my research and planning advice, hopefully you’ve found a good niche you’re confident you can succeed in. If so, take some time to be proud of your accomplishments.
After that, get ready for the work that still needs to be done.
To succeed in any e-commerce venture, you will need a calculated approach to marketing.
If you walk into dropshipping without a marketing plan, you’re going to find that you’re spending way more money on ads and business expenses than you’re getting back. But don’t get discouraged; if you’re smart about this, you can and will succeed!
The main, and I mean the big thing that newcomers to the online moneymaking businesses across the board neglect is search-engine optimization (SEO).
The way I figure, most people think that if they set up a nice store and spend some money on ads, that they’ll hit critical mass after a while, and they’ll coast on word of mouth and move up in the search engine results naturally (if they even think about search engines).
That’s a big mistake.
Marketing and SEO need to be at the forefront of your mind from the start. Paid advertising should never be your primary traffic method (and when you do pay for ads, you have to be very smart about it).
Follow me as I get into the nitty-gritty about marketing strategies:
Setting Your Store Apart
I don’t need to reiterate the huge competition in the space of e-commerce. If you’re going to cut through this huge swath of businesses to the potential customer, you need to stand apart from them.
How do you do that? It really comes to solving a problem for them.
There’s a really great anecdote for this I experienced recently:
The pillow industry is huge, and there are thousands upon thousands of manufacturers of pillows, so many that you probably don’t even know who made your pillow.
So how does one come out of nowhere and create a huge pillow business in the midst of massive competition?
They solve a problem you didn’t even realize you had.
Above is PillowCube. Long story short, they stand out massively because:
1. Their product is visually unique
2. It solves a problem for customers (bad neck experiences with pillows)
They chose a specific demographic (side-sleepers) and targeted them with a great product.
You may not be actually creating a product in the industry of dropshipping, but you can learn tons from an anecdote like this.
Build your marketing strategy, and take it to these channels:
Now in eCommerce, this is a real classic, and for good reason.
Email marketing is an extremely effective strategy to target customers in their daily routines that only costs as much as it took to get them on your email list.
There’s a variety of really great email marketing software, such as MailChimp, that will provide you with a simple and easy way to create great emails to send to your potential customers.
Some e-commerce platforms such as Wix even have built-in functionality for this.
This is a given, but it’s a critical channel to discuss nonetheless. To really solidify your online presence, you need to have a regular presence on social media to communicate to potential customers that you are an active and involved brand.
I myself will often use a new company’s social media presence to gauge how serious of a business they are. If I see that their posts are low-effort and that they don’t post very often, their chances of getting my business are meager.
So, it’s really critical you do a good job on this front.
You might not have known that there are a variety of services that can make this much easier for you.
Check out social media management platforms such as Crowdfire and Agorapulse to help out with the daunting task of social media management.
In addition, some e-commerce platforms have built-in functionality for some social platforms, so you can post on Facebook (for example) without even having to leave your page.
I know I said to be careful with this channel, but never would I neglect it.
When done right, paid advertising can return huge dividends.
To get started, I will introduce Google and Facebook ads. These are the big two for pretty much everyone, and they have fantastic tools to help you chart exactly how well your ads are doing.
Google’s keyword-based ads can be really great because you pay for each click (and only each click) rather than for impressions.
This means that your ad expenditure on people who aren’t interested in your product can be kept to a minimum. Why? Because if they don’t want your product, they won’t click on it.
We in the industry call this Pay Per Click Advertising (PPC).
Google AdWords revolves around the aforementioned keywords that you choose and create text-based advertisements that Google will place in the search results of those searching for that keyword.
This is a great form of advertising, but to really get profit out of it can require some meticulous demographic research.
It’s not really recommended for beginners in the ecommerce space as the bill can rack up rather quickly with little to no return.
Ecommerce merchants will commonly use Google Shopping ads over text-based ads because it enables them to give the searcher an image, price, and title of the product in traditional e-commerce rather than just a verbal description.
Let me show you what I mean:
I searched for air fryers and received advertisements of various products complete with images, names, prices, brands, and special offers or reviews.
This can obviously be a really great tool for any retailer to advertise effectively. The Google Shopping platform also has fantastic tools for in-depth research of consumer interest, competition, and industry saturation.
I highly recommend you carefully research your product’s viability here before committing to anything.
In my experience, the primary use of Facebook advertisements is targeting extremely specific demographics that Facebook can provide thanks to all the information about themselves that users give Facebook for free via their social media use.
For one of my businesses, I target the demographic of people that have recently moved. Thanks to their social media service, Facebook can find those people and enable me to advertise for them specifically.
To target particular demographics for your niche, Facebook is a fantastic place to start.
Marketing is absolutely massive, and I could write a full encyclopedia on it, but that’s out of the scope of this article, which is a summary dropshipping tutorial.
So instead, stay tuned for blogs that go in-depth on marketing from me.
4. How to Run Your Business
Now that I’ve taught you how to start and market your dropshipping business, it’s time to learn how actually to keep the gears oiled and the machine of your dropshipping business running.
This is funny because while you don’t actually have to maintain a business inventory while drop shipping, you DO need to keep track of suppliers’ inventory.
Some automated services such as Modalyst make this a breeze, but other times you’ll find yourself having to coordinate shipping with a supplier manually.
The good news is that there are platforms built specifically to help you with this, like Ecomdash. This can make it substantially easier to keep track of your inventory (especially if you’re selling on multiple platforms).
Tools like this will become essential when you start receiving regular orders in your store. You do NOT want to be bogged down coordinating orders, especially in scenarios where you have to refund an item that wasn’t available when the customer placed an order!
Customer support isn’t just important; it can be one of the primary aspects of your competitiveness against other retailers.
As a result, companies spend millions of dollars trying to create the best support system they can.
Some retailers such as Walmart and Costco maintain very generous return policies that they KNOW will make them lose money, just for the sake of maintaining a consumer-friendly image!
A customer who has an excellent experience with your customer support is very likely to come back. On the other hand, a customer who has a bad experience will seldom come back.
Some of the ways you can create an exceptional and memorable customer care experience are:
- Accessibility. List a telephone, live chat, and email on your website (and respond quickly)!
- Social media presence, responding and reacting to consumer comments
- Generous return policies. Be willing to take a loss to provide a good experience at any cost
- Customer reward programs
As your business grows, you can look into dedicated customer care employees or third-party services.
Refund and Return Policy
Let’s talk some more about your return policy.
As I mentioned before with Walmart and Costco, you want to be generous with this. Yes, you will lose money in the technical sense, but overall you will come out ahead as people will remember their easy and convenient experience with you and be much more likely to return.
In the very competitive dropshipping scene, you’re going to find your business competing on customer service as much as any other aspect like customer appeal and product value. So it’s essential if you want to get this right.
Your return and refund policy is going to be a huge deal with word of mouth. However, when I can return something quickly and easily, I have an organic desire to tell other people about my great experience.
NOTHING warms a customer’s heart more than perceived generosity. I remember recently eating at a Brixx pizza restaurant when the manager came out and told me that the pizza that was made for me was not up to his standards.
Consequently, he would be giving me that pizza in addition to a replacement pizza, both for free. Any issues I had with that restaurant’s service were immediately forgiven, and I went right to Google Maps to give them a five-star review.
Whatever loss they took on those pizzas were more than compensated for by my returning business. Remember that principle.
Make your return policy easy and generous, and you will build a steady following of loyal customers.
Even before an order is made, customers will evaluate a new store’s return policy before placing their order, and a good or bad policy can decide their order.
5. How to Grow Your Business
We’ve covered pretty much all the bases in terms of getting your drop-shipping business off the ground with a running start. Now, let’s talk about how to keep growing it after you begin to tread water.
Before I continue, I need to remind you to keep a realistic attitude about your dropshipping business.
Yes, you will read about people who have started and made amazing turnarounds of $10,000 and their first month. However, you need to remember cases like that are the exception and not the rule — they often have lots of hard lessons preceding them.
If you’ve followed my guide so far, you’ve already done a lot of hard work and you can’t afford to get discouraged. Developing your dropshipping business is a marathon, not a track race.
With that in mind, let’s talk about some ways that you can develop your dropshipping business:
Use Multiple Platforms
Just because you have a stunning website with great mechanics does not mean you should be selling there exclusively.
Tons of successful ecommerce retailers sell their products not only on their website! They also sell on third-party channels such as Amazon, Etsy, eBay, and more.
Just be careful: many suppliers have restrictions against third-party retail, as listed above. Always verify whatever product you’re listing online is compliant with the supplier’s retail policies, or you’ll risk getting banned from their service.
Keep in mind that the more channels you have, the more hectic inventory management will become.
As I mentioned before, inventory tracking software will become essential to keeping all your inventory in check. If you fail to manage your inventory, you’ll risk receiving multiple dead orders at once.
Use Ads the Right Way
Advertisements are a potent (and often essential) tool in the e-commerce retailer’s kit.
You need to research the best channels for advertisements and use them to target the right demographics. Done right, these advertisements can generate massive returns for you.
Once you’ve got your advertising channels and target demographic figured out, look into making video advertisements. Countless studies have indicated that video advertisements are the best way to capture a potential customer’s attention.
E-commerce platforms like Wix have services to make video advertisements easy but don’t stop there. Have fun creating skits that will give your viewers a laugh and your links a click.
Summary and Conclusion
My guide has given you in-depth insight into the dropshipping business model in its entirety. Now it’s up to you to put that valuable knowledge into action and create a new income stream for yourself.
More than anything, you need to keep a good attitude.
Remember that building this business is a long-term investment. As long as you keep making smart decisions, you will find success. Keep your head up!
Dropshipping is great for people who don’t have a ton of capital to launch an e-commerce retail operation with.
I encourage you to follow the examples of successful e-commerce retailers and maybe even contact them directly for more insight.
I sincerely hope this article was beneficial to you and will inspire you to create a dropshipping business. Follow this blog for more insight into the entire e-commerce industry to further equip you for success.