If you’re reading this, you’ve probably realized that dropshipping is the perfect business for you – with its low starting cost and the ability to pivot at any point, this is a decision many entrepreneurs follow through with at a certain point.
In this thorough guide, we’ll outline exactly how to start dropshipping and what steps you can take to maintain and grow your ecommerce store.
Choose a niche: selecting a profitable product category
The first step to take when you start a dropshipping business is finding your niche. In other words, determining what products you’ll offer to your customers.
While searching for your niche, remain open to new ideas – sometimes, even profitable niches are oversaturated or lack suppliers. At other times, seemingly small niches have incredible potential. You should be able to adapt to the market and position yourself based on your research and the unsolved pain points.
Below, you can see some tips for finding profitable product niches.
Do What You Love
You already have a competitive advantage if you have a certain niche expertise. Utilizing your in-depth knowledge of a certain industry, hobby, or trend allows you to cultivate an online presence that feels authentic to customers – because it is.
This will also help you with your marketing, pricing, supplier relations, and every aspect of your business because you have a genuine interest and passion for what you sell.
Study Current Trends
You can also use tools like Google Trends to study the market’s current needs. If you establish an unusual spike in search input for dog collars, you may take advantage and build your own online store around this.
More often than not, making data-based decisions is a very reliable way to approach business ideation because it may allow you to identify gaps in the market.
See What Works
Successful dropshipping trends are often fleeting but very lucrative. You can go on social media and look at ads that pop up for inspiration. Alternatively, supplier websites allow visitors to sort their products by popularity, which can help you assess successful niches.
With the right marketing approach, you can make a popular niche market seem (and be) fresh.
Identify your target audience
A firm understanding of your target audience will dictate almost all of your decisions when starting your own dropshipping business. Make sure to pay attention to pricing, value propositions, tone of voice, and targeted advertising, as they are very important. Remember – catering to a specific group is always better than casting a wide net.
Your target audience is the people most likely to be interested in and purchase your products.
Here are some important aspects of identifying your target audience:
- Market Research – Conduct deep-dive research into your niche to understand the current trends and your competition. Then, you’ll be able to identify customer preferences and gaps in the market.
- Demographics – It’s important to gather the demographic data of your potential audience. This includes age, gender, location, and income level. It’s also massively useful to assess online behavior and buying habits.
- Product Fit – Does your product align with your targeted groups? Educated assumptions can be reliable, but your best bet is conducting actual interviews and surveys with real people to understand their points of view.
- Core Value Proposition – You must position your products to address your target audience’s pain points and desires directly. How do you help your customers? How does your brand improve their life? Your value proposition has a tremendous impact on your marketing and advertising efforts.
So, having an in-depth understanding of them is essential to a successful dropshipping business.
Research popular products and trends
With your niche established, you’ll need to find specific products to sell online. You can choose based on market gaps, demand, or, in some cases, getting recommendations from a reliable dropshipping supplier.
If your brand is positioned correctly, it can sell products with a generally unprofitable history. In this case, knowing your audience is critical.
Remember – a significant part of dropshipping is that sunk cost is generally not a factor. Likely, your first choice of products isn’t your last. And that’s okay. Experiment, proactively explore trends, speak to different suppliers, and compare performance.
Analyze competition and market demand
Many dropshippers get discouraged at the prospect of competition. However, competition is a good thing because it indicates demand. On top of that, analyzing your competition can help you improve and provide additional value to your customers.
Some actions you can take in researching your competition are to:
- Identify Competitors – Research dropshipping stores in your niche and regular e-commerce websites to establish direct and indirect competition. Study their traction to establish market demand.
- Analyze Competitor Websites – The competition’s websites can help you identify effective web design practices within your industry. You can consolidate all of them to create exceedingly effective online stores.
- Analyze Competitor USPs – Understand the status quo of your niche by analyzing current USPs (unique selling points). This will enable you to present your products in a new light or position them in front of a new audience.
You may also use the same logic to study your competitor’s marketing campaigns to optimize your advertising strategies.
Find a reliable supplier
Establishing long-term relationships with the right dropshipping suppliers can make or break your business because they are the core of your operations.
Not only will they provide you with products, but they will also deal with packaging and sending orders, and they will store inventory for you.
Let’s see how you can find reliable suppliers online.
Evaluate potential suppliers
Using keywords in your niche, you can find suppliers that fit different aspects of your criteria.
Here are some qualities to consider when evaluating suppliers:
- Location – Many dropshipping suppliers operate from China or India. While production costs may be low in Eastern countries, the shipping costs and delivery times can often be significantly higher and lead to a poor customer experience.
- Consider proximity to your target market and international shipping options.
- Packaging Capabilities – It’s extremely valuable for your brand if wholesale suppliers can package products using your own brand and logo. This builds trust with your customers and improves their general experience.
- The quality of the packaging is also essential, especially if it’s eco-friendly.
- Inventory Management – Understand how suppliers manage their inventory – like how often they resupply and how they deal with out-of-stock products.
Last but not least, make sure you work with a supplier who can process more orders if the need arises.
Compare product prices and product quality
If you’ve found multiple relevant suppliers, your next step is to compare their services. Review their prices and assess your potential profits.
Remember that the profit margin is usually lower in the dropshipping space, so any unnecessary processes within the supply chain should be ruled out in favor of better profitability.
On the other hand, low prices should not come at the cost of high quality. Many dropshipping stores get surprising returns due to low-quality products, inconsistent packaging, or a slow fulfillment process.
That’s why if you’re considering a partnership with a supplier, you should always request product samples. Not only will this let you determine whether or not the stock meets your quality standards, but you’ll also get to understand your product better up close.
Verify supplier credibility and legitimacy
Before engaging in any contractual binds with a supplier, it’s important to run a thorough background check of their company name, address, and contact information to confirm whether they’re a legitimate business entity. Check their business license – depending on the jurisdiction, you should be able to verify this information online.
Look for inconsistencies in legal names and contact information. Regarding the latter, contact the supplier via the provided contact details and pay attention to factors like responsiveness, professionalism, and transparency.
Finally, if you can ask for references or visit the supplier’s location, that would be extremely valuable as you’ll get a very in-depth look into their history and current operations.
Assess supplier customer service and support
Having a direct line of communication to deal with the dynamic nature of the dropshipping business model is critical.
You can judge a supplier’s level of support by:
- Responsiveness – The number of open lines, availability, and the average response times.
- Professionalism – Evaluation of the supplier’s attitude and their customer service representatives.
- Processes – Whether the supplier has established dropshipping process for different scenarios and situations or simple day-to-day tasks.
- Language Capabilities – The supplier’s ability to speak with you freely and proficiently. Language barriers can be detrimental to a professional relationship.
- Product Knowledge – An in-depth understanding of the product. It should be tested by asking specific questions.
- Openness to Feedback – A supplier receptive to feedback and actively tries to improve product and service quality is a valuable partner.
While you won’t get a full picture without working with a supplier, keeping the above factors in mind will help you ask the right questions in your initial conversations with potential supply partners.
Set up an ecommerce platform
A crucial step in building your online store is choosing the right platform and building your website. Here, we’ll go over the fundamental steps in doing so.
Choose a platform for your online store
There are many ways to build an ecommerce store, however, your choice will depend on factors such as your available time, resources, and scale.
Here are your two main options:
- SaaS Website Builder – Most dropshipping marketplaces utilize ecommerce platforms like NEXT BASKET to quickly build a functioning website using templates and plugins that automate and simplify dropshipping processes. This is an excellent option regarding the time required to develop the store and the funds needed to realize it.
- Building Your Own Website – Another option is building and hosting your website. While this option gives you the most freedom of customization, it may require a lot of funds and a significant initial time investment, as you’ll need to hire developers and designers to work alongside you.
Remember to always choose wisely and check all the pros and cons before making the decision.
Create a user-friendly website design
When it comes to the website’s design, it’s essential to start by using some tropes and principal design directions common to your industry. From there, you can customize your website to fit your specific brand and tone of voice. Always use high-quality images to stimulate your audience visually.
Remember to focus on an intuitive user journey. Users dislike an interface that isn’t familiar. So make sure that categorization, navigation menus, and sorting systems are easy to use so visitors can find exactly what they want.
Integrate payment and shipping options
Customer purchases should be easy to complete, with various payment options relevant to your target audience and their region.
This is also important for shipping methods, which may vary depending on the geographical location of your audience. Use your preliminary research to implement satisfactory checkout options.
Ensure website security and data protection
Keeping your personal and business finances and your customer’s data secured is a top priority.
To protect sensitive information, you should introduce safety measures such as:
- SSL Encryption;
- Complex Passwords;
- 2-FA Login.
While there are many complex anti-malware and anti-hacking measures, the ones we mentioned are a bare minimum to keep your site safe.
Select products and import them to your own site
When you complete the development process of your ecommerce site, the next step is to select the right products you will sell.
However, there are a few steps that you need to follow. You can find out more about each of them in the paragraphs below.
Add products to your store
Browse your supplier’s catalog and find products that align with your niche and target audience.
Use your platform’s tools to add the products and ensure your meta-data is checked so your internal processes run smoothly.
Optimize product descriptions and images
Images must be of the highest quality possible and accompanied by videos if available. A good visual representation of your products will make them alluring and give your brand a flair of professionalism.
Descriptions are an overlooked aspect of a product page. A well-written product description copy can boost sales significantly. Avoid copying and pasting product descriptions from the supplier’s web pages, especially if they are just charts or graphs.
Manage inventory and pricing
Regularly sync your store’s inventory with your supplier’s to ensure accurate and up-to-date information. Have automatic messages set up so you get notified of stock levels.
Regarding pricing, be competitive, but factor in shipping, marketing, and operational costs. Dropshipping profit margins are usually lower, so making enough profits is important to grow your ecommerce business and scale appropriately.
Create collections and categories
Creating groups and sub-groups of products is essential for building a successful ecommerce store, especially one with an abundance of items.
Creating collections and categories helps users navigate their desired products more easily while also helping your SEO and general website layout.
Promote your store
Now that your online business is running, it’s time to develop and implement marketing strategies to sell products. As an online retailer, most of your sales will come directly from advertisements and marketing campaigns.
So, figuring out the optimal ways to use your resources is a key step in your dropshipping business plan.
Develop a marketing strategy
Your marketing efforts should align with the standard practices of your niche while not being afraid to experiment and bring something new and fresh to the table – this is especially true in highly competitive environments.
Your marketing strategy should be pre-planned and optimized along the way so there’s no downtime and wasted resources.
Regarding e-commerce, paid ads are one of your best bets for immediate returns. While they take some A/B testing to get going, they’re usually the best way to generate revenue quickly. While other methods (we’ll list below) are reliable, they take time to gain momentum.
Google advertising services, Facebook and Instagram ads, and YouTube video ads. With the proper production and script, they can lead to a tremendous spike in website traffic and sales.
Use social media and influencer marketing
Partnering with influencers is another great way to funnel highly targeted users into your website. This way, you can target communities with specific interests and work with influencers who understand your product niche more deeply.
In many cases, influencers accept upfront compensation and work via an affiliate fee system, where they receive a commission for every purchase completed using their customer affiliate link.
Create email marketing campaigns
On your website landing page, you can set up an email collection pop-up where users leave their emails in exchange for a discount code or use a registration system for cultivating an email list.
You can use your email list to send email blasts or multiple sequences that aim to increase sales. They can be seasonal or used to generate interest in a new product.
Email can be a powerful marketing tool with high-quality copy and valuable, exclusive offers if used in regulation.
Implement SEO tactics
SEO (search engine optimization) is an excellent way to generate organic traffic to your website. It helps search engines like Google rank you high in search result pages.
Businesses invest a lot of resources into their SEO because of the nature of said traffic – it’s primarily people who are interested and already looking to buy specific products.
However, while it’s extremely valuable to work on your SEO, it shouldn’t be a primary focus for your dropshipping store.
SEO takes time and resources in order for your website to start ranking well (especially in competitive fields), so you may consider investing in other forms of direct marketing as well.
A rigorous order fulfillment process and business structure is essential to smoothly operating a profitable dropshipping business store.
Below, you can see some elements to keep in mind.
Manage customer orders and inquiries
An OMS (Order Management System) can be a useful and organized way to manage incoming orders. Most website-building platforms have in-built OMSs that allow you to manage the lifecycle of an order.
It’s important to be aware of the stage an order is at so you can have complete control over the process and provide prompt updates about their state to your customers.
Monitor stock levels and reordering
Prioritize regular inventory checks to know which products might be running low with your supplier.
The optimal way to do this is to set up automation tools that send you updates when stock levels reach a predetermined threshold.
Process and ship orders
Automation tools also remove the tedious process of manually forwarding orders to your supplier, saving you much time and effort.
Ensure that all relevant customer information is relayed clearly, including shipping information, product sizing, etc.
Handle returns and refunds
Set a clear return policy for a transparent and fair return process in case the customer’s expectations are unmet. Assist your customers as best you can and refund funds through a direct bank transfer (if the payment was digital) or store credit.
If a return ever occurs, be sure to find the source of the issue. Conduct quality checks and take measures to avoid the problem arising again.
Analyze and optimize
Even if you develop one of the more profitable dropshipping business ideas, it’s natural to observe suboptimal performance. Don’t panic – it’s part of the process. Analyzing your key metrics and making data-driven decisions to improve will eventually lead your store to a healthy and consistently profitable state.
Analyze store performance and traffic
Using your analytics dashboards, you can study your website traffic – the main traffic sources, conversion rates, key demographics, and other factors that can be relevant to improving your overall performance and revenue.
In addition to built-in systems, you can implement third-party online tools like Google Analytics for a more sophisticated view of your online store.
Identify areas for improvement
Study your findings and determine where your conversion rates suffer.
Here are some indicators to pay attention to:
- Cart Abandonment – Where do customers usually leave their carts? This will allow you to optimize the checkout flow.
- General Retention – Look at how long customers remain on your website before leaving. You’ll learn a lot about whether your website layout and general design decisions are optimal.
- Specific Demographics – Specific target groups may not resonate with certain aspects of your website. Knowing this, you can make amendments that fit your target audiences better.
- Customer Feedback – Direct feedback via social media or surveys can also give you valuable insights into how you can improve.
Also, if you notice a dropoff in social media engagement and social media-based traffic, you might assess areas for improvement outside of your website.
Test and optimize product offerings
Your product performance is another key metric to pay attention to. If specific product pages are less interesting, consider changing image placement, product descriptions, and pricing.
Making changes and assessing their success through tests is a reliable performance optimization method that will set you on the right path to success.
Scale and expand your business
Constant analysis and optimization is what makes online commerce a profitable business model. It’s what makes the difference between consistent success and exponential growth.
Later, you may decide to add new products, launch novel marketing campaigns, and form partnerships with additional suppliers to eventually solidify your presence in your respective industry.
Let your dropshipping business idea grow as you stay open-minded to possibilities and changes in user searches and expectations.
Frequently asked questions
What sales tax do I pay on dropshipping sales?
You’ll pay sales tax on dropshipping orders, but the rules under which countries collect sales tax depend on the specific jurisdiction.
What are some bad dropshipping practices?
Bad dropshipping ecommerce businesses practices include not researching suppliers properly, selling low-quality products, and ignoring customer service.
What are the risks for dropshipping companies?
The risks for dropshipping businesses include quality control issues, delayed shipping, supplier outages, and increased competition. Most dropshipping risks stem from the dropshipper’s inability to control the stock directly.