Ecommerce continues its rapid growth as almost $375 billion of online sales were generated in the United States in 2020. And with an ongoing pandemic that is forcing consumers to adjust the way they shop, this growth is only going to accelerate.
If you want to enter the ecommerce market, dropshipping is the perfect place to start. There is little upfront investment and you don’t need to be a major retailer to have success dropshipping products.
That said, there is a lot of hype surrounding dropshipping around the web. Because it is low risk and easy to get started, many have equated it to a get rich quick method of making money online. Sadly this is not the case. Dropshipping has the potential for massive success but it requires planning and consistent effort like any other business.
In this guide, I will lay out your roadmap for success, teaching you how to start a dropshipping business in 2021.
Table of Contents
- What is Dropshipping?
- How Do You Decide On Dropshipping Business Idea, Niche and Product
- What Sales Channels Should You Use?
- Do I Need to Create a Business Plan?
- What Are the Startup Requirements?
- How Do You Find Dropshipping Suppliers
- How Do You Create Your Dropshipping Store?
- How to Set Up a Customer Support System
- How Do You Market a Dropshipping Business?
- How Do You Handle Order Fulfillment?
- What to Do When You Get Return Requests
- How to Track Your Store’s Performance
- Dropshipping FAQs
- How to Start a Dropshipping Business Conclusion
What is Dropshipping?
Dropshipping is an order fulfillment method where an online seller does not hold inventory of the products that they sell. How this works is that the merchant partners with a supplier who holds the products. The seller lists the products on their website or on a third-party marketplace. When a customer makes a purchase, the seller passes the order information on to the supplier and pays them for the product. The supplier then ships the products to the customer and the process is complete.
The diagram below from IO Scout helps give a visual depiction of this process.
There are several advantages to using dropshipping for your ecommerce business including.
- Low upfront investment
- Easy to get started
- Low overhead
- Easy to pivot if needed
- You can do it from anywhere
With a better understanding of what dropshipping is, it is time to start building your business.
You will have to ask yourself some important questions. What products will you sell? Where will you find suppliers for those products? How will you get the order information and payment to the supplier?
I’ve broken what you need to do to start a dropshipping business into a simple step-by-process. Let’s get to it.
How Do You Decide On Dropshipping Business Idea, Niche and Product
The first step to starting a dropshipping business is to come up with your dropshipping business idea. This will involve choosing the niche or market you want to enter and the specific product(s) you want to sell.
Choose Niche and Product
The niche that you choose to enter will go a long way in determining how successful your business is. Fortunately, you are spoiled with choices. You could sell clothing, electronics, toys, and more.
Finding the right type of product to sell is a balancing act. On one hand, you want to sell something that is unique on the other you want to ensure that there is enough demand for what you are selling.
This chart from eMarketer shows the most popular ecommerce categories in the United States.
Start by exploring an area you are passionate about to see if there is a profitable opportunity. Having a business you are passionate about can help you stay inspired to put in the work necessary to be successful. From there you want to do some research to ensure what you want to sell has a solid profit potential.
Use a Keyword Research Tool
By using a keyword tool like Ahrefs or Ubersuggest, you can see what people are searching for around the web. This will give you an idea of what products are in demand. You will also be able to use the keywords (or search terms) that you find in your research for future SEO and paid advertising campaigns. Along with looking at the volume of searches you want to analyze the competition. You should look for a healthy level of competition but not too much. A niche that is saturated with competitors will make it hard for you to get started. Too little competition is often the sign of low demand or a niche that isn’t profitable.
Use a Product Research Tool
Jungle Scout is designed specifically for selling on Amazon. But what works on Amazon is usually a sign of a consistent market trend given that the majority of shoppers begin their shopping journey with a search on Amazon. With Jungle Scout, you can research both products and keywords. The platform has a database of over 475 million products that are pulled straight from Amazon. It will tell you which have high demand, low competition, and good ROI. There are similar product research tools available including Helium10 and AMZScout.
What Sales Channels Should You Use?
After you decide what to sell, you must determine where to sell it. There are two primary sales channels for selling your dropshipping products: your own ecommerce store and third-party marketplaces. Let’s examine each of these further.
Your ecommerce store will be the foundation of your dropshipping business. You can choose to sell on other marketplaces but you will still need to have your own ecommerce store.
With your own store, you own the web property and do not have to adhere to a marketplace’s rules. You don’t have to pay listing fees and you can control the branding.
I will break down how to create your ecommerce store later in the post.
Marketplaces are a great place to sell because you can tap into a massive audience already looking to buy products. Let’s take a look at some of the top marketplaces for dropshipping.
You likely are already familiar with the Amazon Marketplace. With over 12 million listed products and a 37% share of the ecommerce market in the United States, it doesn’t really need an explanation. Over half of all sales on Amazon come from independent sellers so there is plenty of opportunity.
To sell on Amazon you’ll have to create an account. You’ll have two options: An individual account or a professional account. The individual account doesn’t have a monthly fee but you’ll have to pay a per-item fee for every product you sell. The professional account requires a $39.99 monthly fee but no per-item fee for each product you sell.
Generally, you are able to sell whatever you want on Amazon excluding forbidden items like guns and such. There are some restricted categories that will require approval before you can sell the products. This includes
- Collectible Coins
- Personal Safety products
- Entertainment Collectibles
- Fine Art
- Fine Jewelry
- Sports Collectibles
- Power Sports
- Streaming Media Players
- DVD and Blu-rays
A note about dropshipping on amazon:
Amazon has stipulations for dropshipping on its marketplace. First, you cannot buy items from another online retailer (i.e Target) and ship them to your customers. You must also make sure that all the information included in the packaging lists you as the seller, not a third-party (you should be doing this anyway). Finally, you must handle all returns and customer support inquiries, not the supplier.
It is easy to get started selling on eBay and the marketplace gets tons of exposure. The biggest downside to selling on eBay is market saturation. With over 1 billion listings on the marketplace, it can be hard sometimes to get your products in front of customers, even with the high number of shoppers.
You can create an account for free and list up to 200 products without a fee. Beyond that, it costs $0.35 for every item you have listed. There are no special rules regarding dropshipping.
Etsy is a popular online marketplace focused primarily on handmade or vintage items and craft supplies. If you sell products that fall into any of these categories, it is a great marketplace for your dropshipping business.
When you sell on Etsy you are charged a $0.20 listing fee for every product you add to the market. If you list an item with a quantity over one, you will be charged $0.20 upfront for the initial listing and then a $0.20 renewal each time one of the items sells.
Etsy also charges a 5% transaction fee for every item sold on its marketplace.
Bonanza is not as well known as Amazon or eBay but it is another great marketplace for selling your dropshipping products. It is free to create an account and you can list as many products as you want without any listing fees. It also provides integrations for many popular ecommerce platforms. This enables you to connect your store to Bonanza and automatically have your products uploaded to the marketplace.
Do I Need to Create a Business Plan?
If you want your business to be successful, creating a business plan can be incredibly helpful. Otherwise, you could end up like the countless other would-be entrepreneurs who jump into dropshipping just hoping to make a quick buck without a sound strategy in place.
Here are the main sections the plan should include:
- Executive Summary
- Company Description
- Product Analysis
- Marketing Plan
- Operations Plan
- Financial Plan
The good thing about making your business plan is that you do not need to write it from scratch. There are plenty of dropshipping business plan pdf templates available to help you get started.
You don’t need to spend too much time forming your business plan in the early stages of building your business. It is most important to cover the main areas so you are aware of the competitive landscape and have a clear plan of action so you can launch more efficiently.
What Are the Startup Requirements?
Before you get to building your store or selling your products, you will want to make sure the legal aspects of your business squared away. Let’s examine what this entails.
Legally Form Your Business
You have a couple of options for the legal structure of your business.
- Sole Proprietorship: This is the simplest business structure and is the easiest to manage. But it does not provide liability protection.
- Limited Liability Corporation (LLC): An LLC is like a mixture of a sole proprietorship and a corporation. You get liability protection while also having the ability to have income flow through as personal income.
- Corporation: This is the most complex business structure and probably not ideal if you are just starting your first business. It provides the best liability protection but comes with more requirements.
Choosing the best business type will depend on your unique needs and is beyond the scope of this post. You’ll need to do some research to find the right option for you.
The employer identification number (EIN) is required by the IRS for certain classifications of businesses operating in the United States.
You will need this number to not only pay your business taxes but to do other things like open a business bank account or apply for a reseller account with some suppliers.
Note, that if you choose to operate as a sole proprietor you do not need to get an EIN. In this situation you would simply use your Social Security number for banking and taxation purposes.
Getting an EIN is free and you can do it online and receive the number instantly.
Set Up a Business Bank Account
A business bank account will provide a dedicated place to keep your profits and the funds you will use to run your business.
Having a bank account specifically for your business is especially important for dropshipping as there is a lot of money moving in and out when you need to pay suppliers for products with each individual order.
Don’t overlook this step. You don’t want to mix personal and business expenses in the same account. It will lead to an accounting nightmare.
Get Sales Tax ID
If you sell products you will likely need to collect sales tax from some of your customers, even if you are only selling online.
The way this works is that the state where your business is located is considered a “sales tax nexus”. If someone in this nexus buys something from you online, you must collect sales tax. But if someone buys something from you that lives outside of your nexus you do not have to collect sales tax.
To give you an example let’s say you live in New York and that is the state of your business. If John Customer who also lives in New York buys from you, you must collect sales tax.
Now if Jane Customer who lives in Oklahoma buys from you, you don’t have to collect sales tax. Make sense?
Since you will likely sell something to someone in your home state at some point you will need to get a sales tax ID for your location. Some suppliers will also check to see if you have one before partnering with you.
The steps you’ll need to take will depend on your specific location. For most states it involves filling out a simple application with the Department of Taxation and they get back to you with the ID number used to verify your account. Do some research to see what your state requires.
Name Your Dropshipping Business
This is an important step in setting up your dropshipping business that you need to take early on. The name you choose for your business will have a big influence on your brand and how customers will perceive your business.
The customer facing name you choose for your business doesn’t necessarily have to be the same as the legal name for your business. For example, you could want to call your business Widget Store to customers but the legal name could be Your Name, LLC.
If you go down this route you will likely need to file a Doing Business As (DBA) or Fictitious Firm Name form with your state.
Once you have determined the name you will use for your business, you will need to buy your domain name.
Your domain name is the web address where users will access your ecommerce store.
Domain names tend to cost around $15 per year. The exception to this is premium domains. These are domains that are more valuable given the words that they use. These domains can cost anywhere from hundreds to thousands of dollars.
Depending on what ecommerce platform you use, the service provider will also have a domain registry you can use to buy your domain. We’ll get into different ecommerce platforms in more detail later in the post.
Along with the domain, you will also need to create social media profiles on all the popular platforms using some form of the name you have chosen.
Create Business Logo
Your business will need a logo for you to display on your site and to help establish your brand. You don’t need to be an artist to get a high-quality business logo. There are plenty of places you can go to have somebody create one for you. It’s also not very expensive.
How Do You Find Dropshipping Suppliers?
Before you can begin creating your dropshipping store, you need to get your suppliers in order to be sure you have a stable supply of products.
What to Look For In a Dropshipping Supplier
Finding the right suppliers is one of the most important parts of starting your dropshipping business. Here are some of the key qualities you should look for when selecting a supplier:
- Good support: Communication is important when working with a dropshipping supplier so it is important to find someone that offers solid customer service. This way when you have any questions they can quickly answer them and you can work to resolve any issues before they become major problems.
- Timeliness: It is essential that your supplier ships your products on time, every time. Having to wait for long processing times can alienate your customers and cause them to do business elsewhere.
- Reliability: You want a supplier that you can rely on to help build your business. They should have a high order fulfillment rate while also not delivering many defective or damaged items.
- Solid inventory levels: If you are hoping to scale your business, it is important that your dropshipping supplier has a good amount of inventory on-hand. This will ensure that you can place a lot of orders without worrying about them running out of stock.
- Easy to use platform: Whether you partner directly with a manufacturer or use a dropshipping network (we’ll discuss the difference in just a bit), it is important that they support some form of dropshipping platform that enables you to automate much of the order fulfillment process. Otherwise, you would have to place every order manually which can be time-consuming.
These are the core qualities to look for when selecting a dropshipping supplier. Some other important question you’ll want to consider include:
- What is their return policy like?
- How often does the cost of products fluctuate?
- Do they give discounts to frequent buyers?
- Do they let you customize the packaging?
- Do they ship internationally?
Now, when getting set up with a dropshipping supplier you essentially have three options:
- Use a dropshipping platform that aggregates products in a central place
- Partner with a supplier directly
- Use a print on demand dropshipping service
Using a dropshipping platform
Using a dropshipping platform or service is the best option for finding products to sell, especially if you’re just getting started. With certain services, you do not have to go through any setup process for suppliers. They also provide tools to help you streamline adding products to your site and processing orders.
Let’s take a look at some of the best options for using a dropshipping service to get your products.
Oberlo is a dropshipping service that runs as an app for the Shopify ecommerce platform. Oberlo itself is not a supplier, instead, they provide a connection to the AliExpress marketplace for you to seamlessly add products to your ecommerce store.
When you create an account you can use the app to search for products across the marketplace. You can then add any products directly to your Shopify store with just a few clicks. Oberlo also has a chrome extension that allows you to add products directly from AliExpress. You simply browse as you would during a shopping trip and click the “Add to Oberlo” button.
When a customer places an order, you can use order to automatically place the order within AliExpress. When the order ships the tracking information will be pushed back to your Shopify store and sent to your customer.
Oberlo has a free plan and two paid plans costing $7.90 and $29.90 per month.
Spocket offers a service similar to Oberlo with a few key distinctions. Instead of relying solely on AliExpress for sourcing products, Spocket primarily uses suppliers based in the United States and Europe.
It also integrates with more ecommerce platforms than just Shopify including BigCommerce, Wix, and WooCommerce.
The app functions very much like Oberlo’s. You will search for products within the app, and add them to your import list before pushing them to your store. When a customer places an order it will appear in your orders dashboard. You can then process the order with a single click right on the platform. Spocket will then place the order with the supplier, charge your payment method, and the supplier will deliver the items to your customer.
Spocket plans start at $24 per month.
Wholesale2B is a dropshipping platform that connects merchants with suppliers across the United States.
When you use WholeSale2B, you do not need to sign up for reseller accounts with any of the suppliers to be able to sell their products. You just activate your Wholesale2B account and add the products that you want to your store.
Wholesale2B integrates with the most popular ecommerce platforms including Shopify, BigCommerce, WooCommerce, and others. With the platform, you are also able to push your products to marketplaces like Amazon, eBay, and Bonanza with a few clicks.
Like Oberlo and Spocket, all orders from your integrated sales channels will automatically be populated in Wholesale2B. You can then process the orders with a few clicks and pay for it with the payment method you have on file.
You can create a Wholesale2B account for free to browse their directory. To sell products you will need a paid account which starts at $29.99 (depending on the sales channel).
Partnering directly with suppliers comes with its own challenges and advantages.
When you set up a direct relationship with a supplier you get the best price for your products. If you use a platform like Wholesale2B to find domestic suppliers they are essentially acting as a middleman. While you have the benefit of being able to use the platform and easily add products to your site, they will add a markup to the wholesale cost of your products that can seriously cut into your margin.
This is less of an issue if you use a platform like Oberlo that connects to a marketplace like AliExpress. In this situation, you are still buying directly from the marketplace so there are no markups added.
Now researching and finding reliable suppliers on your own can be a time-consuming and difficult task.
If you want to go this route I recommend starting with a service like Wholesale Central. They have compiled a list of some of the top wholesalers and manufacturers in the United States that offer dropshipping services for their products.
Another option is to sign up for the free version of either Inventory Source or Wholesale2B. These two provide dropshipping automation services with their paid plan however their free plans provide access to a database with hundreds of dropshipping suppliers. You can use these free directories to browse for suppliers to see if there are any that you want to partner with.
Print on-demand services
Print on demand (POD) is a unique business model in which you can list and sell custom-designed products without having to handle any manufacturing or printing yourself.
When you partner with a print on demand service they will print your designs on the item once a customer has placed an order.
There are a number of quality print on demand services available today. The most popular is Printful. You will need to closely evaluate different services to see if it will work for the sales channels you plan to use. Some POD services have their own marketplace and do not integrate with ecommerce platforms or let you sell on your own store.
How Do You Create Your Dropshipping Store?
Once you have determined who you will use for your suppliers it is time to begin creating your dropshipping store. This will involve the following steps.
- Choosing your ecommerce platform
- Configuring your settings
- Optimizing your store for conversions
- Creating essential pages
- Optimizing your website for performance
Note: Your ecommerce store requires web hosting in order to be visible on the web. Some ecommerce platforms handle this for you while others are self-hosted solutions in which you need to handle it yourself. A detailed breakdown of how to set up web hosting is a bit beyond the scope of this article. So, we have not included it in the steps needed to create your store. I’ll touch on it a bit later in the post when analyzing WooCommerce. It is the only self-hosted platform we discuss. Given their ease of use, it is recommended to use one of the hosted options we provide.
Choosing the Right Ecommerce Platform
Selecting your ecommerce platform is one of the most important steps in starting your dropshipping business. You need to make sure that it works with your chosen dropshipping service and that the platform is easy to use. Let’s take a look at the best ecommerce platforms for starting a dropshipping business.
Odds are, Shopify is the ecommerce platform that you are most familiar with. It has experienced massive growth over recent years and is the second most popular platform in the world.
In our best ecommerce platforms review, we named Shopify the best platform for dropshipping. There are a couple of reasons why we named Shopify number one.
First, it offers the most integrations for dropshipping services. Second, it is incredibly beginner-friendly, making it easy to manage your store.
There are platforms (Wix) that make it easy to build web pages but Shopify has tons of high-quality themes that will help you create an attractive storefront with little design work on your part.
Shopify plans start at $29 per month and come with a 14-day free trial.
Popular dropshipping solutions that integrate with Shopify:
- CJ Dropshipping
BigCommerce is another widely popular ecommerce platform and is a great choice for your dropshipping business.
The platform is a little harder to use than Shopify but it offers more ecommerce features out of the box. It is also notably better for SEO.
BigCommerce plans start at $29.95 per month. There is also a 15-day free trial for you to see if it is right for you.
Popular dropshipping solutions that integrate BigCommerce:
Wix is a popular option for new dropship business because it is incredibly easy to use. Its greatest strength lies in its ability to design highly attractive web pages without needing any technical knowledge.
The platform does have some limitations though when it comes to ecommerce features, but with the support of a strong dropshipping platform, you’ll have everything needed to run your business.
Wix ecommerce plans start at $23 per month.
Popular dropshipping solutions that integrate with Wix:
- Inventory Source
WooCommerce is a free to use ecommerce platform that runs on the WordPress content management system.
While the plugin itself is free, there are still costs you will need to take care of to run your dropshipping business using WooCommerce.
First, you will need to pay for web hosting because it is not a hosted platform. You will also likely need to pay for a few plugins to give your store the functionality needed to maximize your chances of success. We break down the true cost of using WooCommerce more in this post.
If you are just starting your first dropshipping business you will likely want to use a platform that provides better ease of use. Not only is setting up the store more challenging you also need to set up web hosting. This can be an issue for new sellers. With a hosted platform like Shopify, you do not need to worry about performance as they will handle it for you. With WooCommerce your hosting provider will ensure basic server functionality but it will be up to you to optimize your site’s performance.
Popular dropshipping solutions that integrate with WooCommerce:
- CJ Dropshipping
Adding Products and Configuring Your Settings
When you will need to add your products and configure settings. If you use a dropshipping platform you can automate this process, by pushing products from a marketplace or product feed directly to your store.
If you partner directly with a supplier who doesn’t integrate with one of these services you will need to do this manually. This can be tedious, to say the least.
Upon setting up your ecommerce platform, you will also need to configure important settings. This includes.
Shipping: Your shipping settings will calculate how much customers are charged for shipping. They will also determine the delivery time the customer is given for their order. The ecommerce platforms we have listed allow you to offer free shipping or change the shipping cost based on location. You’ll want to keep international shipping in mind. If your suppliers do not ship internationally, you’ll need to remove this option from your shipping settings so someone in one of these locations can’t place an order.
Taxes: Your tax settings will determine if (and how much) taxes customers are charged when they place an order. You can choose to set a standard tax rate that applies to all orders or to have the platform automatically calculate the appropriate tax based on location. The latter is the best option.
Transactional emails: These emails are the communications that take place throughout the buying process. The most important ones being the order confirmation email and shipping confirmation email. Most ecommerce platforms will have these set up automatically but they are not always the most attractive looking. If you want to leave the best impression on your customer be prepared to customize these yourself.
Abandoned cart recovery: An abandoned cart is a shopper adds something to their cart and then leaves without making a purchase. With abandoned cart recovery, you can send them a follow-up email encouraging them to complete the purchase. Most ecommerce platforms have some native abandoned cart functionality built-in. You will need to make sure it is activated and that the follow-up message is aligned with how you wish to communicate with your customers.
You will need to configure a payment processor to be able to accept payments from your customers.
It is a good practice to give your customer multiple options so that they are able to pay with a method they are comfortable with.
When setting up your payment processor you need to pay close attention to how long it takes to withdraw the proceeds from your sales into your bank account.
If you are operating with a limited budget then you will have to use the money from the customer to purchase the product from the supplier. In this situation, if your processor takes several days to disburse the funds, you will then have to wait longer to get the products to your customers.
A simple way around this is to use a credit card. Sticking to the idea of not mixing business and personal finances that we established earlier you should consider getting a business credit card in this situation.
Optimize Your Store for Conversions
You need to design your store so that it converts visitors to become customers. Conversion rates vary considerably based on niche, as the chart below from SmartInsights highlights.
However, there are some common traits present in high-converting sites across different niches.
Here is what you should look to include in the key areas of your site.
The homepage should make it clear what your business sells and should encourage users to continue shopping. It should be easy to navigate while featuring any prominent promotional offers.
Category pages also need to be easy to navigate if you want your visitors to be able to find the products that they are looking for.
Features like product filters, sorting, can help with this. As your store gains more popularity, you’ll gain insight into what products perform the best. You can then place these more prominently at the top of your catalog.
Product pages need to have a clean and easy to follow design. There should be nothing on the page that causes friction in the buyer’s journey. This means it should be easy for customers to get the information they need and to add items to their cart. Some of the important elements you’ll need to include are as follows:
- Trust signals (security badges, payment badges, etc.)
Now, if you’re importing products from a dropshipping service, much of this will be included. That said, suppliers don’t always optimize their product information for conversion so you may still need to do some tweaking yourself.
Create Essential Pages
There are certain pages that are standard for an ecommerce website. Some of these pages may not get a lot of traffic but they are still important to have.
The terms and conditions page is a simple page that lays out the rules for using your website. It is not a prominent page and will likely not receive that much traffic. While it is not necessarily required, it is good to have and you can make one quickly and easily. The most efficient way to create this page is to use a template or a terms and conditions generator.
Like the terms page, you can use a template to help get you started but it’s important that the details of the page are relevant to your specific site.
The about page is where you will tell your audience about how your business came together and what your purpose is. This is a surprisingly important page as many shoppers will go to the About page early in their shopping journey to get a sense of the company they are considering doing business with.
The contact page is where you will give your visitors contact information to get in touch with you should they have any questions. At the very least you should have a fillable form. You can also provide an email address or phone number.
The returns page is where you will detail your returns process to your visitors. As much as you would like to think this is something you can skip over, returns are unavoidable if you sell enough products. By providing a clear return policy you are setting expectations with customers in advance. It will also make it easier to handle any returns as they arise as you will already have procedures in place.
Your return policy will be greatly influenced by your suppliers. If your suppliers do not give any returns you may find it disadvantageous to offer returns to your customer as you will have to eat the cost of sourcing the products. One potential solution is to offer returns when your supplier does not, so long as the item is not defective. This way the customer can return the item to you and you can use it to fulfill a future order.
The shipping page is where you will provide details about your delivery methods and how long customers should expect to wait to receive their orders.
Optimize Your Website For Performance
Once you have added your products and optimized your pages, you need to make sure that your website performs well. This means fast page load times, unbreakable security, and constant server uptimes.
If you use a hosted platform like Shopify or BigCommerce, much of this will be taken care of for you. The only action really required on your end is to compress your images so that they aren’t too big. Images make up the bulk of web pages, meaning they take longer to load. If you have a product page with a handful of uncompressed images you may find that your site speed lags a bit.
There are plenty of apps available for the ecommerce platforms listed above that will automatically compress all the images you add to your store.
Now, if you use a self-hosted platform like WooCommerce optimizing your site’s performance is much more involved. You’ll need to set up page caching and a content delivery network (CDN) if you want your site to serve content quickly to your users.
If you use a self-hosted option, your server will have limited resources compared to using a self-hosted solution. This is unless you opt for one of the more expensive hosting plans, which is unlikely when just starting your dropshipping business. This shouldn’t have a big impact early on when the server isn’t strained with too much traffic, but keep an eye on your site’s performance as your store grows and you have more web visitors.
How to Set Up a Customer Support System
You want to figure out how you will provide support to your customers before you start selling your products. This will help ensure that you are not caught off guard with any issues that you were not prepared for.
Set up a dedicated support email so that you can keep all your support communications in a single place. You can also consider creating a FAQ page that answers common questions or using a live chat system to provide more immediate assistance.
How Do You Market a Dropshipping Business?
With your ecommerce store fully setup, the next step in starting your dropshipping business is to attract customers to your site.
Unfortunately, if you build it, they won’t necessarily come. If you don’t market your store, no one will know you exist and you won’t get many sales.
The best marketing channels will depend on your particular products and how big of a budget you have to spend on ads.
Let’s take a look at the most important marketing channels and how they can help you grow your business.
Search engine optimization (SEO) is what makes your website visible for relevant searches on platforms like Google. Because the majority of ecommerce purchases begin with a search on either Google or Amazon, mastering SEO is a great way to bring new customers to your business.
One of the best parts of SEO for new business owners is that it is free. You do not have to pay for advertising. It only takes the investment of your effort to plan and optimize your site for search engines. That said, SEO can take some time before you can see results.
Unless you enter a niche with absolutely no competition, do not expect to rank at the top of results immediately.
You’ll want to expand on the keyword research you did when choosing a niche to hone in on the primary keywords you should target. You can then tailor your pages around these keywords.
Search engines like Google weigh a variety of factors when ranking websites. You’ll need to be aware of these factors and ensure that you optimize for each of them. Some of the important factors to keep in mind include:
- Meta titles and descriptions:
- Page load speed
- Image alt attributes
- External links (backlinks)
- Internal links
- Keyword density
- Use of LSI keywords
This diagram from Let’s Talk About Money further illustrates the importance of SEO for ecommerce.
Google Search Ads
You’ll notice when you make a search in Google that the top results are often paid advertisements. These ads are an effective way to reach new customers as you will appear right in front of them for relevant search queries.
Google search ads use a cost per click (CPC) pricing model. This means that you do not pay for an ad unless someone clicks on it and goes to your site.
Some sellers feel overwhelmed when first exploring Google search ads and opt to hop right to a platform like Facebook instead. While mastering Google Ads to get the best results takes time, there are some advantages to using this form of advertising early on in your business.
The biggest stems from purchase intent. Someone who is searching for a product on Google is further along in their shopping journey and much closer to making a purchase. Compare this to a social media platform like Facebook. You can target users based on their interests, true, but that does not mean they are close to making a purchase. When your ad appears in front of them they are simply scrolling through their Facebook feed. They came to Facebook to use the platform not to shop.
With Google, however, when someone searches for a specific product they are in the process of researching or buying something. As a result, the potential for higher conversion rates is greater, especially when you are presenting your business to a potential customer for the first time.
Google Shopping is a comparison shopping engine run by Google. Some results will appear for certain searches on the main results page. They are also available when someone clicks into the “Shopping” tab of a search query.
There are two ways your products can appear in front of customers in Google Shopping; organically (without paying) or through paid ads. To help small businesses through the COVID pandemic in 2020, Google made changes to Google Shopping to enable merchants’ products to organically appear in the results for a query, similar to the regular search page. Before, your products would only appear if you were running a paid ad campaign.
Now, paid shopping ads are still worthwhile as it will help get your products to the top of the results. Google Shopping Ads are cost per click just like search ads.
To get your products you will need to create a Google Merchant Center account and set up your shopping feed.
There are different plugins and apps for popular platforms like WooCommerce and Shopify that will help you format the feed correctly and automatically sync it to Google.
Social media ads are an effective way to get your dropshipping business out in front of potential customers. Here are the platforms you should explore when starting your business.
Facebook ads allow you to showcase your business and products to people while using their Facebook accounts. Facebook uses both cost per click and cost per impression pricing models. With the latter, you will pay every time someone SEES your ad, even if they don’t click on it.
To run Facebook campaigns you will need to install the Facebook pixel on your website. This little tracking code will allow you to track the activity of visitors on your site. Facebook is particularly useful for retargeting campaigns. This is when you show ads to people who have already visited your site. These ads work well as people who have already interacted with your business are more likely to make a purchase.
Instagram ads are similar to Facebook ads and in fact, you can manage your Instagram campaigns in the Facebook Ad Manager. Like Facebook, there are a variety of ad formats you can use to display your business and products in users’ feeds. Instagram is also very effective for running remarketing ads to people who have already visited your sites.
Imagine someone browses your site and looks at a certain product. With the Facebook tracking pixel, you can pick up on this. You can then show a remarketing ad to that customer on either Instagram or Facebook showing that specific product.
Email marketing remains one of the best forms of marketing as it continues to boast a higher average ROI than any other channel.
To run email campaigns you will first need to build your subscriber list. The best way to do this is to add a signup form somewhere on your website. This could be a simple email field in your footer or a popup that displays when someone is about to leave the site.
You can increase the number of people that join your email list by offering an incentive such as a coupon code or free shipping.
There are plenty of viable email marketing solutions available today. I would recommend checking out Klaviyo, Mailchimp, and OmniSend to start.
How Do You Handle Order Fulfillment?
As you market your store to your potential customers you will start to see orders coming in. It is at this point of running your dropshipping business that using some form of dropshipping platform or service will pay huge dividends.
While you do not need to handle shipping products with dropshipping, you still need to process the orders for fulfillment. If you use a solution like Oberlo, Spocket, Inventory Source, or Wholesale2B you can process orders with just a few clicks.
These platforms will populate the customer’s information for each order. If you have your payment method on file, you simply review the info, click a few buttons and submit the order. The order will then be placed with the supplier, your card will be charged, and the supplier will prepare to deliver the items to the customer. Simple right?
If you do not use a service like this, processing orders is much more tedious. It will involve you going to a marketplace and manually adding items to your cart and checking out with the customer’s information. Or, for some suppliers, it could mean sending emails with purchase orders.
When you first get started this may not be that burdensome as you will still have a small number of orders. But imagine trying to scale your business doing this. You will find yourself spending all day processing orders, not doing the things that will help your business grow.
This is why it is highly recommended to use a dropshipping service to automate the order fulfillment process.
What to Do When You Get Return Requests
When you sell products online, having customers who want to return their order and get a refund is part of doing business. We’ve touched on this a little bit earlier but it’s important that you’re prepared to handle returns when they arise.
As I mentioned, what you are able to offer for returns will have a lot to do with the suppliers that you use. Some suppliers provide a generous refund policy while others won’t take any returns at all.
Let’s take a look at some of the return options for popular dropshipping services:
AliExpress: If you use suppliers from AliExpress, the marketplace offers a buyer protection program in which they will accept a return and process a refund if the item is defective, not as described, or if it arrives outside of the guaranteed delivery window. To get a return like this, a dispute needs to be opened within 15 days of delivery. As it is unlikely that you’re telling your customers that you get your products from AliExpress, you will have to serve as an intermediary. The customer will need to contact you about the return and you will need to collect proof of damage and file the request in AliExpress.
Spocket: Suppliers on Spocket each have their own individual refund policy. Some will offer returns in certain circumstances and others won’t. However, Spocket reserves the right to override a supplier’s refund policy if a customer receives a damaged product. The customer will need to provide visual evidence of the damaged product within 15 days of delivery. You will have to serve as an intermediary in this situation as well. If Spocket approves the claim, the supplier must pay the return shipping charges and either replace or refund the order.
Overall, you’ll find that many dropshipping suppliers will not offer returns for a customer that decides they do not want an item. There must be something wrong with the item for them to issue a return. If this is the case, you will have to weigh if you want to offer returns for “buyer’s remorse” out of your own pocket.
Another thing to keep in mind is that some suppliers charge a restocking fee in order to process returns. In a situation like this, you will have to pay these as you certainly do not want to pass them on to your customers.
How to Track Your Store’s Performance
If you want to sustain success with your dropshipping business it is essential to track your performance.
To do this you will need to make use of both an analytics platform like Google Analytics as well as the reporting system inside your ecommerce platform.
Beyond measuring basic stats like total web traffic and total sales, there are several key metrics you will need to continually monitor.
Your conversion rate is the percentage of people who view your website that make a purchase. It is calculated by dividing your total visitors by the total number of orders.
This is one of the most important metrics to measure for your dropshipping business.
Average Order Value (AOV)
This metric measures the average dollar amount a customer spends when placing an order on your store. You can calculate this metric by dividing your total sales revenue by your number of transactions.
This metric tells you the number of visitors who leave your website without viewing a second page. The metric is helpful in letting you know if your website is having the intended effect on your visitors. If your bounce rate is high it is a sign that you may need to make some adjustments.
Customer Acquisition Cost
This metric measures how much it costs on average to get a customer. For example, if you spend $100 on an ad campaign that results in four unique orders, your customer acquisition cost is $25.
For your business to sustain profitability, your customer acquisition cost must be lower than your customer lifetime value (the average amount of total money you make from each customer).
Sales by Traffic Channel
This metric measures how much of your sales come from different sales channels. For example, Google, Facebook, direct visits, email, etc. Knowing which sales channels are generating the most sales will allow you to plan your marketing more effectively.
This metric measures the total number of users who subscribe to your email list. A healthy email list is a sign of strong business as email marketing can result in a very high ROI.
How profitable is dropshipping?
How profitable dropshipping is depends on several factors:
- Your average margin per order
- Your total number of orders
- Your return on ad spend
Dropshipping products tend to have lower product margins. But, you do not need to invest in inventory up front. So while you may earn less per sale, you do not need to make as many sales to be profitable.
How much money do I need to start a dropshipping business?
One of the main attractions of the dropshipping business model is that you do not need a lot of money to start selling.
The main costs you’ll need to cover include your domain name, your ecommerce platform, and any dropshipping platform you might use. Here are some estimates for these initial startup costs:
- Domain: $15
- Ecommerce platform: $30
- Dropshipping platform: $10 to $50
The above diagram from Oberlo shows how much it would cost to start a dropshipping business using its platform along with Shopify.
If you want to grow your business quickly you will also want to invest in marketing. This is where you will start to notice more substantial costs. However, if your marketing is effective it will yield a positive return. You can then reinvest this profit into the business to scale.
Can you still make money dropshipping in 2021?
Yes, you can still make money dropshipping in 2021. At its core, dropshipping is nothing more than an order fulfillment method. If you are able to execute in the other areas of running an ecommerce business then you will make money.
Can you dropship without a website?
Yes, you can dropship without a website. If you wanted to dropship without a website you could choose to do it on a marketplace like Amazon or eBay.
But with today’s ecommerce platforms there isn’t really a reason to dropship only on a marketplace and not your own website. If you use Shopify for example, you can add the products from your Shopify store to Amazon with just a few clicks.
Is it better to dropship on Amazon or Shopify?
There are advantages to using each. When you use Amazon you are able to expose your products to the marketplace’s audience and have the potential to make sales without marketing. With Shopify, you own your ecommerce store so you have complete control over the customer experience and don’t have to pay fees to be a seller.
If you were to choose one, I would recommend Shopify as it is better to build your ecommerce store than to rely on a third-party marketplace.
Do you need a business license to dropship?
Technically, you do not need a business license to dropship but there are some caveats to this. Certain suppliers will require you to have a business license before agreeing to partner with you. If you are looking to set up a direct relationship with a wholesaler or manufacturer you will likely need one.
On the other hand, if you are reselling products from AliExpress or using a service like Spocket or Wholesale2B where they are effectively serving as a middleman then you do not necessarily need to have a business license.
That said, a legally formed business can help protect your personal assets in the event something were to happen with one of the products you sell and a customer decides to sue you.
Also, don’t think because you don’t form a business that you can avoid paying taxes. The IRS will still expect you to report any income you make from reselling products even if you are doing it “personally”.
What is the difference between dropshipping and print on demand?
The biggest difference between dropshipping and print on demand is that with dropshipping you are selling products that are already manufactured and ready for delivery. With print on demand, the POD company has the materials needed to create the product (the physical item, your design, and the equipment to print) but the product is not actually manufactured until a sale is made.
How much can you make dropshipping?
The amount of money you can make dropshipping will depend largely on the types of products that you sell, how much you are willing to spend on advertising, and how successful your advertising campaigns are.
The biggest factor is the types of products that you sell and the margins that you make on them. If you only make $10 to $20 or so per sale then you will need to sell ~ 500 to 250 products per month just to make $5,000.
But if you make $200 per sale then you would only need to make 25 sales to make $5,000 per month.
Advertising is also an integral part of how much you can make because without it, you are not going to get customers to your store. SEO can help bring organic visitors to your business, but it takes time.
How to find the best dropshipping suppliers?
The best way to find high-quality dropshipping suppliers is to start with a dropshipping network or service. These services will have already vetted the suppliers to make sure they are reliable businesses.
Look for reviews online to see what others who have used the supplier have to say. It is also important to look for suppliers who have been in business for a while as it shows that they are dependable.
How to Start a Dropshipping Business Conclusion
Congrats on making it this far. You now know how to start a dropshipping business in 2021.
Let’s review the main steps you need to take to get your business up and running:
- Research your niche Take care of the startup requirements
- Choose your suppliers
- Build your dropshipping store
- Market your products
- Track your performance and grow
It is important to continue to expand your knowledge as you grow your dropshipping business. Check out some of our other guides and reviews to ensure that you are putting yourself in the best position for success.