How to Start a Dropshipping Business in 2020
Starting a dropshipping business is a great first step into entrepreneurship. You’ll be able to sell products to customers, set your own product prices, and market your very own brand. You don’t even need to pay for inventory until it’s sold to an actual customer. If you’re willing to put in the work, you can build a successful brand.
And if you’re still on the fence about starting your online business, maybe it will help to know that ecommerce sales amounted to nearly 3.5 trillion dollars worldwide in 2019. So, if global stats on ecommerce are any indication, starting an online business is an increasingly lucrative option right now.
In this article, you’ll learn how to start a dropshipping business. We’ll explain what a dropshipping business is, how to find the right dropshipping business ideas, and everything else you need to know to start dropshipping.
- What Is a Dropshipping Business?
- How Does the Dropshipping Business Model Work?
- Why Is Starting a Dropshipping Business a Good Idea?
- Where to Find a Dropshipping Business for Sale
- How to Start a Dropshipping Business: The 6 Step Dropshipping Business Plan
- Want to Learn More?
What Is a Dropshipping Business?
Dropshipping is a business model which you can use to run your store without ever holding any inventory. Once you’ve made a sale your supplier will ship your products from their warehouse, straight to your customer’s doorstep. You’ll never need to worry about storing, packaging, or shipping your products.
How Does the Dropshipping Business Model Work?
There are three key players in the dropshipping business model: the manufacturer, the retailer (you) and the customer.
The manufacturer’s role in a dropshipping business model includes creating products, carrying inventory, shipping products to customers on behalf of the retailer, replacing defective products, and restocking them. They sell products to the retailer at wholesale prices assuming the risk of unsold inventory.
In the dropshipping business model, the retailer (you), sell the manufacturer’s products on your website under your own brand. You’ll be responsible for choosing and marketing those products. Plus, you’ll also be responsible for their shipping costs and setting prices that make you a profit.
Lastly, in the dropshipping business model, the customer buys the products directly from you, the retailer. If questions or issues arise, they contact the retailer they bought the product from.
How Profitable is Dropshipping?
That’s a dropshipping FAQ we hear quite often. Dropshipping can be the most profitable business model of all, as you are not responsible for the costs of shipping and manufacturing. Because of this profits can quickly be reaped once you have found the right suppliers with Oberlo. You can calculate your profit to ensure you are on the right track to success with our dedicated Profit Margin Tool.
Why Is Starting a Dropshipping Business a Good Idea?
A dropshipping business is a low-risk business model. When it comes to startup costs, you only pay for products that you sell to paying customers. You don’t become overburdened with the cost of creating products, carrying inventory, costs of maintaining unsold inventory, and the cost of employees for packaging and shipping products. It’s a great entry into entrepreneurship as you can start your own dropshipping business by yourself during your evenings and weekends. It will require daily work when it comes to processing orders. However, most of the order processing steps are automated and require a click of a button. The dropshipping business opportunities are endless, you just need to take the first step.
Can You Make Money Dropshipping?
Yes, you can make money through dropshipping, like many of our successful merchants continue to do. Dropshipping allows you to find products with huge profit potential, and set up a business selling them. When you are motivated to sell products you are more likely to invest more time into promotion and marketing, leading to more profits from your endeavours.
Is Dropshipping Worth It?
Yes and no. Dropshipping is worth the time and money you invest into it. If you don’t invest time into your online business you will never reap the rewards. One of the reasons why people quit dropshipping is the lack of consistency and perseverance. Dropshipping takes time as you need to set up a store, import products, decide your pricing strategy, and starting selling. Nothing can happen if you don’t put in effort.
Where to Find a Dropshipping Business for Sale
If you don’t want to build a Shopify dropshipping business from scratch, you can easily find a dropshipping business for sale on Exchange. Exchange is a marketplace of Shopify stores for both people looking to invest in a fully-functioning business or those that want to skip the building phase and start directly with marketing. They have a great collection of online stores, including dropshipping ecommerce businesses, of varying price ranges and niches that you can choose from depending on your budget and interests. So, if you’re looking for a dropshipping business for sale, Exchange has got you covered.
When choosing to buy a store take into account the cost, the design, the age of the website, how much money it has made, popularity of niche, penalizations, and the type of business.
- The cost: Do you currently have a budget to not only pay for a premade store but also invest funds into growing it? If so, you need to work out what your budget looks like. What price are you willing to pay for a business? Is there room to negotiate a better deal?
- The design: Does the store look like it was designed by a professional or by a new entrepreneur who’s looking to make a quick sale? If the store design looks professional, clean and easy to navigate it may be worth pursuing.
- Age of website: On Exchange, you can choose a dropshipping business based on its age. An older website will typically have a better chance of ranking online than a newer one.
- How much money its made: Sometimes you’ll see that a store made a lot of money. However, a question you need to ask is ‘how much money was it making at its peak and how much is it making now?’ This will help you understand if the dropshipping business is growing or dying.
- Popularity of niche: You probably don’t want to be selling fidget spinners anymore or any trending product. However, if a store is within an evergreen niche and has trending products within it, it could work out well. Broad topics (beauty) tend to perform better than stores around a specific type of product (makeup brushes).
- Penalizations: Before buying a dropshipping business you need to double check that the website hasn’t been penalized. You can use a tool like Is My Website Penalized to determine if a website has been penalized by Google. If a store has been penalized it may be harder for you to rank in search engines. You also want to ask if any of their Facebook ads were banned?
- Type of Business: If you plan on buying a dropshipping business, you need to select dropshipping on Exchange. Other options may require you to buy and hold inventory which can cost more money over the long term, especially in unsold inventory.
How to Start a Dropshipping Business: The 6 Step Dropshipping Business Plan
Step 1: Choosing a Dropshipping Business Idea
Truth is, what you sell matters. You should take some time to find the best dropshipping business ideas. Most people tell you to pick a niche you’re passionate about. But that’s only a half truth. It’s about a combination of profit and passion, skewed towards profit. The reality is the best dropshipping business ideas are usually the profitable ones. It’s a lot easier to be passionate when you’re actually making money.
At Oberlo, we regularly save you time by creating lists of trending products. It’s true that those tend to be the ones people gravitate to but that’s because they’re proven winners. It’s illogical to enter a niche with no competition, I learned that the hard way. Fitness, fashion, jewelry, beauty, tech, purses, and backpacks are some of the evergreen niches that we keep seeing top online stores enter and succeed in. For example, Tim Kock recently created a dropshipping case study where his pineapple business failed but his watch business made nearly $7000 in only 8 weeks, showing that your niche matters. So, spend some time looking into different dropshipping business ideas.
If you’re set on coming up with your own dropshipping business ideas instead of checking out our lists, here are a few things to keep in mind:
- Google Trends is great for knowing whether a niche is on an upward or downward trend. However, on its own it’s not enough to determine whether or not a niche is viable. Some niches may be on an upward trend but don’t have enough search volume to warrant its popularity.
- Use Ubersuggest’s Keyword Tool. What’s the search volume for a keyword? Or the competitiveness of it? Using Ubersuggest’s Keyword Tool will help you understand the potential of your dropshipping business ideas, and give you addition ideas for the future.
- Browse popular websites within your niche. For example, if you check out a fashion retailers website, they’ll often organize their store into trend categories. This helps you understand what trends you should be adding to your store right now. You can also browse a store’s best-selling products to help you find the best products to sell.
- Check out the order volume for products. Inside of Oberlo, you can browse products based on their order volume to help you understand how popular a product really is. Don’t rule out dropshipping business ideas if they’re not as high as other products, because those products could be newer.
The most profitable dropshipping business ideas aren’t trends. Instead, they have trends within them. For example, denim apparel is a trend within the fashion niche. Artificial eyelashes is a trend within the beauty niche. Marble phone cases is a trend within the phone case niche. You’ll want to have the trends as products but not as the entire store, especially if you’re building a long-term business. So keep that in mind when you’re working on your dropshipping business plan.
Step 2: Competitor Analysis
Once you have decided what to sell you now need to educate yourself on who your competitors are, what they sell, and how they sell their products. There are many ways to do this.
- Enter the name of one of the products you want to sell into Google and do a quick search to see who shows up on top. The top ten results on Google or any other search engine will give you a good indication of your competition in a certain location. If you are selling products in a location different from where you are based you can use third party tools to gather data. Use tools like SEM Rush or Ahref to get information about search results in different locations across the world.
- Search through Alexa or SimilarWeb to find niche competitors that might not show up high in general search results. These websites will give a summary of the websites you are searching for including their social media profiles, any advertising they are doing, audience and traffic information for their website, and a list of competitors for that business.
- Hunt around on social media. I’ve come up with dropshipping business ideas by doing competitor analysis. I’ll browse Facebook ads within a niche and social media pages for top brands. How many followers do they have? How do they market their brand? How much engagement does their brand get? What can I do differently to stand out against them? What are they doing right that I should copy?
- Know your competitors content and what performs better for them through the use of BuzzSumo so you can replicate. This tool will give you insight into what content gets the most social shares so you can find inspiration for new blog ideas. Signing up to a competitor’s newsletters can also keep you on top of their content if they share their blog content this way.
Step 3: Find a Supplier
- It can be easy to find a good supplier with Oberlo. Once you are on the platform you can search for products, and choose suppliers from the list of results. On the Oberlo platform you can see reviews, ratings and how long the supplier has been on the platform, for each supplier and this should sway your decision on which supplier to choose.
- When you have a list of five or six potential suppliers to choose from you can move onto the next step which is contacting these suppliers to ask important questions like minimum order quantities and shipping times.
- By now you probably have reduced possible suppliers from a list of 5 suppliers to 2-3. The best way to make the decision now is to place a sample order with them for a product and compare the results. Compare ecommerce shipping times, product quality, and packaging while making a decision, keeping your customer in mind and what they will expect from you when placing an order.
Step 4: Building a Dropshipping Business Store
There are a few components to building a dropshipping ecommerce business the right way. Here are a few:
- Domain Name – Your domain name matters, especially if building a long-term brand. You can use free business name generator to help you simplify the process. Always get a .com domain, no matter what. If you want your niche as a keyword in the new domain make sure it’s broad like beauty, jewelry, fashion rather than very specific so you don’t need to change your domain name down the road. Also, avoid using your name as the domain for your store. If you ever sell your business, you could legally use the rights to your own name.
- Sign up for Shopify – Shopify is the most comprehensive ecommerce platform on the market. With new features, tools, resources and apps being added regularly, you’ll find that it’s easy to use and run a business on the platform. Plus, if you get stuck you can reach out to a Shopify guru who will personally walk you through any steps for free.
- Shopify Themes – Personally, my go to free theme is Minimal Vintage it’s easy to navigate, clean and overall a great starter theme for those on a tight budget. Themes can be changed overtime. In the beginning while you’re just testing out free themes do get the job done. Once you’ve started making some money, you can invest it into buying a new theme for a better store design.
- Install Oberlo – Oberlo dropshipping allows you to find products online that you can sell the same day. You’ll be able to find products in a number of popular niches. Aim for 10-25 products when starting out as it can be overwhelming to write product descriptions for much more than that. If you ever have questions you can reach out for help via the Oberlo blog, social media pages or via Shopify’s support line. You can also check out 50 Ways to Get Sales with Dropshipping to learn the exact strategies and marketing hacks I’ve used on my own online stores to make money with dropshipping.
- Need a step by step guide? Check out this article to learn how Tomas Slimas launched an online store in only 30 minutes.
Step 5: Marketing Your Dropshipping Business with Everything You’ve Got
So at this point, you’ve found your product and built your store, now’s the time to market your dropshipping business like there’s no tomorrow. This is a crucial step in your dropshipping business plan. So don’t keep making tweaks to your store design and pretend like you’re making improvements. You don’t need to be scared of putting yourself out there. Getting your first sale is one of the best feelings!
If you’re just starting out, you’re probably on that super tight budget. Some of my best marketing ideas have come from those super frugal moments. Here’s a few to get you started:
- Facebook Advertising: I know it can be tempting to blow $500 on Facebook ads. Many new entrepreneurs think you’ll make it rain money on your first try – you won’t. My first ad I spent $20 and lost all of it to no conversions. I actually cried from a failed ad. But truth is, I didn’t risk much. So I bounced back quickly and created a second ad which converted at five cents a click. You need to keep your budget low at the beginning to be able to afford experimentation. You don’t even know what your best selling product will be at this point. Create several ads to figure out which product sells best. When it comes to targeting, create a World ad but remove Canada, Australia, United States and U.K. this will keep your ad costs lower. As your business grows, or if you have a bigger budget, you can create separate ads for those four countries. So the United States will have its own ad, as will the remaining three.
- Retargeting Ads: If you’re really tight on budget, I really like retargeting ads because they keep the cost low. This ad works great if you have a store with tons of traffic. Maybe you’re marketing for free on Pinterest and getting a lot of traffic from there. Maybe you wrote a blog post on your website, featured influencers and now influencers are sharing your blog for free. With a retargeting ad, you take that free traffic and it’s a lot more likely to convert into a paying customer. Even better than a standard Facebook ad. Plus, it’s a lot cheaper. It’s actually how I got my first sale in only two days.
- Influencer Marketing: Starting a dropshipping business will require you be a bit scrappy in the beginning. If you can’t afford to pay influencers their rates, trust me this is a good thing, you can offer them an affiliate commission instead. Why is this a good thing? I learned the hard way that sometimes even a niche specific influencer doesn’t actually convert. It’s almost like a shot in the dark. If you pay an affiliate fee for every sale, you lower the risk for your dropshipping business and it’s up to the influencer to convert the sale. Plus, you’ll get some pictures which will help increase your social proof for your brand. If the influencer has real followers, they could potentially make a lot more money as an affiliate than they would’ve if they were paid a flat rate. Thus, giving them a chance to make even more money.
- Get free media coverage: Using the free HARO tool you can subscribe to a three times a day email list where reporters reach out to you to get stories for their article. Some may be looking for influencers in a specific niche others may be looking for product recommendations. Either way, if you’ve got that retargeting ad running, that free traffic back to your website could result in some sales. Instead of adding a link to your homepage ‘websitenamehere.com’ send it to a product collection or a specific product to create a more targeted focus. You can still add your brand’s name as the name for the hyperlink.
Step 6: Optimize
Once you have spent time building your website, brand, and marketing you can start to analyze the results of your hard work. You may find that certain marketing activities are hugely successful while others are not so much. Or you can look at your pricing against competitors and see if you could change things up a bit to make things more competitive.
You can use tools like Google Search Console or Analytics to evaluate your online traffic to make sure that traffic is increasing, not decreasing. If you are using third-party tools for email marketing or social media reporting, set up weekly or monthly automatic reports so that you will be reminded to analyze this information regularly. Even a quick snapshot of data from a tool can be enough to decide if a campaign is working or not.
Overall the most important part of a successful online ecommerce store is to test and optimize in order to increase the revenue that you generate online. This makes sure that your website will not fall behind best practices and keeps you ahead of your competitors too.
There you go! We’ve got you covered on how to start a dropshipping business. By applying some of the advice from this article into your own online store, you work towards building an online empire of your own. If you have questions along the way, feel free to leave a comment or reach out to the Oberlo team on social. And remember, the best way to learn how to start a dropshipping business is by taking that first step to build it.
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