Starting a dropshipping business is an accessible path to entrepreneurship. When a customer orders from your dropshipping store, the supplier ships the product directly, so you don’t need to hold inventory and overhead costs stay low. If you are considering starting a dropshipping business, here are nine steps to help you get started:
1. Decide if dropshipping is the right business model
Dropshipping is just one way to run an online store. Before diving in, take time to ensure it’s the right business model for your goals. Typically, dropshipping is suited to people with marketing skills who want to run a store with minimal upfront investment. Since you don’t need to stock or handle products, it’s possible to start with just a laptop and an internet connection. However, this accessibility comes with tradeoffs. Dropshippers tend to have less control over the goods in their catalog, and because other retailers are likely to sell the same products, competition can be tough. If you plan to focus on marketing and aren’t looking to build your business around a flagship product, then dropshipping could work for you.
2. Choose a dropshipping niche
A niche is a segment of a market. You can target a niche with your store, brand, and product selection. Selecting a dropshipping niche helps you identify a target audience. With specific customers in mind, it’s easier to search for products to dropship. There are two general methods for selecting a business niche: choose a niche that you’re knowledgeable or passionate about, or choose a niche based on market demand. The aim of the second method is to find niches with high customer interest but low competition. Dropshippers assess market demand through keyword and product research.
3. Research competitors
Competitor analysis helps when starting a dropshipping business. Spend time gathering information about rival stores in your niche. By observing what your competitors, especially other dropshippers, are offering, you can identify potential products and marketing strategies. Conduct thorough competitor research by running a Google search, using competitor analysis tools, browsing social media, and checking marketplaces. Track all your competitor research in a spreadsheet to make it easy to search and reference your findings.
4. Choose a supplier
A dropshipping supplier sources and manages inventory, accepts orders and payments, and organizes shipping to customer addresses. With such core responsibilities, your choice of supplier will have a large impact on the success of your dropshipping business. Depending on your niche and the products you sell, you might work with a single supplier, or partner with multiple suppliers using a supplier directory. Popular supplier directory apps and websites automatically connect your store with a large network of dropshipping suppliers.
5. Select products and set prices
The products in your store are dictated by your supplier’s inventory. You’ll encounter many of the same products in rival dropshipping stores, so it’s important to curate a selection that resonates with your niche audience. A well-chosen product catalog creates opportunities for cross-selling and upselling, where shoppers add additional or higher-priced items to their shopping carts. When picking products from an app or marketplace, study reviews from other sellers, as well as the supplier’s performance history. Pricing your dropshipping products is essential for ensuring your store is competitive and profitable.
6. Build an ecommerce store
Your online store is a hub for your dropshipping business, showcasing your product catalog and giving customers a way to check out. It’s also the destination for traffic from your social media ads. Beyond product pages, your store can feature content to enhance the customer experience. This includes product reviews, user guides, buying guides, and relevant blog posts. Additional content not only helps customers make decisions, but also improves store visibility in search engine results. Use Shopify’s store builder to customize your store’s appearance with professionally designed themes that fit your brand. Adding a dropshipping app to your Shopify store simplifies product management and order processing.
7. Decide on a business structure
Writing a business plan and creating a legal entity are key initial steps in setting up your dropshipping business for the long term. Three common business structures for a dropshipping business are sole proprietorship, limited liability company, and C corporation. Before choosing a business structure, it’s advisable to consult with a lawyer to understand the best fit for your situation. Apply for an employer identification number (EIN) to file taxes, apply for wholesale dropshipping accounts, open a bank account, and other business activities.
8. Set up finances
Separating your personal banking from your dropshipping business helps simplify accounting and keeps your business’s financial health visible. Consider opening a business checking account, applying for a business credit card, checking local business license requirements, and collecting sales tax if required. Managing your finances effectively is crucial for the success of your dropshipping business.
9. Market your dropshipping business
Once your dropshipping store is live, turn your attention to marketing. An active marketing strategy that brings traffic to your store will give your dropshipping business the best chance of success. Develop a strategy for marketing channels such as paid ads, influencer marketing, content marketing, communities, mobile marketing, and email marketing. Experiment with different marketing channels to find the most effective approach for reaching your target audience.
In conclusion, starting a dropshipping business in 2024 is a viable option for aspiring entrepreneurs. By following these nine steps and avoiding common dropshipping mistakes, you can set yourself up for success in the competitive world of ecommerce. With the right research, planning, and execution, your dropshipping business has the potential to thrive and grow in the coming years.
