How to Start a Dropshipping Business in 6 Steps
This article is part of a larger series on Retail Management.
To start a dropshipping store, you need an initial investment of $100–$500 for platform fees and marketing, a computer with internet access, and plenty of time for research and setup (along with five to 10 hours a week in ongoing management of your new operation).
Unlike standard ecommerce ventures, you don’t need to buy expensive inventory, invest in warehousing, or spend time fulfilling orders. This makes dropshipping a low-cost, low-risk entry into online retail, with profit margins averaging 15%–20% of each item’s selling price.
Here’s how to start a dropshipping business in six simple steps:
1. Develop a Business Concept
Most successful businesses are based on a concept—around that, you center your brand, content, and product collection. This concept can grow out of something you are passionate about or be based solely on sales trends that you uncover through product research and trial and error. As a dropshipping seller, you can brainstorm ideas, experiment with different concepts, and fine-tune your business as you go.
You can proceed with a fuzzy notion of your business and brand. One of the biggest advantages of the dropshipping model is that you aren’t tied down by expensive inventory, so changes can be made at any stage.
As you explore dropshipping business concepts and research products, keep in mind that focusing on niche products can make marketing more effective, help your website rank high in topic-specific search results, and strengthen eventual buying intent. Also, ask yourself how your business concept and related offerings will solve problems for your buyers.
This approach can help you achieve an edge in the competitive ecommerce world by creating meaningful connections between your customer base and your offerings.
Product Research
Whether you’re niche-focused or casting a wide net, you’ll want to do some product research to get an idea of what’s selling. Seek out products and categories that are trending in order to gain your store traction.
Shopify, our recommended ecommerce platform for dropshippers, publishes a current list of trending products that can be a valuable jumping-off point for your research. This list includes vital stats on global order growth, growth of related sellers, and geographical relevance for each item.
Not sure where to start? Here are the metrics you can use to assess the potential of a product, plus helpful tools and resources to get the data you need:
2. Source Products
Your dropshipping store will serve your customers by working with wholesalers and manufacturers who supply your products.
Regardless of how you discover your suppliers, sourcing products is one of the more time-consuming steps in starting a dropshipping business. To be sure that your efforts pay off in profits, you’ll want to consider each item and partner-vendor for its total viability.
Consider these factors as you review potential products and suppliers:
- Item Popularity: An item’s previous sales volume is an easy metric to find on most dropshipping marketplaces. Although you may be able to market less popular products effectively, hot-sellers are usually safer investments of your time.
- Profitability: Your credit card processing fees and shipping costs will take a consistent bite out of your profits, so evaluate each item’s wholesale cost and suggested pricing for potential profitability. Keep in mind you can increase an item’s markup to make your sales more profitable or decrease it to better attract buyers.
- Item Quality: One of the biggest drawbacks of dropshipping is that it’s hard to gauge the quality of your goods. You can order a sample for yourself to get hands-on experience, but this can become overly time-consuming to do for an entire store’s worth of offerings. Most dropshipping sellers rely on marketplace supplier ratings and sales numbers when judging the quality of an item.
- Location: A supplier’s location will have an impact on shipping cost and delivery speed—important factors in the customer’s buying decision. Many dropshipping vendors are based in China, so try to work with vendors who provide ePacket shipping for fast, trackable deliveries.
- Supplier Reliability: Until you’ve worked with a supplier, it’s difficult to assess how reliable they will be. However, most dropship marketplaces are strict with their vendors and won’t keep a vendor with ongoing service and quality complaints. Additionally, supplier reviews are usually accurate and helpful resources.
- Return Policy: Most dropshipping marketplaces aim to avoid returns and handle most problems via no-return refunds. However, each marketplace operates differently, so you’ll want to check out the return policy and process for each platform (or direct vendor) you use.
The two main ways to source dropshipped goods are through dropshipping marketplaces or direct-source suppliers. Here’s an in-depth look at each option:
Once you’re familiar with your sourcing options, it’s time to get your website up and running.
3. Build Your Online Store
To put your dropshipping business into action you need an accessible, user-friendly, and traffic-driving ecommerce website.
For this step you’ll need to plan a model for your site, choose a reliable ecommerce platform, and create standard online store features (like product listings and return policies).
Model Your Store
Is your business concept more product-focused or content-focused? This differentiation is important because some ecommerce platforms are better for content-rich sites, while others cater to product-focused businesses. Plus, this model will play into your advertising strategy, which we’ll discuss later on.
Here’s an overview of these two models:
With a general plan for your site in mind, the next step is to obtain the right tool to build it.
Choose Your Ecommerce Platform
To easily build a site with shopping cart and payment processing features, you need an ecommerce platform.
You can list dropshipped items on Amazon and other large marketplaces like Walmart and eBay—but proceed with caution. These marketplaces have costly seller fees, strict shipping deadlines, and customer service requirements.
Many dropshipping sellers do well on these platforms, but they’re not startup-friendly by any means. Get to know your suppliers and the process first on your own site, then branch out to seller marketplaces.
The best platform for your dropshipping venture will depend on your store’s model and your plan for sourcing suppliers.
For a more detailed rundown of available ecommerce platform options, check out our buyer’s guide.
Here are some of the top platform options for dropshippers:
Once you’ve made an account with your chosen ecommerce platform, the process of building a usable site is simple. We’ll cover the details in the next section.
Build Your Site
Building an ecommerce website starts with laying the groundwork, like setting up payment processing, connecting a domain, and designing a layout.
If you’ve chosen Shopify as your ecommerce platform, check out our guide to setting up a Shopify store for detailed instructions.
If you’re using another ecommerce platform, refer to the provider’s website for tutorials, FAQs, and helpful articles. Most platforms offer helpful customer support or even free setup assistance sessions to make this step as easy as possible.
These resources can help you sort out all of the aspects of your store—from integrating your shipping strategy to listing your products. However, some critical details may apply differently in a dropshipping operation. Here are some areas of your site to focus on:
After you’ve created an online store, it’s time to work on the operational side of your ecommerce business.
4. Set Up Your Business & Finances
To launch a legitimate venture, you’ll need to take care of these legal and financial aspects of your business:
5. Drive Sales Through Marketing
Once your site is up and running, you need to market it in order to attract shoppers.
Each of the following marketing tactics is startup-friendly and can be very effective at getting sales flowing:
6. Run Your Dropshipping Store
Once your business is set up and your marketing efforts are in place, you’ll soon see orders start to trickle in. Running your dropshipping store mainly comes down to overseeing your orders, serving your customers, and basic accounting.
Then, as your business develops, another task is to use analytics to refine your offerings and find ways to drive growth (and make more money).
Here’s what the duties of a dropshipping store owner look like:
Keeping up with these day-to-day duties as well as site maintenance and marketing efforts is the way to run a successful—and profitable—dropshipping business.
Bottom Line
The dropshipping business model is a highly accessible solution for sellers seeking low-cost and low-risk entry into ecommerce. It’s flexible enough to work for part-time entrepreneurs and has the potential to earn a steady stream of real income. However, it often takes a few months for dropshipping stores to gain traction and be sufficiently profitable.
The initial investment of time can be hefty, but your store’s success relies on proper research, site building, marketing, and management.
Starting a dropshipping store is best done through Shopify and Oberlo, which integrate to make the process simple from start to finish.