How to Start a Dropshipping Business in 10 Steps (2023)

A new dropshipping business isn’t ideal for filling a gap in the market. By identifying which products are already selling well, you’re ensuring that there is a demand for your offerings.

To determine which items are selling well, use these resources:

• Shopify’s list of trending products can be a valuable jumping-off point for your research. It’s a frequently updated resource that includes vital stats on global order growth, growth of related sellers, and geographical relevance for each item.
• Amazon’s Best Sellers Lists allow you to see which products are performing best in each category, so you can hone in on what your niche market is buying.

These lists can be viewed by broad category—such as Camera & Photo Products—or refined to focus in on more specific sectors like darkroom supplies. This can help you model your concept and identify specific, promising products.

Learn more about Amazon trending product research and how to use Amazon keyword tools in our guide to the best products to sell on Amazon.

Through keyword data, you can see how many searches have been made for a term in the past day, week, month, or longer—which indicates product demand and success potential for your concept.

Try these online tools for your keyword research:

• Google Ads’ Keyword Planner provides insight into how frequently your keywords are searched and allows you to compile data into a usable advertising plan (although it only displays a range of search volume—i.e., 10K–50K searches—rather than specific figures).

It has helpful features that can gauge competitiveness, recommend successful related terms, and show how search volume could play into your advertising budget.

• Ahrefs Keyword Explorer supplies thousands of relevant keyword ideas with accurate search volume, a user-friendly keyword difficulty score, and advanced metrics like cost-per-click (CPC), bounce rate, and parent topics.

From a keyword search on Ahrefs, you can also see how each term performs based on location, plus which competitors are ranking in the results pages.

Ahrefs’ Keyword Explorer shows that the term “camping supplies” boasts 15,000 monthly searches in the US alone (Source: Ahrefs)

Another aspect of keyword research is getting a feel for how your search terms’ performance has changed over time.

Trend data can demonstrate a product’s potential for long-term success or provide ideas that could be temporary hot-sellers. The beauty of dropshipping is that your offerings can more easily adapt to changing demands than the inventory of a standard retail store.

Analyzing search trends can also give insight into the seasonality of a product. If an item’s popularity waxes and wanes through the year, it might be necessary to diversify your offerings or skip it altogether.

This free tool is our recommendation for trend analysis:

• Google Trends presents search data through graphs showing interest over time. It allows users to see results on a customizable timeline and refine by search channel—such as web search, image search, or Google Shopping search.The tool also ranks “rising” keywords and suggests related topics to explore. Plus, it’s equipped with a comparison feature to weigh the stats of multiple terms against each other.

The performance of the keyword “camping supplies” over the past five years shows a heavy seasonal impact. (Source: Google Trends)

For new sellers, using marketplaces is the easiest path to starting a dropshipping business. These platforms automate the dropshipping process and make it easy for entrepreneurs to both build and operate a business. They do this by directly integrating with ecommerce platforms, which allows you to:

• Easily search for and source goods to sell
• Add listings to your store with a single click
• Display stock availability to avoid backorders and customer service issues
• Automatically forward orders to be shipped to the correct suppliers
• Automate shipping confirmations to update customers
• Pay the wholesale cost upon shipment (after the buyer has paid you for it)

The most impactful of these benefits is the ability to find products with ease. Platforms like DSers host thousands of suppliers—ranging from independent manufacturers to individual wholesalers and aggregate vendors such as AliExpress.

In total, DSers connects store owners with millions of products to choose from. You can search the entire catalog by item, category, vendor, location, or by useful metrics like sales volume.

Dropshipping marketplace profit margins run about 15%–20% of the selling price, which is a healthy profit for a low-cost, low-risk selling method. The downside of using these marketplaces is that your competitors can access the same products.

Some marketplaces charge monthly or per-transaction fees to access their platform, but most offer a free starter plan to help you start a dropshipping business without any upfront costs.

Top-rated Dropshipping Marketplaces

After the startup phase, many dropshipping businesses use more than one marketplace to source their products. You can list and sell goods from multiple marketplaces using plug-and-play integrations on platforms like Shopify and WooCommerce, which helps diversify your offerings.

Seasoned dropshippers and industry experts agree that dropshipping marketplaces are ideal for startups or side gig and part-time sellers. However, to develop a more profitable, long-term venture, sellers need to look at more direct sourcing options, which we’ll look into next.

As order volume scales and your dropshipping business develops, higher profit margins are attainable by sourcing your own dropshipping partners directly.

One way to do this is to form relationships with vendors you’ve previously used on dropshipping marketplaces. If their products consistently perform well with your customer base, it’s worth seeking outside arrangements that are more profitable for both parties.

Once you find your product niche and establish relationships with suppliers, this can turn into selling “white-label” products. These are goods that are manufactured and fulfilled by other vendors but branded to appear as though your own company produced them.

If you prefer to source wholesale suppliers through other means, here are some resources to use:

Recommended Sources for Wholesale Suppliers

Most manufacturers and importers have average order volume thresholds, so they’re unlikely to work directly with startups. For most new dropshipping businesses, direct sourcing is a goal to have on the radar for future development.

Plus, unlike the dropshipping marketplaces, the above resources don’t offer plug-and-play connectivity. To work directly with suppliers, you’ll need a more hands-on approach in terms of adding products to your website and forwarding orders for fulfillment. That is usually done through ecommerce management software, which adds to your labor requirements and operating costs.

These sites take on the usual storefront-style design to sell goods, and they’re the simplest choice for new dropshippers.

Product photos, descriptions, and specs play the leading roles, and items are grouped by category or promotion (such as featured items, new arrivals, or sales). Product-focused stores usually have an FAQ section that clarifies shipping details, return policy, and other relevant info. An “About Us” page is also common—this sheds light on the company’s history and philosophy.

Other than those written sections, additional content is sparse on product-focused sites. This structure is best for general dropshipping stores that sell a wide variety of goods, as well as simple niches that don’t require prerequisite knowledge.

For example, a dropshipping store that sells socks would be a good candidate for a product-focused model. On the other hand, a site selling bird-watching equipment would benefit from publishing educational content to bolster its listings.

This product-focused dropshipping site leverages simple, eye-catching visuals with minimal written content. (Source: Mooshe)

Product-focused stores can still use content to garner engagement and market themselves, but it often exists offsite. Maintaining an active YouTube channel and social media presence are great ways to publish content, along with sending regular, informative email updates.

Some dropshipping business concepts benefit from having a store structured around applicable content. This is often the case for niches that have an engaged community or require prerequisite knowledge to use—like infrared saunas, custom mechanical keyboards, or rock climbing gear.

Informational content like blog posts, recipes, instructional videos, and user highlights take center stage in content-focused stores. This material supports product listings by elaborating on how your items are used and what benefits they can provide.

A content-focused business provides plenty of fodder to support your marketing efforts. While shoppers will find your store in search of products, this model can also gain traction with viewers seeking information rather than goods—boosting your site’s traffic and encouraging future sales.

Plus, informational content is heavily weighted in Google’s algorithm, so content-focused stores have the potential to rank higher in search results.

These sites also feature standard product listings grouped by category or other filter options for more direct sales.

This content-focused site sells saunas through informational blog posts, eBooks, videos, and educational FAQs—all accessible from the store’s homepage. (Source: Celebration Saunas)

Even though the products you’re sourcing likely come with product descriptions from the manufacturer or dropshipping supplier, it’s crucial that you write your own product descriptions if you’re selling on your own site.

Copied product descriptions can harm your website’s chances of ranking in search results. And, most pre-supplied product descriptions simply list features and product specs instead of clearly communicating benefits.

See our guide and free worksheet on crafting product descriptions to learn more.

Every online store needs user-friendly, affordable, and secure payment processing— dropshippers are no exception. In fact, choosing the right payment processing methods can help increase conversions and decrease shopping cart abandonment by allowing customers to checkout with just one or two clicks.

Digital and mobile wallets like Apple Pay are the most popular payment methods for online shopping, followed by credit and debit card payments.

However, buy now, pay later (BNPL) financing is increasingly popular. Adding a BNPL payment method to your online store can encourage more sales and higher average order values.

Most popular ecommerce platforms come with pre-configured payment processing that you simply need to enable. Often, there are also options to enable mobile wallet payments and connect other processing options like PayPal and BNPL financing partners.

Even though you won’t be fulfilling orders yourself, most suppliers will charge you the cost of shipping their products to your customers.

At this stage you’ll need to determine which transportation choices you’ll offer, how those costs fit into your margins, and what shipping charges the customer will pay.

The top reason for shopping cart abandonment is a surprise shipping fee at checkout, so the way to combat this is to be transparent with your shipping costs. Be upfront with all shipping charges and clearly list any fees before shoppers reach the checkout stage.

Dropshipping sellers can choose from a variety of strategies to manage shipping costs on their sales, such as offering:

• Unconditional free shipping and absorbing the costs into your margins
• Unconditional free shipping and incorporating shipping costs into your prices
• Conditional free shipping on a minimum order value
• Conditional free shipping on products with a high markup
• A low, flat-rate shipping fee and covering any excess costs yourself
• A shipping fee equal to the exact cost of shipping

Your customers need a means of contacting you to handle questions, order modifications, returns, and other inquiries. It’s important to offer high-quality customer service to gain loyal customers, get positive customer feedback and reviews, and minimize the need to issue refunds.

Make sure to include a “Contact Us” page that is accessible from anywhere on your site. From there, list at least one contact option (the more you can offer, the better). These can include:

• Contact form: The simplest channel for feedback is a contact form. Your form should have fields for the customer’s name, email address, and a personal message.
• Email address: Avoid using your personal email address and opt to set up an account that inspires confidence in your customers, such as contact@yourstorename.com or help@yourstorename.com. Read about how to get an address with a custom domain for free.
• Virtual live chat: A chat platform is one of the best ways to serve your customers by providing responsive, real-time help. You can set up a chat feature for free through providers like Tidio.
• Phone support: With a virtual phone system, you can list a number that receives voicemails to respond to later, greets customers with an instructive automated greeting, accepts text messages that are forwarded to your email, or simply redirects to your personal line so you can try to answer every call.

A sizable amount of your customers (roughly 20% on average) will inevitably want to return their orders. It’s a drawback that comes with the ecommerce territory.

Starting a dropshipping business complicates things further. As a seller, you aren’t able to personally gauge the quality of your goods or control the fulfillment process, which makes returns more likely to happen.

Moreover, all of your products are coming from a separate (and often distant) third party, so returned merchandise needs to be sent back to the supplier in order to be re-sold. This is a time-consuming and costly snag.

As a solution, the most efficient way to handle dropshipping returns is to satisfy the customer without having the item sent back. Creating a positive shopping experience is vital to emerging businesses, with most shoppers saying that a smooth return process would sway them to buy from a business again.

Here are some ways to handle dropshipping returns:

• Offer a replacement: Allow the customer to keep the original item and receive a replacement at no cost.

If the product they received was damaged or incorrect, offer to have another order delivered quickly without the hassle of returning the problematic item. Try asking them to send photos of the issue during the customer service process—this way, you can validate their claim and get useful info to take to the supplier for a potential refund.

If the customer is dissatisfied with the product in general, allow them to choose another selection from your store or suggest a similar product as a suitable replacement. They’ll likely be pleased by the opportunity, and if your margins are big enough, the transaction might still be net positive in revenue.

• Offer a refund: To simplify things right off the bat or appease a customer who doesn’t want a replacement item, refund their purchase without requiring a return. Depending on your supplier’s policies, you may be able to receive credit or compensation for the loss. Ask the customer to send photos or a description of the issue.
• Leave it to the customer: If your goods are high-value or your margins can’t take the hit, another option is to have the customer return the product to the supplier at their own shipping expense.

However you decide to structure your returns policy, create a clear page for it on your site and include the following info:

• Any items that may be exempt from your returns policy (usually due to hygiene or value reasons)
• The cost of your returns process (or if is it free of charge)
• If you offer exchanges
• Which countries are eligible for refunds and returns
• The period of time after a sale during which an item is eligible to be returned

If you’re using a dropshipping marketplace, the process of listing items in your store is very simple. Start by integrating your chosen marketplace(s) with your ecommerce platform. On Shopify, this is done by installing the marketplace app.

From there, you can browse the marketplace’s entire catalog of products. You can search by keyword, category, name, or brand—or via filters, like top recommendations, best-selling items, specific suppliers, and even fast-shipping products.

For example, you can search for mugs on DSers through its integrated Shopify app, as shown below.

Search results display product thumbnails with costs, reviews, and the number of times the item has been ordered. More details are available by clicking on each item.

To add the product to your site, simply click “Add to Import List,” and DSers will automatically prep the listing for you to push to your Shopify store.

From Shopify, you can add a category, edit the description, and inspect other data by clicking the product, description, variant, and images tab.

You can also change your selling and shipping prices. Under the variant tab, your item and shipping cost (which is what you’ll pay the supplier when an item sells) are visible, along with updated inventory status.

Once your edits are complete, clicking “Import to Store” sends the listing live to your shop, ready for customers to order. This entire process takes a couple of minutes for each item.

Once listed, products can be edited from your ecommerce store dashboard.

Right off the bat, plan to separate your personal and business finances. This is a step commonly missed by casual or part-time store owners, which can lead to a host of problems.

Make sure to set up a business checking account. Then, deposit all revenue into it and draw all expenses from it. Without dedicated banking, your accounting will be difficult, business liabilities can be personally assumed, and you’d likely be in hot water with the IRS should an audit take place.

Additionally, it’s a good idea to take out a business credit card. This can help to further separate your finances; you can also accumulate major rewards for all of the merchandise you’ll be buying from suppliers

Most businesses need to obtain and renew a local business license or permit on a regular basis. Your dropshipping business may not have this requirement, depending on your products and location.

Research your own state, county, and city regulations to determine the permits and licenses you may need.

As a dropshipping store owner, you’ll need to think about consumption tax paid by your customers, and your own tax exemption for goods purchased from your suppliers.

Since your customers are ultimately consuming your products, they are responsible for paying the sales tax—otherwise called consumption tax. This rate and its regulations vary state by state (refer to your state’s revenue department website), but generally, you only need to collect sales tax if:

• Your business has a physical presence (known as a nexus) in a state that charges sales tax, and
• The order was placed by a customer in the same state

In most US states, there’s a sales tax exemption for purchases intended for resale.

Thanks to this, you don’t have to pay sales tax on purchases made to your supplier as long as you obtain an official exemption certificate.

Depending on your state, you’ll either need to go through the Multistate Tax Commission or contact your state’s revenue department to get the certificate, which can be provided to your vendors for tax exemption.

You’ll also need to decide on a business structure and register it if necessary. Here are the most commonly used business structures for dropshipping:

Create accounts for your business on Facebook, Instagram, and Pinterest and use them to promote your store through audience engagement and shoppable posts.

You can easily populate a Facebook Shop from your Shopify or WooCommerce product listings. Then, use those new listings to create posts and share across your personal network. Both Instagram and Pinterest let you create shoppable posts.

This method is a great approach to reach interested customers in their natural habitat. Plus, it reduces the steps for conversion, helps you gather data, and builds your online presence.

Take a look at the impact on the NY-based intimate wear brand The Natori Company: After creating shoppable Instagram posts and becoming active on Facebook and Twitter, the brand saw a 100% increase in revenue and a 1,416% increase in Instagram referral traffic to its website.

Influencer marketing is another social media-based approach. It’s an affordable, flexible, and effective way to reach your target audience.

You can recruit affiliate influencers by finding them yourself and reaching out or by going through an affiliate network such as Commission Junction.

Negotiate an affiliate fee with an influencer or online personality who aligns with your target customer base. Depending on the marketer’s reach, this cost is often less expensive than traditional advertising and more valuable in the eyes of your audience.

Nearly all consumers check their inbox every day, which makes email a crucial channel for marketing your store.

Start building your email list from day one and send out regular updates. Use these messages to inform about new collections, highlight exciting products, and draw attention to sales or promotions.

Shopify and other ecommerce platforms have tools to maintain contact lists and manage email campaigns.

Pay-per-click advertising is a great way to boost your store’s visibility to a qualified audience. Google Ads, Facebook Ads, and Facebook Sponsored Posts are the primary channels for this, but other platforms like Instagram, Reddit, Pinterest, and YouTube also offer effective advertising.

The average cost for a Facebook ad is 94 cents per click, which makes it one of the more affordable paid ad channels.

Google is a costlier platform to advertise on, but you can reach shoppers with strong buying intent by targeting distinctive, longtail keywords. This can make your ad spend go further by bringing in highly qualified clicks.

A Google search for this keyword brings up shopping ads at the top of the results page.

For more info, read our guide to boosting your business through Google advertising through advertising on Google.

Search engine optimization (SEO) helps your website rank higher in online search results. SEO tactics are crucial to ecommerce success, seeing as a widely reported stat says roughly 68% of online experiences begin with a search engine.

SEO can get complicated—it shapes how you structure your product descriptions, image files, title tags, meta descriptions, and more. Your search engine rankings take over 200 factors into account, but you don’t have to tackle them all to be successful in your niche.

Start by carefully identifying your chosen keywords and working them into your site’s content. Then, use your ecommerce platform’s site builder to carve out effective title tags, meta descriptions, and headers. Read our beginner’s guide to ecommerce SEO to learn more.

Dial in SEO tactics on your Shopify store by navigating to the Preferences tab. (Source: Shopify)

Whether your site is product- or content-focused, adding appropriate content to your marketing plan is an effective way to build a long-term traffic stream. It also benefits your SEO, nurtures brand recognition, and can help grow your contact list.

Content marketing can be done by creating a few blog posts about your niche, starting a YouTube channel, recording a podcast, or adding custom infographics to your site.

If you don’t have the means to create content yourself, try seeking help from a freelance professional on Fiverr. Alternatively, you can work with established content creators to score guest spots on their media channels. Any amount of content is a useful tool to get the word out about your store.

Personally reaching out to those interested in your niche is a great way to get attention as you’re starting a dropshipping business. It is especially effective if your concept appeals to those in active, engaged communities.

Niche communities exist on thousands of Facebook groups, online forums, and Reddit pages. Members of these groups are enthusiasts who love to talk shop, which often includes discussing products and sources (like your new store).

The mechanical keyboard Reddit community has 940k members, with thousands online at any given time. (Source: Reddit)

These audiences are welcoming to like-minded participants, but they usually don’t respond to intrusive sales techniques in their spaces.

Try building rapport with these communities by leveraging your own knowledge of your niche. Build relationships, start conversations, offer advice, and post reviews. While engaging with other members, you can mention your store or recommend some of your products.

When done tactfully, community involvement can build trust for your brand from well-qualified customers.

If you’re using dropshipping marketplaces, order management and fulfillment is a hands-off process, but you’ll need to keep an eye on it. Your ecommerce platform dashboard will report new, processing, and shipped sales; if any orders sit unshipped too long, follow up with an inquiry to your supplier.

Fostering relationships with your vendors is important to scaling your business. As your business grows, you may want to move away from dropshipping marketplaces and source your products directly for greater margins. Stay in good standing with your suppliers and keep communication professional.

Keep an eye on your communication channels listed on the “Contact Us” page of your website. Depending on how much time you have to dedicate to your business, you can either respond to queries as they come in, or set aside a time each day (or few days) to catch up.

As your orders increase, so will customer service needs. Be prepared—it’s a standard part of owning an online business. If customer support tasks require more time than you can provide, consider hiring part-time help or outsourcing to a third-party service provider.

As a startup dropshipping venture, your accounting responsibilities will be minimal. It’s still crucial to keep track of the money that comes in and out of your business (including sales tax) and keep up on your licensing renewals and platform fees.

Another part of running a successful business is identifying ways to improve. Your ecommerce platform likely has analytics features that convert your store’s data into clear, helpful reports to help you get crucial insights, such as:

• Sales: Identify your best-performing channels, bestselling products, most popular categories, and where to put more ad spend.
• Shopper Behavior: Uncover whether more customers are buying on mobile or desktop, how they interact with your store, and who your best customers are.
• Profitability: Point out which products and variants are the most profitable, and evaluate what your sales and profits look like month over month.

An example of Shopify’s sales reporting feature (Source: Zenstores)

To learn more about the top metrics and KPIs (Key Performance Indicators) you should monitor to improve your business, read our guide to retail analytics.

Dropshipping is an ecommerce business model in which the retailer acts as an online storefront where customers purchase goods. However, instead of the retailer fulfilling orders, they’re fulfilled by a third-party manufacturer or wholesaler.

This way, the dropshipper doesn’t keep the products in stock and instead acts as a facilitator between the customer and supplier. In many cases, the customers do not know they are receiving a dropshipped product.

It can be. Overhead costs are much lower for dropshipping compared to traditional ecommerce because there is no upfront investment in products. However, the profit margin on each individual sale is typically much lower—around 15%–20% compared to 40%–50%.

You can start a dropshipping business with less than $100 if you just want a simple setup. At a minimum, you’ll need a domain name, an online store, and a reliable internet connection.

However, you will also likely want to invest in product samples, which can cost up to several hundred dollars depending on the type and quantity of products you’re interested in.

Once you’re up and running, you’ll pay an ongoing ecommerce software fee ($30–$300 per month). To generate sales, you’ll also likely want to invest in social media and/or search engine marketing as well as content creation.

No. Many new and small dropshippers operate as a sole proprietorship. However, registering for an LLC reduces some elements of personal liability. If your business grows or you have high ambitions to scale, registering for an LLC is a wise choice.

The easiest items to dropship are typically trending or popular items, lightweight products (for low shipping costs), items that aren’t typically purchased brand name, or items that have a marketable niche.

Some of the best items to dropship include:

• Car accessories
• Phone cases and screen protectors
• Pet toys
• Office supplies
• Kitchen utensils
• Clothing
• Ring lights
• Ear Plugs
• Kitchen appliances
• Gaming headsets
• Hats
• Scalp massagers
• Face rollers
• Water bottles
• Camera tripods

Yes, dropshipping is a perfectly legal method for fulfilling ecommerce orders. But, as with any business, dropshippers need to follow all the rules and regulations set by local, national, and international authorities around selling goods.