Dropshipping is one of the most lucrative and yet active sources of income online. Building a store is easy, and you can almost immediately see the results of your efforts. Unlike affiliate marketing, you do not have to wait for months before you see your first sale.
But how do you build a dropshipping business in 4 easy steps?
The steps that we will talk about today are:
- Choose a profitable niche
- Select a supplier
- Build a store on the right platform
- Plan your marketing strategy
But before all that, we need to understand what dropshipping is and its pros and cons. By the end of this tutorial, you should be able to decide if dropshipping is the best option for you.
If you want to compare dropshipping and affiliate marketing, read my blog post: Dropshipping vs Affiliate Marketing: What Should You Choose?
Overall, the topics we will cover today are:
- What is dropshipping?
- Is dropshipping a new concept?
- Pros of Dropshipping
- Cons of Dropshipping
- Start a Dropshipping Business in 4 Easy Steps
Let us get started!
When readers buy products and services discussed on our site, we earn affiliate commissions that support our work.
What is dropshipping?
Dropshipping is an active business model where you sell a product. The thing is, this product is not yours—it is someone else’s. What you do is to market it through your website or on online marketplaces such as Amazon, eBay, Etsy, and others.
Once you make a sale, you purchase the product from your supplier, and your supplier ships the item to your customer.
So, how do you make a profit?
In dropshipping, you do not buy the product before it is sold. However, you sell the product like as if it is yours. Let us say that I am a supplier of bracelets with gemstones, and that I am selling one of my bracelets or $9.99, plus shipping of $4.99.
You as the dropshipper will take photos of my product—from my product listing—and then post it on your website. However, you have to post it at a price where you have a mark-up.
So, you sell it for $19.99, plus you charge $4.99 shipping from your customer, so your gross sale for this item is $24.98.
Once a customer pays you, you go to my website and process the order. You have to pay me $9.99 for the product and then $4.99 for the shipping. You need to tell me who the recipient is and where to ship the item.
Once your payment has cleared, I will ship the item to your customer.
The difference between what you paid me and what you sold it for is your gross profit. It is from this gross profit that you have to pay your website costs, your virtual assistant’s salary if you have one, your Facebook ads, and other expenses.
Once all that is paid, you will get your net profit.
Here is a sample scenario of how your month as a dropshipper is going to look like. We will no longer include the shipping rate in the assumption that it is just even between what you charge and what you pay to the supplier.
|Facebook Ad Cost||$200.00|
Let us say that it takes 10 minutes to process one order. If you process 200 orders a month, this roughly translates to only 33 hours of work per month, or 1.07 hours per day.
Is dropshipping a new concept?
Dropshipping is not new—it has been around even in times when the internet did not exist yet. In the 1950s, this used to be called mail order. Dropshippers created catalogues from suppliers and then mailed these catalogues to thousands of addresses.
These flyers, catalogues, and magazines have a phone number to call. In some cases, these are the phone numbers of the manufacturers. But in many cases, you call just one number and pay—with your credit card.
Once the payment is processed, the dropshipper calls the manufacturer, and the manufacturer ships the item to the customer.
With the advent of the internet, dropshipping has become easier to implement. Since the cost of entry is so low, a lot of people tried dropshipping and failed, not realizing that this is a real business, not a monkey-business.
Here, take a look at the interest of people about dropshipping over the past years.
The chart above shows interest based on Google Trends data from 2004 to March 2020. As you can see, the breakout happened in 2016, and the interest dipped in March 2020.
Probably it is the COVID-19 scare. People have no money to start an online business.
Anyway, it is a real business, not some kind of new fad.
And most certainly, dropshipping is not a get-rich scheme. While there are those who successfully made $178,000 in three months, dropshipping requires hard work. If you know what you are doing, you may see success faster than the others.
But if there is one thing guaranteed, dropshipping is not a walk in the park.
Like blogging and affiliate marketing, there are many who tried dropshipping and failed. They failed because they thought money grows on trees.
Pros of Dropshipping
Dropshipping has its fair share of the good, the bad, and the ugly. Let us first take a look at the pros of dropshipping.
In a nutshell, here are the pros:
- Low startup costs
- No inventory
- Low cost to fulfill orders
- Unlimited inventory
- Manageable anywhere
- Easily scalable
Low startup costs
With dropshipping, the only thing you have to pay upfront is your online store. It is up to you how you want to build it—you can use the most popular options, which are Shopify and WooCommerce.
At the very least, you only have to spend $29 to maintain a Shopify website. WooCommerce is free, but you have to choose a web host service provider to host your website.
Visit WooCommerce here.
As discussed in the business model earlier, you do not have to buy items and stock them in your warehouse. In dropshipping, you only buy a product once an order is placed in your store.
With an inventory, products that do not get sold are like money sitting in your house. This problem can never happen with dropshipping—the supplier carries this burden of inventory.
Low cost to fulfill orders
Once a customer ordered a product from your store, you have to front the payment to your suppler. Typically, payment processors have a delay when it comes to disbursing the funds to your bank account.
For example, a customer paid you through 2Checkout. This payment processor can take anywhere between two days to two weeks before you get that money. As such, you have to order the product from your supplier while you are waiting for this payment to clear.
Since you do not have to buy inventory, you can post as many products in your dropshipping store as much as you want. Web builders do not impose a limit to the number of items you can post.
What this means is that you can build a general store, and you can also build a niche store. You can choose to build a store that sells all types of clothing for men, women, and children, or you can build a store that sells only underwear for women.
What should you build—a niche store or a general store? If you need guidance on this, read my blog post: Niche vs General e-Commerce Store: What Should You Choose?
Your dropshipping store is online. All your orders, product placements, ads, and order fulfillment are online. You can process orders while on vacation, while at home, or during snack time while you are at work.
Dropshipping requires access to the internet—there is no alternative to it.
Since you do not have to keep inventory, you can easily scale your business. Let us say that you started selling female underwear, and you succeeded. Now, you can scale up and add men’s underwear. Then, you can add clothing, then shoes, then wristwatches, and more.
There is a lot of benefit to the dropshipping business. However, it is not a passive income, like blogging and affiliate marketing. You need to consistently watch for trends, connect with your consumers. Write blog posts, and also create Facebook ads.
Cons of Dropshipping
Now, let us take a look at the bad and the ugly. While dropshipping is a lucrative business model, there are some compromises you have to make. Most of these cons are actionable, and you can find your way around it to make your business successful.
The cons are:
- No control over quality
- No control over shipping
- Dependency on the supplier for availability
- Lots of competition
- Active income, not passive
No control over quality
Since you are not the manufacturer, you have no control over the quality of the items you dropship. Even if you want the manufacturer to make a more durable products, or use a different material, these things are simply not on the menu.
In dropshipping, WYSIWYG.
It means what you see is what you get.
Now, you certainly do not want to ship low-quality items to your consumers, right? If you let this happen, you will get inundated with refunds and returns.
The trick here is to test your supplier. So, while you can start dropshipping at a low cost, quality always comes at a price. Before you sell someone else’s products, see it for yourself. Order the item from a supplier and be the judge if it is worth selling.
No control over shipping
A lot of suppliers in the dropshipping industry are in China. As such, most of the suppliers use ePacket. They also use other couriers such as DHL and FedEx, but the shipping prices from these couriers cost a finger.
This is one of the main challenges of dropshippers—ePacket takes anywhere between 10 days and 60 days. The products get stuck in Customs, and your customers are going to have to wait.
The only way to go around this is to set your customers’ expectations right from the get-go. On your product or shipping pages, you have to tell them that shipping can take up to eight weeks.
A great way to phrase this without telling them that the package comes for China is: “Due to high volume of orders, please expect your items to reach you in eight weeks.”
If you want to learn more about ePacket, I wrote a blog post about it here: What is ePacket: Your Ultimate Guide to ePacket
Dependency on the supplier for availability
In dropshipping, you cannot tell the supplier to produce more just because you are selling more. The products you can sell depend on the manufacturer’s supply.
Let us say that you are selling a red die-cast car—a Ferrari model—and this is your top seller. If the supplier decides to stop the production of this model, there is nothing you can do about it.
Lots of competition
This has to be expected. Since the barrier to entry is too low, thousands of people, are doing this. We have no idea how many exactly are in the dropshipping business, but there are 500,000 Shopify stores active today.
And that is only one platform.
Do not get intimidated by this. Like many bloggers and affiliate marketers, a lot of people start this business and never get to the finish line. I have scoured a lot of forums, and there is an endless list of people who built a dropshipping store and never made a sale.
Again, this is not a walk in the park. It is easy to walk away from this business because, after all, you only invested $29, right?
Despite the number of people starting this business, only 10% succeed within the first year. For every 100 people who start, you are only competing against 10.
Active income, not passive
Dropshipping is an active income. It is a store, and you need to manage this store every day. There is no way you can process orders, remove out of stock products or add new ones if you do not manage it daily.
Dropshipping requires your attention.
Once it is earning, you can hire someone to manage it part-time or full time. The thing is, you have to hire somebody as skilled as you, and this is difficult to do.
If you start your dropshipping store, it is likely that you are in charge of pricing, product research and selection, graphic arts, marketing, advertising and all that. You may wind up hiring several people to do all this.
Pin it so you don’t forget it!
Start a Dropshipping Business in 4 Easy Steps
Now, we can move on and guide you on how to build your dropshipping store in 4 easy steps. These steps are high-level, and there is so much to learn for each one.
The steps you will learn here today will serve as the foundation of your dropshipping dream. No matter what dropshipping course you take, you will do these steps.
Step 1: Choose a profitable niche
This is an issue of debate. Some insist that you have to focus on your passion, and some say that you have to sell products that have a market.
I say you have to balance both.
It is difficult to sell a product that you do not like. And it is equally difficult to sell a product you love but with no market.
A lot of people are also confused by how profitability is defined. Of course, any product that you can sell for a mark-up makes a profit, but is that profit enough to run a business?
To be able to do this, choose a product and see how your competitors are pricing it. If you sell your product at the same price or lower, how much profit will you make from each sale?
Now, suppose that you sell 100 of these items in a month, and then subtract the same expenses we used as an example earlier, does it still make sense to sell it?
To see if there is a demand for a product, use Google Trends. You can go to AHREFS to learn how to use Google Trends to see if there is a demand for your product.
Step 2: Select a supplier
This is one of the most crucial parts of building your business. The supplier must be a high-performing supplier.
Here are the characteristics that you should look for from a supplier:
- Must be responsive to your inquiries
- Must have high-quality products
- Must have multiple shipping options
- Must have a clear and reasonable return and refund policy
There are thousands of suppliers out there, and you can get lost in a sea of manufacturers. If you go to AliExpress, the most likely thing to happen is that you will suffer from shiny object syndrome—a phenomenon where you leave behind your original purpose because you saw something new.
My advice is that you use dropship supplier tools. These tools are directories that companies built to help dropshippers. They vet or filter suppliers and only leave the best ones so dropshippers can conduct their business at the highest standards.
The three that I recommend are Dropified, Spocket, and SaleHoo. You can read my reviews about these three here:
Or you can just visit their websites here:
These tools can help you narrow down suppliers of good standing. They also provide a lot of tools to help you in your dropshipping business, such as tutorials, apps, and more.
Step 3: Build a store on the right platform
Now, this is a critical part of the dropshipping business. You can only choose a platform once. If you do not make a wise decision right now, you will have to repeat the store-building process from the beginning.
The most common web-builder that dropshippers use is Shopify. Not only is it affordable, but the platform was also specifically built for e-commerce. Shopify only costs $29 per month, and you do not have to pay on a yearly basis—you only pay your website maintenance cost per month.
For more details about Shopify, read my blog posts here:
If you are interested in Shopify’s 14-day free trial, tap on the image below.
Shopify is a complete suite of everything that you need for a store. It is easy to use, and anybody can build a fully-functional store, even if you do not know how to code.
You may have heard about BigCommerce, but I have to say that it is too expensive. The other option that you can check out is Ecwid.
If you need a comparison between Shopify and Ecwid, read this blog post:
Step 4: Plan your marketing strategy
The last step in building your dropshipping business is to plan your marketing strategy. If you are new to online marketing, you have to choose only one or two marketing platforms. There is a ton of social media platforms, and you can get overwhelmed with them if you use them all at the same time.
Here is a shortlist of what you can do to market your store and products:
Each marketing platform has its own unique benefits and challenges. Also, not all types of dropshipping products can be advertised on all these. For example, you cannot advertise sex toys on Facebook or Instagram, but you can do it on Google.
I would say that marketing is the most important step in the dropshipping business. Selecting a niche or product is easy. These are one-day projects. Building your store is a one-week project, but marketing is a never-ending cycle.
At best, I strongly suggest that you take a marketing course, or a dropshipping course that has marketing baked into it before you start. Do not be like many amateur dropshippers who spent at least $2,000 on their stores and Facebook ads, and never got any sale.
There you go—now you have the four steps to start a dropshipping business. Dropshipping is one of the most exciting businesses that you can ever build online. It is affordable, and it does not take a whole lot of technical skills to make it happen.
Just like any business, the road to success is never easy, and there are risks. You need mental grit to make this happen. And this is why I strongly suggest that you take a course before you dive into it.
Once you have taken a course, do not just start a dropshipping business. Take the course again. List down every aspect of what you have learned, and then create an action plan. Use a spreadsheet to track your progress, and think carefully before you decide.
Never ever start a business out of a whim, or simply because you think it is easy. Think, analyze, and make sure that you make smart decisions based on data.
I have several eBooks about dropshipping that you can download for free. Check it on my Freebies page. Take advantage of these books and learn what you can before committing yourself to the business.
Do you need help?
If you do, subscribe to my blog and let me know how I can help you.
You can ask me to questions on topics not covered in this website, and I will do research about it. If you need me to review your website , let me know, and I will provide my opinion.
Sign-up once. Learn forever. For free.
Get my best content delivered straight to your inbox!
If you like this article, I was hoping you can follow me on my social media channels. If you do, you would know if I published a new blog post.
Here are my social media details:
MY RECOMMENDED TOOLS
Visit my recommended tools page if you are looking for the best software to help you build your e-commerce business!