How to Start a Dropshipping Business: The Easiest Way to Sell Online

By Nishat ManzarThursday December 7, 2023

Dropshipping represents a strategic order-fulfillment approach, enabling store proprietors to engage in direct consumer sales without the need to maintain inventory. In this operational model, when a customer acquires a product from a dropshipping-enabled store, a designated third-party supplier undertakes the responsibility of shipping the product directly to the end consumer.

This sophisticated arrangement entails customers remitting the retail price established by the store owner, who, in turn, compensates the supplier at their wholesale rate. The differential between the retail and wholesale prices constitutes the profit margin. Notably, this method liberates store owners from the logistical complexities associated with product handling and obviates the necessity of substantial inventory investments.

Crafting a successful dropshipping business plan requires careful consideration and strategic planning.

1.Commit To Starting A Dropshipping Business

Embarking on the establishment of a dropshipping enterprise necessitates a substantial commitment, coupled with a steadfast, long-term outlook. The pursuit of a six-figure income within a brief six-week span of part-time engagement is regrettably unrealistic and not aligned with the realities of the business landscape.

Adopting a pragmatic approach to your venture, inclusive of a clear understanding of the requisite investment, both in terms of time and financial resources, is paramount. By maintaining realistic expectations regarding the commitment involved and the potential for profitability, you will significantly mitigate the likelihood of encountering discouragement and prematurely abandoning your endeavors.

As a novice in the realm of ecommerce, the initiation of your business journey demands a substantial investment, be it in the form of dedicated time or financial capital. This deliberate allocation of resources is fundamental to establishing a solid foundation for your venture’s growth and sustained success.

2.Choosing An Idea

The second crucial step in establishing a successful dropshipping business involves conducting comprehensive market research. Similar to the process of opening a traditional retail store, which entails assessing various factors such as location, competition, and industry trends, initiating a dropshipping venture requires a thorough exploration of a chosen niche. The objective is to scrutinize the niche’s potential profitability and base strategic decisions on these findings.

Identifying validated product ideas for dropshipping, however, poses a challenge. To facilitate this aspect of the process, Shopify offers a curated list of trending products based on the top-selling categories on its platform. Emphasizing more specialized and trending items allows entrepreneurs to capture the attention of potential customers and gain traction in the market without directly competing with well-established businesses.

It is noteworthy that niche products often cultivate a more dedicated customer base, simplifying the process of selling to specific demographics by heightening awareness of the products. Entry points into dropshipping without substantial initial investments may include niches such as fitness, fashion, beauty products, electronics, phone accessories, and yoga-related items.

Examples of niche dropshipping store concepts encompass:

Dog bow ties tailored for dog enthusiasts.

iPhone cases designed for iPhone owners.

Camping gear catering to the needs of outdoor enthusiasts.

Exercise equipment targeting fitness enthusiasts.

Google Trends:

This tool aids in assessing the upward or downward trend of a product, as well as identifying the seasons during which certain products tend to gain popularity.

It is important to note that while Google Trends provides trend data, it does not indicate search volume. Therefore, cross-referencing this data with a keyword tool like Keywords Everywhere is recommended to ascertain the product’s popularity in online searches.

3.Comprehensive Competitive Analysis for Your Dropshipping Business

Now that you have identified the products you intend to feature in your store, a pivotal step in establishing a successful dropshipping venture involves conducting meticulous research on your competitors. Understanding the dynamics of your market and gaining insights from competitors can provide valuable clues for shaping a robust marketing strategy for your business.

In instances where your market boasts numerous competitors (a favorable condition in dropshipping), it is advisable to focus your research on approximately five other dropshipping companies. This selection should include prominent players in the industry, such as Walmart, eBay, or Amazon. Concentrating on a limited number of competitors allows for a more targeted approach, facilitating effective planning of subsequent actions.

Outlined below are professional approaches to conduct thorough competitor research:

Utilize Search Engines:

Commence your research by employing search engines, with Google being a prominent starting point. Initiate a simple search using key terms relevant to your niche, such as “ear plugs.” Analyze the top 10 search results to identify your main competitors and observe how they promote their products. For a more focused analysis in specific regions, consider leveraging third-party tools like Ahrefs or SEMRush to obtain keyword data.

Leverage Competitor Spy Tools:

Employ online tools like Similarweb and Alexa, designed to uncover and monitor your competitors’ online activities. These tools provide valuable insights into competitor websites, including social media profiles, top traffic sources, visitor metrics, and identification of competing businesses. This information serves as a foundation for understanding the competitive landscape.

Explore Social Media Platforms:

Conduct a thorough examination of your niche’s Facebook ads and observe the leading brands in the market. Analyze their communication strategies with customers, the design of their feeds, engagement levels, and overall social media presence. By following their feeds, you can stay updated on their latest activities. Extract insights from this information to identify opportunities for your business to distinguish itself and enhance your social media marketing strategy.

Comprehensive Competitor Profiling:

Endeavor to acquire a comprehensive understanding of your top competitors by scrutinizing various aspects, including their websites, pricing structures, marketing methodologies, product descriptions, and reputation. Maintain an organized record of your research in a spreadsheet for easy reference when making critical decisions for your store.

For instance, if you are contemplating using an email list for promotional purposes, refer to your spreadsheet to ascertain whether competitors are already employing this strategy and the specific tactics they employ—all conveniently accessible in one centralized location.

This systematic approach to competitor research positions your dropshipping business for informed decision-making and strategic differentiation in the market.

4.Choosing A Supplier

Selecting an appropriate dropshipping supplier is a pivotal and strategic decision in establishing a thriving dropshipping business. The reliability of your chosen supplier is paramount, as it directly influences the availability of products for shipment to customers, thereby determining the viability of your business.

After meticulously identifying the profitable dropshipping products to offer, the next imperative step is to secure a reputable dropshipping supplier capable of delivering the high-quality service essential for business growth. E-commerce platforms such as Shopify present a seamless and efficient solution by facilitating connections with DSers, a marketplace designed to simplify the process of discovering and adding products to your online store.

DSers offers a diverse array of products, spanning electronics, fashion, toys, and other trending items, sourced from reputable dropshipping suppliers worldwide. Integrating these products into your store is a straightforward, one-click process, streamlining your operations.

The DSers application assumes the responsibility of forwarding customer orders to your chosen dropshipping supplier, alleviating concerns related to packaging, shipping, and inventory management. Importantly, the initial setup incurs no cost.

Utilizing AliExpress, the DSers app ensures a user-friendly interface for discovering and incorporating products into your store.

For those seeking additional insights into product quality, shipping times, or supplier verification, the DSers product page offers comprehensive information to facilitate informed decision-making. This robust approach to supplier selection is instrumental in establishing a solid foundation for your dropshipping venture.

5. Establish Your E- Commerce Store

Establishing your e-commerce store requires the utilization of a robust e-commerce platform, such as Amazon , Flipkart, Meesho, Myntra . This platform serves as the central hub for directing traffic, facilitating product sales, and processing payments.

6. Business Structure

Establishing a solid business foundation is a crucial step for any serious entrepreneur. Below, we outline three commonly utilized business structures, each with its own set of considerations:

Sole Proprietorship:

The simplest structure to implement, a sole proprietorship has minimal filing requirements. However, it provides no personal liability protection. In the event of a lawsuit against your business, personal assets may be at risk. Business earnings are reported on personal taxes, and no additional state or federal filings are necessary.

Limited Liability Company (LLC):

An LLC offers enhanced protection for personal assets by establishing the business as a separate legal entity. While not entirely foolproof, it provides more protection than a sole proprietorship. Compliance with additional filing requirements is necessary, and both incorporation and ongoing fees are applicable.

C Corporation:

Common among major corporations, C corporations, when properly established, offer the highest level of liability protection. However, they tend to be more expensive to incorporate and are subject to double taxation, as income does not directly pass to shareholders.

Choosing the right structure requires careful consideration. It is advisable to consult with a legal professional before making any incorporation decisions. Many small entrepreneurs opt for either a sole proprietorship or an LLC.

Please note that the information regarding business structure and Employer Identification Number (EIN) is specific to the United States and may not apply to other countries.

Obtaining an EIN for Your Business:

The IRS mandates that all businesses have an EIN, akin to a Social Security number for individuals. This number is essential for filing taxes, applying for wholesale dropshipping accounts, opening a bank account, and other business-related activities. Thankfully, obtaining an EIN is a straightforward and cost-free process, with online application available.

7.Organize Your Finances:

A common pitfall for entrepreneurs is commingling personal and business finances. This practice leads to confusion, complicates accounting, risks personal assumption of business liabilities, and raises red flags during IRS audits. It is crucial to maintain clear financial separation between personal and business accounts to ensure proper business governance.

Business Checking Account:

It is advisable to centralize all financial transactions for your business through a designated primary checking account. All business revenues should be diligently deposited into this account, while all expenses are systematically withdrawn from it. This streamlined approach significantly facilitates accounting processes, ensuring a more organized financial structure.

Credit Card Management:

Maintaining a dedicated business credit card exclusively for business expenses and inventory acquisitions, particularly in the realm of dropshipping, is essential. Leveraging the right rewards travel cards can yield substantial benefits, especially given the frequent transactions with suppliers.

Sales Tax Compliance:

Collection of sales tax becomes necessary only if your operating state enforces such taxation and the order originates from within the state. Notably, for orders placed by residents of other states, even if those states impose their own sales tax, collection is not mandatory. Although legislative changes may occur in the future, the current tax laws offer favorable conditions for small online merchants.

Local Business Licenses:

While most cities and towns mandate businesses to secure and renew regular business licenses, the requirements may vary for dropshipping ecommerce ventures, often operated from home offices. Compliance should be investigated based on local laws and regulations.

Incorporating Outside the United States:

International merchants can navigate the complexity of incorporating a business in the United States, providing access to US-based dropshippers and customers. This process may involve physical presence in the US, delegation to a trusted business partner, or engagement with a professional agency for seamless setup.

8.Marketing Your Dropshipping Store

Effectively promoting your dropshipping store is crucial for standing out in the market. Consider allocating extra effort to marketing and advertising within your dropshipping business plan.

Strategies include:

Paid Ads (Facebook and Google): Utilize scalable Facebook ads and Google Shopping Ads for targeted exposure.

Influencer Marketing: Leverage influencers for affordable and trusted outreach.

Content Marketing: Incorporate content marketing through blogs, YouTube, infographics, or podcasts.

Community Engagement: Participate in niche-specific online communities for meaningful interactions.

Mobile and Email Marketing: Embrace mobile marketing initiatives and harness the power of email marketing to build lasting customer relationships.

Continually assess the effectiveness of each channel, adjusting your marketing strategy to optimize costs and enhance revenue as your business evolves.