eCommerce Blog / Start a Drop Shipping Business

How to Start a Drop Shipping Business (in 5 Easy Steps!)


By Monday January 22

Starting an online business has never been easier than it is today.

With the growth of Amazon, eBay, Shopify, and other online retail platforms, anyone with $20 can start an online shop!

If you’re just starting out, however, you may not have a lot of cash and a big house or warehouse to store your goods. Plus it can be daunting to figure out what to sell.

That’s where dropshipping and dropshipping supplier directories come in!

Understanding what a drop shipping business is

Drop shipping is another name for price arbitrage; a fancy term that means you find low-cost products and sell them at a higher price.

With a dropshipping business you don’t need cash or storage space. You just need to set up your store, list your products, and focus on marketing and selling.

It works like this:

First, you find and source a product with a low wholesale price from a supplier. Then, you place that product on your store and list it for a higher retail price.

When your customers purchase the item, you take their orders and send them to your supplier. The supplier sends out your goods directly to your customers and you keep the difference.

The great things about dropshipping:

  • It's easy to set up a store.
  • You don’t have to worry about inventory.
  • There’s little risk to you as the seller.
  • There are millions of products you can sell.
  • It’s possible to have a dropshipping business anywhere in the entire world.

Now that we’ve talked about what drop shipping is, it’s time to go through the steps needed to start your own drop shipping eCommerce store.

Ready? Let’s dive in!

Step 1: Figure out your niche

One of the biggest misconceptions you’ll hear about drop shipping is that you’ll be successful (and profitable) in almost any niche imaginable, even if you have no interest in what you’re selling.

We hate to break it to you, but that’s simply not true.

Without any knowledge about the niche you choose, you won't have the ability to pick up on anything fishy about the quality of the products, the process, the pricing, or anything related.

Picking a niche you fully understand will give you some additional advantages over your competitors. Especially if they haven’t invested the same amount of research or personal experiences!

If you’re struggling to find the perfect niche to dive into, follow these quick (and effective) steps:

  1. Identify your interests and passions. You probably already know this, but business isn’t always easy. There are going to be times where you feel like giving up and, unfortunately, if you’re not passionate about your niche, it’ll be that much easier for you to leave behind. If you can’t stand watching baseball, it’s not a good idea to sell items in that niche.
  2. Identify problems you (and your niche) can solve. In order to create a profitable business, you’ll want to research problems your target audience may be feeling and come up with a solution for them. Check forums (such as Quora) to see what people are saying about the niche you’re interested in for a better insight.
  3. Research your competition. Is the niche you’re interested in over-saturated? If so, is the competition easy to beat? Better yet, is it worth beating them? You’ll often find that the niche you’re most interested in joining is the one that nearly everyone is already a part of. This doesn’t mean you can’t hop on the bandwagon, just be ready for some competition! Rise above the competition by reading this article!
  4. Determine whether or not your niche is profitable. Will you be able to get a good amount of money from your niche? A good way to find out if your niche will make or break your bank account is by checking out the top trending items (on both eBay and Amazon). If the niche you’ve picked doesn’t look like there’s much traffic, it’s probably not a good one to go with.

Above everything, remember this: there is no set way to find the perfect niche for you.

Your interests will vary and you may find it hard to settle on a niche. Keep in mind that you’ll learn more from doing than you will from planning.

Pro tip: It also helps if you have the seller’s experience in the niche you pick, such as:

  • You're a consumer in that niche yourself. You’ve purchased a number of products in this niche, you know what’s good/bad about them, and you know how to make them better.
  • You've witnessed other businesses in your niche rise and fall. You recognize the common mistakes they’ve made and know how to avoid/fix them.

Step 2: Find a dropship supplier

Finding a wholesale supplier might sound difficult, but, lucky for you, we have an entire directory filled with reputable sellers with products ranging from cosmetics to farming equipment!

Let’s say you wanted to sell fashion jewelry. You’d go to our directory, type in “fashion jewelry” and you’d find 36 reputable distributors to choose from:

From there, you’d find a wholesale supplier that you liked, reach out to them, and get your business gears turning.

Hint: Jewelry is a pretty popular niche, check out this guide to see how well it does!

 

Before you settle on a supplier, be sure to ask them the following questions:

  • How long will it take for an order to be shipped once placed?
  • What shipping methods do they offer and what are their tracking systems like?
  • What are their quality control systems?
  • Do they offer warranties?
  • Can you use their product photos? Or, better question, are they able to provide you with updated product photos (and videos)?

Step 3: Get a sales tax ID

Sales tax (also known as retail or resellers license, tax ID, resale number, resale certificate or vendor's license) is a tax levied on all sales of physical goods to consumers within most states.

While it's important you collect the exact amount of sales tax (otherwise you’ll be held liable for the difference), not all eBay sellers need a tax ID!

That said, some wholesale suppliers require you to have one before they will do business with you.

You’ll need to get a sales tax ID if you are inside the US or Canada and running a business (not just selling items from around the home).

Note that some US states, including Alaska, Delaware, Montana, New Hampshire and Oregon, do not require sales tax IDs. So let your wholesaler know if that’s the case, as they may have  another form for you to fill out.

Click on your state to find the right sales tax information for you,
and register for your license.

 

 

 

 
Sales Tax Applies
 
No Sales Tax

 

 

Applying for a tax ID is easy and inexpensive; you can do it by visiting your local county clerk’s office or online – just Google “[your state] + sales tax ID”.

To get a sales tax ID, you may need to be a business entity; a company or a sole proprietor (which applies to a lot of at-home online businesses), and have a Federal Tax ID number.

Step 4: Choose your selling platform

eBay is known as the world’s easiest marketplace for beginners. It’s one of the best eCommerce platforms to start off on, but that doesn’t mean there aren’t other options to choose from.

Amazon is the world’s largest online marketplace. Because it’s a retail marketplace, Amazon has a better venue to sell mass market goods.

Most people think that eBay and Amazon are their only option, but we’re here to tell you that they’re not!

Sites like Ruby Lane and Bonanza are great for new eCommerce store owners, too!

It's a good idea to diversify when selling on online auction sites, as each site has its own unique visitors (not everyone checks eBay first!) and with most sites being free to join, there’s no reason not to give others a try.

For sellers who are really looking to diversify, consider setting up your own eCommerce site such as a SaleHoo Store which is the fastest and easiest way to open your own store.

You can get a free 30 day trial of SaleHoo Stores right now and try it for yourself!

Pro tip: Check out this guide to better understand how dropshipping on eBay works.

Step 5: Promote your store

If you’re just now starting out, you may find it hard to gain traction to your store (even if you don’t have many competitors to deal with).

In order to gain a following, you’ll need to work extra hard on promoting your store.

How do you do this? We’re glad you asked! Here are three strategies:

1. Build a kickass email list

Research done by MarketingSherpa found that 60% of marketers realized email marketing produced an ROI for their company (32% believe it will eventually produce an ROI).

When asked what the estimated ROI from email marketing programs for the company were, the overall group reported 119%, a figure that’s tough for any online store owner to ignore.

To learn a bit more about email marketing, check out this guide!

2. Create referral discounts

Referral discounts are the classic marketing tactics to promote your online store and help you reach new customers fast!

Uber started a referral program which allowed new customers to get a free ride, if they signed up for the app through their friend.

You can offer a similar discount by saying something like:

“Sign up for my email list to get 10% off your first order!”

3. Send samples of your product to influencers

Whether you’re in the beauty or car niche or anywhere in between, you’re bound to have high-ranking influencers who can help you promote your products.

All you’d have to do is email them, explain what your product is (and why’d they want to use it) and, if they’re down to show it off for you, send it their way!

Keep in mind, however, that bloggers and influencers get tons of “Hey, sponsor my product for me!” emails per day. You’re going to need to get a bit more creative with your email if you want an answer!

Pro tip: This guide is incredibly helpful when it comes to reaching out to influencers and takes you on a clear, step-by-step process to hearing “Yes” nearly every time.

Conclusion

Huzzah! We’ve reached the end and, by now, you should know how to start up your own eCommerce drop shipping business from scratch.

The work is far from over, though! Now you have to successfully run your business.

But don’t worry! As long as you follow these next few tips, you’ll have a successful eCommerce drop shipping business for years to come.

  • Continue to update your website. Work on your SEO and create high-quality content to bring in traffic.
  • Maintain your relationship with your supplier. Keep tabs on the products you’re offering and, when you’re ready, look into adding more. (Hint: You can use SaleHoo’s market research lab to find hot new products!)
  • Keep up with your customer service. Answer emails and questions, and update your FAQ page (if you have one).
  • Stay on top of your social media. Refine your ads, run contests, and promote like crazy!

We hope you’ve enjoyed this article on how to start a drop shipping business! Did this inspire you to create one? Leave a comment down below! And don’t forget to share this article with your entrepreneurial friends!

 

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Comments (55)


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Roy on 8:53 30 Oct
The article is a good reference for a new biz like me. I am interested to venture into the dropshipping business but still hesitant to do so. I really need articles like this to make me going. Thank you. Roy from www.inboxcashexplode.com
Keyuri on 14:28 14 Dec
Very useful information. Thank you very much. Saved me weeks of research.
JL on 17:58 21 Jan
Thanks for the free information very much appreciated, i believe i will begin my business starting with your model, thanks!
John on 16:21 13 Feb
Yes, this info was very helpful.
Gloria, on 21:33 7 Mar
Thank you for the information.
crazypetfood on 9:00 1 Apr
Thansk for the article, I am looking to start my own pet food dropshipping business as well.
Stacey on 12:57 1 May
The most helpful information i've found so far. Explained all of my uncertainties, answered questions just as my mind thought of them. Now I feel better prepared to venture onto the entrepeneurial highway....
Stacy on 18:35 5 May
I disagree with Chris (above). Google does not always display the correct information on a supplier. As a business owner, it is IMPOSSIBLE to please 100% of the customers 100% of the time regardless of how a business owner handles the situation. Some customers are natural born complainers and nothing goes right for them. They are the type who will post negative feedback on the internet in hopes of causing damage to your business. I do a high volume business weekly. I might have 1 of these customers out of my 2-3000 customers. It is not fair to judge a business by a single negative comment posted when the satisfied customers just usually come back and do not post. I have about 75% repeat customers in my business and that is a high percentage. I would recommend doing a business with the company and check them out for yourself instead of relying on posted comments via the internet!
Humphrey Davy on 0:12 23 Jun
Stacy has a good point. I 've been through those customers who just want to complain for no reason at all.
Pakize Taskiran on 10:48 3 Jan
This was by far the BEST and clearest advice i have seen, thankyou so much :)
Richelle Monfort on 5:57 14 Jan
Glad to hear you feel that way, Pakize :) Should you need help with anything please feel free to let us know. Flick us an email st support@salehoo.com

Cheers!
Gary on 23:36 22 Aug
Hello,
I have concerns, I don't have a lot of money to start with and I'm not sure on how this works. Will I be in a position to make a few extra dollars with this, I'm a full-time student and a veteran with a family.

thanks
Gary
Melissa Johnson on 3:54 25 Aug
Hi, Gary!

One of the reasons we at SaleHoo believe in dropshipping as a business model is because there is hardly any start-up capital required -- in some cases, none at all. It just depends on where you list. eBay allows sellers to list a certain number of items for free. Amazon charges a flat fee per listing for small-scale sellers. If you build your own online store, you'll obviously have to pay for web hosting and a domain name (but no listing fees).

If you're not sure about dropshipping, I recommend looking at our in-depth guide to drop shipping: http://www.salehoo.com/dropship

It'll walk you through all the steps.

You can also visit the SaleHoo forum and talk to other drop shippers and get your questions answered: http://www.salehoo.com/forum/

I hope this helps!
John on 12:02 3 Dec 2017
Hi Melissa I'm trying to find a way to make money on line. I ran across this drop shipping. But I'm not too good with computers. And kinda scared of being scammed again.but I need to get my bills paid. Is there any way someone can walk me through this
Brandon on 17:28 2 Feb
I've been researching drop shipping for a while in my small amount of spare time. I just want to make sure this isn't some false get rich quick scheme. Is there any advice for the Don'ters from the Doers?
kathy on 13:16 30 Nov
I have tried one drop shipper and they wanted to charge me monthly to just be able to use them. Should I stay away from the ones that charge a monthly fee and just go with the ones that only charge me at the time I actually make a sale. IF so, how do I find those dropshippers. I have been researching for months now on a niche to sell and am having a hard time finding that right thing or dropshipper. I have been selling on eBay with some success but only one here and there. I think dropshipping is definitely the way to go but finding the right one is HARD!
Melissa Johnson on 18:06 4 Dec
Hi, Kathy!

You're right. Finding a good dropshipper is definitely the hardest part of operating. And we're generally not fans of monthly fees for dropshipping.

Our directory (http://www.salehoo.com/directory) has more than 8,000 pre-screened suppliers who sell more than 1 million products, including many dropshippers. And our support team is standing by to help you find a supplier who can help you find what you need. A membership might be exactly what you need to take your business to the next level!
Nitin Mohan Sharma on 20:10 26 Jan
Thank you for writing this article. Got quality info on dropshipping and ideas as well
Filjun on 4:55 11 Jul
Hi,

For those outside the USA or Canada is sales tax id still required?
Justin Golschneider on 13:56 11 Jul
Hi Filjun! In the US, you shouldn't have to worry about sales tax if your business and business partners operate entirely outside the US and import each order in. However, if you use Amazon FBA, a dropshipping supplier, a warehouse, or any other physical presence based inside the US, sales tax becomes an issue. Here's a great article about it: https://blog.taxjar.com/international-sellers-deal-sales-tax-u-s/

I'm less familiar with Canadian sales tax law, but from what I gather you need to register for and pay sales tax on any sale in Canada. I recommend contacting our support team for further assistance: support@salehoo.com
Edgar on 17:10 1 Aug
What kind of website can I use for items listings? Can I use blogger site for drop shipping?
Justin Golschneider on 18:09 1 Aug
Hi Edgar! Just about any website builder can be used to make a dropshipping site, even WordPress. But I'd recommend going with a dedicated online store builder to make something that looks professional and works properly with minimal effort. We actually provide one, SaleHoo Stores: https://www.salehoo.com/stores
Kristina Mathis on 2:08 4 Aug
I'm so excited After hearing about drop shipping I tried doing it on my own that hashed out to be a tough decision but Im not giving up hope you're the answer to my lack of experience
Thanx
Tarp pavlosky on 0:16 6 Aug
Send me what you can please, looking to start dropshipping online.
Justin Golschneider on 21:14 7 Aug
Hi Tarp! You can find our full dropshipping guide here: https://www.salehoo.com/dropship
Norman Moulton on 21:46 7 Aug
I'm looking to start and online store any info is great
Justin Golschneider on 13:41 8 Aug
Hi Norman! Here's an article to help you get started: https://www.salehoo.com/blog/how-to-set-up-an-online-store

Happy selling!
Brittany fussell on 16:39 11 Aug
This is a great way to start out if your new to online selling.
on 11:24 17 Aug
I am going to give it a shot. I havebeen trying to sell things online and have bi success.
Amber Knorr on 11:32 19 Aug
I am new to the "Drop Shipping" world and or idea. I'm definitely interested in hearing more about how to run a full-time successful online Drop Shipping business. My niche or my biggest interest has always been buying, selling, and trading. Finding the best deals out in the market and turning those deals for profit. The idea intrigues me. Please send me the list you offer for high "niche" products, most wanted, needed and desired products in the market today. Please send me more information about your business, as I would like to educate myself on how to run a successful Drop Ship home based business. Thanks kindly!
Justin Golschneider on 16:51 21 Aug
Hi Amber! We provide current data on trending products in the SaleHoo Labs: https://www.salehoo.com/labs

You'll be able to find all sorts of juicy info there. :-)

You can also learn more about dropshipping at https://www.salehoo.com/dropship

Happy selling!
Nat on 4:30 24 Aug
Hi if i want to to a lingerie online with all the brand in my web is it a supplier that. Ishould look for also ?
Justin Golschneider on 13:47 24 Aug
Hi Nat! We have over 50 lingerie suppliers in our directory: https://www.salehoo.com/directory

Several of them are dropshippers, too. :-)
Jeffrey Akins sr on 19:18 30 Aug
Hope to succeed
Jaime McGhee on 12:28 1 Sep
I'm interested
Tyler stade on 3:59 3 Sep
Any advice for beginner?
Justin Golschneider on 10:19 4 Sep
Hi Tyler! More advice is available at https://www.salehoo.com/dropship

Happy selling!
Gerald Gaston on 14:16 3 Sep
Great information! Thank you for providing it.
Neria Coronel on 23:15 3 Sep
A totally baby in this kind of business which is interested to know everything about this type of business. Wish I woud've known this earlier.
Tyla on 14:45 16 Sep
Awesome ! Can't wait to delve in and start !
Kristine Joyce on 7:21 19 Sep
Is it okay if I'm in the Philippinesand my supplier and customers are from united states?
Justin Golschneider on 11:33 20 Sep
Hi Kristine! To the best of my knowledge, there will be no problems with that. You will just likely have to apply for a sales tax ID in the states where your dropshipping suppliers are located, and possibly in their cities as well. You can learn more about getting a sales tax ID here: https://www.salehoo.com/blog/how-to-get-a-reseller-license-sales-tax-id
Sasha on 9:13 20 Sep
Hi,
Thanx for the article. It is succinct. I don't see much difference between platforms but i notice that you mention most of them exсept Aliexpress.com and Dropwow.com. Why is that?
Justin Golschneider on 11:45 20 Sep
Hi Sasha! There are tons of places where you can dropship—we just stuck to a few of our favorites here. :-)
William Guzman on 19:10 9 Oct
The article is a good reference for a new biz like me. I am interested in to venture into the dropshipping business but still hesitant to do so. I really need articles like this to keep me informed and intrested. Thank you BillLee.
douglas bartels on 15:16 17 Oct
Hi ,
Many thanks for all the very useful information you have provided. I look forward to
receiving the suppliers list.
maggi on 16:30 22 Oct
Hi, This is maggi from outside USA but i want to do drop shipping business in USA only . because of my local market place is not that much profitable sale .

I gone through our services with some forum discussions

I'm ok with eCommerce store setup
payment with paypal.
but How to get Tax ID for not USA residential. because most of good supplies asking Tax ID

Richelle Monfort on 11:05 24 Oct
Hello Maggi,

If you are based outside the US you can use the equivalent in your country. Hope this helps!
Tom on 23:07 4 Nov
Great advice & it too saves me a ton of research time.
LaCourtney Rann on 5:58 5 Nov
Thank you so much for this information. I am looking into starting my own online business and this has really helped me.
Rick on 12:37 21 Nov 2017
Great info thanks
Paul Orubebe on 13:54 25 Nov 2017
Great newsletter saves one the stress of researching....
Samantha Gonzales on 22:11 26 Nov 2017
I have a question. I sold a game of amazon and it said it would take 14 days to settle my account. It is a fairly new account and was my first sale, and I used PayPal for the payment method. So my question is, do I have to have my own money to drop ship, meaning they pay me but I don't get the money by the time I have to place the drop ship order. I am new to this and if this is the case, I'd need to start drop shipping really inexpensive items to get the ball rolling or wait until I receive the payment in my account.
Richelle Monfort on 5:58 27 Nov 2017
Hello Samantha,

Yes at time you will have to pay your dropshippers with your own money first so that they can process and ship the order to your customer. Especially when a payment hold occurs.

All the best!
Sad saqi on 10:23 27 Nov 2017
Hi,
I want to start my dropshipping business and I am feeling salehoo really can help me.Your article is very informative.Thank you.
Richelle Monfort on 5:39 1 Dec 2017
Hello Sad,

SaleHoo itself is a directory. We have over 1,000 suppliers that will dropship products on your behalf however.

You can use SaleHoo to find the perfect dropship supplier for your needs.

For each dropshipper you will get contact info, their product range (datafeeds) and quality, details on where and how they ship, and more. You can be confident that each supplier is legitimate and will fulfill orders on time.

Cheers!
Rotari Iurie on 7:32 2 Dec 2017
Great article :) Really helpful

Rotari Iurie,

Mark on 9:27 2 Dec 2017
I like this it's easy and reliable.
Andrew on 17:26 14 Dec 2017
Great step by step guide for starting a dropshipping website. I recommend SaleHoo on my tutorial about getting started with setting up a dropshipping site, SaleHoo is a great resource that i share with my readers
Richelle Monfort on 6:50 18 Dec 2017
Thanks Andrew! Glad you find our guides helpful enough to share them :)
Fadzilah Bt Saaod on 5:47 25 Dec 2017
Thank you for the information
Olufunmilayo on 20:14 1 Jan 2018
Great advice
Jalaja Nair on 8:16 15 Jan 2018
I feel drop shipping is the best way to do online business and with the support n feedback of salehoo, we can rest assure
Thanx
Alex Disouza on 9:05 29 Jan 2018
Great article, can you explain more about how the duty cost is taken care of in this model

Thanks in advance!
Shivam Naik on 9:31 30 Jan 2018
Hey guys
I have been using SaleHoo for a year now and my profits are extremely High
Shivam Naik on 9:40 30 Jan 2018
Hey guys
I have been using SaleHoo for a year now and my profits are extremely High
Cody Charles Deegan on 6:30 13 Feb 2018
WOW, nice infomations, and the steps also is really important to understand for every readers who interested to create their own business like Drop Shipping, this is really good topic for me because that is the kind of business I want to have, and I learned a lot because of this blog. Thank you for sharing tips.

 

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