Is starting a Dropshipping Business in 2023 still profitable?
Starting a dropshipping business in 2023 can still be a profitable venture, as the e-commerce market continues to grow and evolve. Dropshipping allows for low startup costs and minimal risk, as there is no need to purchase inventory upfront. To be successful in a dropshipping business in 2023, it will take a combination of factors such as:
- Identifying profitable niches and products that align with current consumer trends and demands.
- Finding reliable and reputable suppliers that can provide quality products at competitive prices.
- Building a professional and user-friendly website and online store to attract and retain customers.
- Utilizing effective marketing strategies such as SEO, social media, and paid advertising to drive traffic to your store and increase sales.
- Continuously monitoring and analyzing your sales and customer feedback to make adjustments and improvements to your business model.
- Building a strong and loyal customer base by providing excellent customer service and building trust with your customers.
Starting a dropshipping business is one of the easiest ways to make money online in 2023.
But with the barrier to entry being so low, dropshipping has exploded in popularity over the past decade, meaning that many markets are highly competitive.
If you’re thinking of starting a dropshipping business - either as a side hustle or a means to leaving your full-time job - you can save yourself time and set yourself up for success by following the simple steps outlined below.
In this complete guide to drop shipping for beginners, we show you how to start a drop shipping business in 7 easy steps:
But first, what is a dropshipping business?
A dropshipping business is where you are able to sell merchandise to your customer without holding any inventory. A customer purchases an item from your store at retail price. You then forward the order to your supplier, which you pay the wholesale price. Once your supplier receives the order, they ship the item directly to the customer under your business name while you earn the profit margin. All you have to do is set up the retail website, find customers, and handle customer support.
There are thousands of people around the world who make five-, six-, and seven-figure incomes from drop shipping and there’s no reason why you can’t do the same.
What Is a Dropshipping Business?
Here’s the official definition:
Dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
How Dropshipping Works
In more simple terms, dropshipping works like this:
- A customer purchases an item from your store at retail price
- The order is forwarded to your supplier (you pay wholesale price)
- The supplier ships the item directly to the customer under your business name
This means that you - the dropshipper - don’t have to buy and store bulk stock, which saves you having to invest a lot of money upfront.
It also eliminates the risk of buying in bulk and not being able to sell all of the products, leaving you out of pocket.
This is why dropshipping is so popular - it requires minimal investment, but reaps similar benefits to traditional retail models.
What is a Wholesale Dropshipping Supplier?
Dropshipping or 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 these to your supplier. The supplier sends out your goods directly to your customers and you keep the difference between what you bought and sold the product for.
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.
The hardest part of being a new dropshipper is finding the right product and supplier.
Not only do you have to find a product people want to buy, but you also need to ensure that your supplier will deliver exactly what you advertise to your customer.
This is extremely important because you want to ensure your product arrives in a good condition, meets all of the customer’s requirements, is shipped quickly, and will not be returned.
The top suppliers will even include your company’s marketing materials to make it seem as if you sent the product yourself!
Working with sketchy suppliers can ruin your business’ reputation or cause you to lose money, so make sure you choose the right supplier or service before you start your business.
Choosing profitable suppliers from your preferred country is extremely important too. For example, if you wanted to use dropshippers from Canada, make sure that the directory you use has a list of reputable suppliers from Canada that can dropship products in your preferred niche.
To help you get started on the right track, we’ve reviewed 16 of the top directories and search platforms.
Because they authenticate and vet their suppliers to ensure you only find the absolute best, based on product quality, price, and legitimacy. You get to avoid fraud for pennies on the dollar.
Dropshipping Statistics: Do the Numbers Add Up?
The hype around dropshipping means some people are skeptical of it as a viable business model and cautious about diving in.
There is limited information about dropshipping specifically, but these statistics should help to provide you with peace of mind (and, hopefully, a sense of excitement).
- 33% of online retailers have adopted dropshipping as their primary business model.
- Dropshipping accounted for 34% of products sold on Amazon in 2011 and the number has only grown since then. That’s $14.2 billion of drop-shipped products from just one online marketplace.
- The dropshipping market is forecast to grow to USD 557.9 billion by 2025.
Google Trends data also shows a massive increase of interest in dropshipping over the past few years.
How to Start a Dropshipping Business in 2023
Step 1: Choosing a Dropshipping Niche
To start a dropshipping business you will need to figure out your niche. A niche is a segment of a market. For example, bluetooth speakers are a popular niche in the home audio market. You could even say that outdoor, waterproof bluetooth speakers are a sub-niche of the bluetooth speaker niche. You get the idea. The more specific your niche is, the better.
Choosing a niche is the first step to starting a dropshipping business. The rising popularity of dropshipping means it’s becoming harder to find niches that aren’t already saturated. But new products and niches are emerging every week, so the opportunities are almost endless.
"Choosing a profitable niche comes down to two major things," Jonathan Molendijk, a successful dropshipper who had a slow start but now scales out dropshipping stores to over $100,000 each month and runs EcomCreed. "Is the niche something that interests you, and does the niche have evergreen products within it? If you have these two key factors, you will be able to identify profitable niches everytime."
A common misconception about dropshipping is that you can be successful and profitable in any niche, but that’s simply not true. If you choose a niche that’s already saturated with sellers or dominated by major brands, you’re going to face an uphill battle with your new business.
Here are a few guidelines to help you choose a dropshipping niche that will make you money online in 2023:
- Start with your interests and passions: Tap into your hobbies and interests. If you enjoy travel or hiking in the outdoors, you’re going to have unique knowledge of the products and trends in those markets that can help you identify a viable niche.
- Scratch your own itch: This is old school entrepreneurial advice. The theory is, if you have a problem in your life then it’s highly likely that others will have the same problem. If you can identify a product that solves that problem, you might have uncovered a great dropshipping niche.
- Research the 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.
This will also give you an idea if the product is in demand. If you’re finding competition then that’s a good sign! Another great way to check the demand for your product is to use Google Trends. It will give you the interest in the product over time and should give you some idea of how successful your product is likely to be.
- Ensure the niche is profitable: The objective of business is to make money, right? Therefore, you need to check the profitability of every dropshipping niche and product idea that you come up with. Ideally, you want a profit margin of at least 40% after shipping costs, seller fees and taxes, but you should be aiming for margins of 100% or more.
PRO TIP: You can use this online calculator to determine the profitability of products you are thinking of selling. It deducts Amazon fees from the retail price and estimates how many items are being sold each month, which is an indicator of demand.
Dropshipping Products that Work Well on Amazon and eBay
While it’s possible to dropship everything from toothpicks to the kitchen sink, some products are more suitable for dropshipping than others. Finding trending products and testing them is also key. "It's very easy to find trending products, what’s not easy is seeing the potential in the product during the initial test," explains Molendijk. "Most people starting in the business have limited money, so they tend to get scared and drop a product before it has it's time to show what it's capable of."
The perfect dropshipping product is generally:
- Not dominated by major brands: What’s the first company that comes to mind when you think of the word ‘smartphone’? Apple, probably. Or Samsung? These major brands have the smartphone market on lockdown and it’s going to be tough for any business to compete for a slice of that pie. A good dropshipping product isn’t dominated by a major brand so that you can have a greater chance of capturing a chunk of the market.
- Small and lightweight: The general rule is that a good dropshipping product should be able to fit inside a shoebox and weigh less than 2kg (4.4lb), the weight limit for ePacket. This is to save you paying extra for shipping.
- Non-seasonal: Ideally, when you’re starting out you want to avoid products that are only in demand for one season a year. For example, selling something you’d only use at the beach during summer, or Christmas decorations really limits your selling power during the off-season. Choose dropshipping products that are in demand all year round.
- Retails for between $15 and $200: This price range is known as the eCommerce “sweet spot”. Anything cheaper than $15 and you’re not going to be making much of a profit margin and anything over $200 is going to be difficult to sell en masse. While there are plenty of exceptions to this rule, following it will make your dropshipping journey easier to begin with.
Brainstorm Business Ideas
Now that you know the criteria for a good dropshipping niche, you can start narrowing down product ideas for your eCommerce business.
You should aim to brainstorm at least 10-20 product ideas and then use the guidelines above to either qualify or eliminate them from your list.
Once you’re done with that process, you might only have a few product ideas that are considered viable. If you have none, then you’ll need to start the process again.
If you have at least one solid product idea at this stage, you’re ready to progress to the next level.
Use SaleHoo Labs for Market Research
SaleHoo Labs is a powerful market research tool for dropshippers and eCommerce store owners. It provides you with valuable information on tens of thousands of products across 25 categories, such as:
- How much competition there is for each product, based on how many people are selling it on Amazon and eBay
- The average retail price each product is selling for online
- The sell-rate of each product
- A list of trusted suppliers of the product that you can contact immediately
It can help to give you product ideas and save you hours of time that it takes to conduct market research manually.
How to Outsmart and Outsell the Competition
If you want to set yourself apart from the thousands of others who are thinking of starting a dropshipping business in 2023, you need to have a few tricks up your sleeve.
You need to find a way to be better and smarter than your competition so that you operate more efficiently and make more sales than they do.
How do you do this? The same way that champion sports teams, like the Philadelphia Eagles or the Golden State Warriors, prepare each week - by studying the competition.
- Identify the competition: Start by finding the top sellers in your niche on Amazon and eBay. Also take note of how many sellers are in the niche.
- Analyse their product listings: How do they set up their product listings? What are their photos like? What kind of sales copy do they use? Find ways to make yours better. You might identify unique selling points you can use or other improvements that will make your product listings more attractive for prospective customers.
- Read customer reviews: Take some time to scroll through the customer reviews for a few of the top sellers in your niche. Take note of what customers liked and what they complained about so you can refine your approach to customer service.
When you’re starting a dropshipping business you should absorb as much information as possible from as many sources as possible. Product listings and reviews of top sellers in your niche are perfect places to look for ideas to improve on what your competition is doing.
The first step to starting a dropshipping business is about choosing a niche. To re-cap:
- Choose a product/niche that’s easy to dropship
- Make sure there’s sufficient demand for your product/s
- Research your competition to give yourself an advantage
For more information on deciding what to sell online, check out this guide
Step 2: Finding a Dropship Supplier
For many aspiring eCommerce entrepreneurs, finding a reliable supplier is the hardest part of starting a dropshipping business.
You rely on suppliers to keep your product in stock, to uphold product quality, and to ensure orders are shipped to your customers in a timely manner. As a dropshipper, your supplier is your most important business partner.
What to Look for in a Dropship Supplier
A good dropship supplier should:
- Actually be a dropshipper: Not all product suppliers offer dropshipping as a service. Some are simply wholesalers or manufacturers. Before you make contact, make sure the supplier is a dropshipper.
- Have experience (+ helpful staff): You want a supplier that has years of experience with dropshipping. Suppliers take on a lot of responsibility with dropshipping so you want to be sure that you can count on them at all times. A good sign is if the sales rep you’re in contact with seems helpful and well-informed. If you suspect they’re not experienced, go elsewhere.
- Not charge huge order fees: It’s quite normal for dropship suppliers to charge a small fee for their services. After all, they’re holding onto stock and organizing packaging and shipping for you. These fees should only a few dollars ($2 to $5 usually). If a supplier charges you more than that, you should let them go.
- Provide fast shipping: Most dropship suppliers are located in China so you can’t expect overnight shipping. However, you do want to make sure your customers will get their items as fast as possible. Check their shipping times to the countries you service. One-two weeks is acceptable for dropshipping. Any longer than that could result in negative customer feedback.
- Have quality products (+ product photos): You should always request product samples to test quality prior to committing to a supplier. The supplier should ideally have high quality images that you can use in your product listings.
- Provide referrals on request: A good supplier should willingly connect you with businesses that can verify their service. Ideally, you want word-of-mouth referrals, but failing that you might be able to make your mind up based on customer reviews online (although be aware that online reviews can be manipulated).
- Have a suitable return policy: Make sure they aren’t charging unnecessary fees and your timeframe for returns matches that of your supplier.
Where to Find Reliable Suppliers
- Searching for suppliers online: You can simply type your product plus “supplier” into Google and see what comes up. Or you can search for your product on websites like Alibaba or AliExpress. A lot of China-based suppliers use these websites to sell their wares.
- Using a wholesale directory: This can save you a lot of time and help you avoid eCommerce fraud. SaleHoo has more than 8000 suppliers that have been vetted and verified. You can contact them in just a couple of clicks and have confidence in their ability to provide good service.
Step 3: Get a Sales Tax ID
If you’re setting up your business in the United States or Canada then you most likely need a sales tax ID (also known as retail or reseller’s license, tax ID, resale number, resale certificate or vendor's license).
Sales tax is a tax levied on all sales of physical goods to consumers and is typically about 6-9% of the sale price. Most states require you to have a tax ID, but there are exceptions, including Alaska Delaware, Montana, New Hampshire, and Oregon.
and register for your license.
It’s standard for businesses to pass this expense on to consumers by adding it to the retail price.
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.
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.
Related: What is an EIN number?
Step 4: Choosing a selling platform
So you’ve decided on a product and you’ve lined up a supplier - now you need a place to start selling and making money.
Choosing the right selling platform or online marketplace is crucial to the success of your business - but which platform is best for you?
You need to decide between selling on an established platform, or starting your own independent online store.
Let’s take a look at the pros and cons of the different selling platforms and online marketplaces.
The Most Popular Online Marketplaces
Most dropshippers use a well-established online marketplace like Amazon or eBay, especially when starting out. Why?
- It’s easy to set up an account and start selling
- They already attract huge amounts of traffic (potential customers)
- Consumers trust these platforms
- You can make significant money through them
However, there are some cons to be are of:
- You will be charged fees for every sale you make
- You have limited control (branding, customer service, product photography etc)
- You’re in direct competition with sellers on the same platform
- Consumers have a huge amount of choice in one place
That said, here are a few of the most popular online marketplaces for dropshipping businesses.
- Amazon: The most well-known of the online marketplaces, Amazon is said to have 300 million active users. In 2016, more than 100,000 sellers made more than $100,000 on Amazon. Amazon offers additional services such as fulfillment by Amazon and Amazon Prime. Fees vary a lot, but it’s estimated that most sellers will pay about 15% of their sale price to Amazon. It’s a popular option for dropshippers and there's a heap of benefits of Amazon free shipping for dropshippers.
- eBay: eBay is said to have 171 million active users with about 1 billion products listed across 190 different markets. eBay charges listing fees (but offers a limited number of free listings) and sale fees, which are generally less than 10%. eBay has an auction option and also operates as a standard online retail platform. There are plenty of tips on how to find success on eBay out there.
- Etsy: Etsy is said to have 54 million members, about 2 million active sellers, and about 32 million active buyers. It’s extremely popular with women (84% of sellers are female). Etsy has established itself as a more trendy online marketplace with a focus on arts, crafts, and handmade goods. As well as home decoration dropshipping stores. Plus, it’s easier than ever to dropship on Etsy.
- Walmart: This superstore now has its own online marketplace, which could be a great option for dropshippers. Alongside offering the traditional dropshipping model for listing items to be dropshipped, it also supports different dropshipping business models, such as dropshipping Walmart items on other marketplaces. As a newer option, you may be able to beat some of the competition already present on Amazon and eBay by selling on this marketplace.
- Shopify: This is a well-known online store platform which is experiencing huge growth. It was reported to have 1,749,000 merchants using it in 2020. On this platform it is easy to build your own custom store and integrate it with a whole bunch of useful third party apps to improve all kinds of operations from email marketing to subscription billing.
- WooCommerce: WooCommerce is a free plugin made by widely used website builder, WordPress, which allows you to change a website into an online selling platform. It has been downloaded over 13 million times. This platform allows you to create a highly customized online storefront with lots of capability that is on par with Shopify.
- Wix: Wix is another website builder with eCommerce capabilities. Even though it has a smaller market share than the giants Shopify and WooCommerce, its highly customizable site builder and multitude of third party app integrations makes it a great option for dropshippers to consider. It also tends to be the cheapest option, with regular discounts on premium subscriptions.
- Facebook Marketplace: Facebook Marketplace is humungous; the CEO, Mark Zuckerburg, reports that more than 250 million people are interacting with Facebook storefronts each month. For this reason alone, it’s well worth building a Facebook business page and selling on this platform.
As you can see, each platform has its pros and cons. "There is no right or wrong answer for this, I can only give my personal recommendation and why," says Molendijk. "I personally recommend using Shopify, for one major reason. There are so many tutorials, blogs and information available in relation to Shopify. So it will make understanding the platform and utilizing it much easier, than with other platforms where it's hard to get answers to your questions." Dropshipping on Shopify is also a popular choice if you are looking to build your own brand and grow a strong brand presence.
Creating Your Own Online Store
A lot of dropshippers take the route of starting their own online store. While it requires more investment up front, this is really the ultimate long-term option for making money and building a business online. There are plenty of online tools that make it really easy to get started.
- You have complete control over branding, design, layout etc.
- You’re building a business independent of a third-party platform
- No fees and higher profit margins
- No direct competition from other sellers on the same platform
- It costs money to set-up and design your own store (web hosting etc)
- You miss out on the guaranteed traffic (customers) from established platforms
- It takes time to rank on Google and you’ll have to invest in SEO and digital marketing
If you have the time and money to invest in your dropshipping business and you’re planning to be in it for the long haul, then starting your own store is a good option, especially with established platforms becoming more and more saturated every year.
Bonus: How to create your online store
Step 1: Choose an eCommerce platform - You’ll want to think about the cost of the platform, how many products you are selling, the design, features and payment options to name a few things. A couple of great options include Shopify, BigCommerce, Squarespace and WooCommerce.
Step 2: Set up your store- This includes the design, adding products to your store, setting up payment methods, adding policies, checkout, and shipping settings as well as buying a domain and opening your store for business!
Step 3: Get people to your store- There are many ways you can do this but a few of the most popular include using social media ads, Google Adwords, SEO and influencer marketing.
Types of Dropshipping
- Print on Demand: You design graphics to be printed on products such as t-shirts and mugs and then find a supplier who will produce and print your designs to dropship them to customers on your behalf. This is a great option if you don’t want to carry stock or invest a lot of money on inventory upfront.
- Private Labeling: You find suppliers who will brand their products with your own logo and then dropship them. The big upside here is that you can sell products that are unique to your own brand.
- Reverse Dropshipping: This is an emerging form of dropshipping where dropshippers sell high quality products made in countries that usually import, to countries that usually export. An example of this could be to find a high quality niche product that a US supplier produces and then selling it to the Chinese market.
- Product Reselling: This may be the most common type of dropshipping. This is where you find existing products to list and sell for a profit, but the supplier fulfills the order on your behalf so you never have to have the product on hand.
Step 5: Implementing a Customer Acquisition Strategy
Now that you have a selling platform for your dropshipping business, you need to attract customers to your store. This is where a customer acquisition strategy comes in.
Customer acquisition is the art of persuasion. You can think of it as advertising and marketing. Sounds expensive, right? But it doesn’t have to be. You can take the fast (paid) path or the slow (free) path to gaining new customers. Let’s take a look at both strategies in more depth.
Fast Results (paid)
Facebook Ads for Dropshipping
Facebook is the world’s largest social media platform. It’s a great place to advertise your products as you can tap into a huge audience. This is how Facebook makes its money, so every customer you acquire through this method comes at a cost. Facebook ads are a good option for the following reasons:
- It’s easy to get started
- You control how much you spend each day
- You can target highly-specific demographics (location, interests, relationship status etc)
- It can yield fast results
- It helps to increase brand awareness
- A good ad or boosted post can go viral
Google Ads for eCommerce
Google is the world’s most popular search engine by far. If you have an online store, you want it to rank on the first page of Google. You can achieve this organically, or you can buy ads for your store to appear at the top of the page for the keywords you want to rank for. Google ads are a good option for the following reasons:
- You can achieve great exposure in search results
- It’s the largest advertising platform in the world (Google search, Youtube, Gmail)
- You can target highly-specific demographics (location, language, device etc)
- Maximise exposure to your ads with high volume keywords related to your niche
Social Media Influencer Marketing
Influencer marketing has become a huge part of customer acquisition for retail brands in recent years. It could play an important part of any customer acquisition strategy in 2023. It can be particularly effective if you are in a trendy niche. For instance, if you’re selling a new style of handbag, you could reach out to an Instagram model and ask if she will share a post of her with the bag, tagging your business. One post can result in a bunch of new fans and customers. The cost of influencer marketing depends on how famous the influencer is. A post from Kim Kardashian might cost $250,000, while a post from a model with 10,000 followers might only cost a few hundred dollars.
Slow Results (free)
Blog or Forum Marketing
This involves finding blogs or forums that are related to your product/niche and actively participating in discussions. By positioning yourself as an authority in your niche and including a link to your website, you can increase traffic and acquire new customers.
This most commonly takes the form of a blog on your store website, a Youtube channel, trendy Instagram posts, or witty posts on Twitter. Content marketing is meant to involve the creation of valuable content that helps to build an audience that you can then convert into customers. It’s not as explicit as advertising and should always be more about serving your audience than your brand.
Lots of successful eCommerce stores have a blog section on their website. If you’re looking for an example take a peek at Good As Gold. They are an online clothing store from New Zealand. Their simple and effective blog section highlights specific products, updates and announcements.
Social Media Marketing
It’s getting harder and harder to achieve organic reach on social media, but it is still possible. Some channels to think about are Facebook, Instagram and TikTok. It’s almost a given these days that businesses and organizations are on at least one of these platforms. Pick one and be consistent and eventually, you’ll build a following, which you can then convert into customers.
Building an email list is still one of the most effective ways of acquiring customers. You need a way of capturing email addresses, such as a request to sign-up at checkout, or an offer or competition that requires an email address. Once you have a decent list of email addresses you have a way of reaching a large group of people regularly, for free.
Search Engine Optimization (SEO) is a great way for you to get your dropshipping business known by getting more traffic to your website by making it more visible on search engine results pages (SERP). What you'll want to do here is learn how to optimize your website so that it can rank better for certain search keywords on search engines, and make your dropshipping website more searchable. Some examples of what you'll want to do is build content around certain keywords that are related to your dropshipping product, reduce page load speed, create backlinks, etc.
Building relationships with like-minded communities who are also passionate about your dropshipping product or things related to it is a great way to get your brand known to your target audience. Whether they're potential customers of just people who have the same passion as your niche, you'll want to start conversations with them whether it's on Reddit, Facebook Groups, or online forums. Try not to come across as 'too sales-y' when you engage with them. Build solid relationships instead.
Step 6: Running your Dropshipping Business
Once you create your customer acquisition strategy, it's time to actually execute it and get things up and running. You going to be busy running your dropshipping business once it actually gets off the ground, whether it's tackling order fulfillment, dealing with customer service, or analyzing your margins. You'll want to create an organized system on how to deal with each task.
Some days you'll have to deal with multiple obstacles so having an organized system in place is really important.
As a dropshipping business, you won't have any inventory or stock so you'll have to deal with order fulfillment differently than a traditional eCommerce business where you have products ready to ship out. When you fulfill your items, you'll have to purchase them directly from the supplier or through a marketplace site like AliExpress. You'll also have to make sure that the items are shipped directly to the customer so you'll have to key in their address as the recipient address. To make sure that the products are packaged up to your standards, you might want to order some products by yourself to make sure you're happy with the unboxing experience.
A big bulk of your dropshipping business will be to deal with customer service. Remember, the customer is buying from your brand, your store, your company so whatever goes wrong, you'll have to be the one to deal with it. If the packaging is off or the product is low quality, they're going to blame you for it. That's why it's important to work with a reputable supplier and actually buy their products before you start dropshipping and selling them to your customers. Using trustworthy suppliers that actually sell quality products will definitely lighten your workload when it comes to customer service.
In the beginning when you first start your dropshipping business, you're going to be in charge of accounting. You won't have an accountant yet or a third part accounting firm to handle your finances when your business is just getting off the ground. This is where you have to be sharp and really be on your A-game. You need to be really clear of what your costs are to purchase the product and what your selling price is plus any shipping cost or taxes/custom. That is how you'll get a clear idea of what exactly is your true margin and whether your dropshipping business is actually profitable at the end of each month. Using a spreadsheet to organize your finances is a smart way to get started.
Analyze & Refine
Not only is there going to be a lot of work involved in running a dropshipping business, but a lot of repetition as well - especially when your orders start to ramp up. You're going to want to analyze and refine this process and perhaps eventually pass it off to a new employee. It's extremely important to look at each step and ask yourself how it can be done better. Only when you run of of answers do you know that each step is truly optimized.
Step 7: Scaling your Dropshipping Business
Once you’ve got your dropshipping store up and running and have implemented some of the strategies covered in Step 5, you’ll hopefully be starting to see some sales come in. As you begin to grow, you might want to think about some of the future-proof processes you can set-up in order to make your job as owner less stressful and prepare for an increasing order load and more customers to satisfy.
Technology has come leaps and bounds in recent decades, and it has hugely improved the way businesses operate, by reducing manual work and heavy filing folders, to mention just a few. For many business owners who are dropshipping as a side hustle, and even for those for whom it’s their full time gig, time can be your most precious resource.
You may wish to consider the following to help you save time and grow your business beyond the bounds of what you are capable of doing by yourself in finite time each week.
It can be daunting to be in charge of marketing, customer service, accounting and more in your business. Luckily there are some ways to make many of their related processes easier, and that is through dropshipping automation.
Automation can help you with processes such as product importing, pricing, order fulfillment, order tracking, promotions, email campaigns, gathering customer feedback, posting on social media and generating reports on customer activity. Its biggest benefit may be that it gives you more time flexibility. Instead of being a slave to time sensitive tasks that need continual monitoring, such as posting on social media each day, or responding to customer enquires as they come in, automation can help take some of the load off you and allow you to set up the automatic execution of these kinds of tasks ahead of time.
You can be pretty sure that successful dropshippers are using some form of automation to give them more time to focus on ‘high value’ activities, such as strategy, new product releases and building brand awareness.
After you’ve got your store up and running, you may see the value in using a tool designed to help dropshippers like yourself, which enables you to easily find quality products and suppliers, import products into your store and fulfil them without huge effort on your part.
Having a tool that streamlines these kinds of processes is a surefire way to cut down on the time, and likely, any stress you may face when trying to source new products to grow your store, or to manage higher order counts.
One such tool is SaleHoo Dropship, which supports the processes mentioned above with the key aim of making your job as a dropshipper easier. They list over a million products from vetted suppliers, up to 500 of which can be imported into your own online store. They also have a dedicated team who is here to help you on your dropshipping journey. They can provide advice, source products that may not yet be listed on the platform, and suggest useful resources to help you scale your store.
Another welcomed child of the internet is the possibility for many new forms of working. You may be after an extra helping hand for a number of tasks but not necessarily an employed team member who you are contractually obligated to pay for set hours each week. You need more flexibility.
That’s where freelancing platforms such as Upwork and Fivver come in. Just a few clicks away are a plethora of skilled workers who can complete a whole range of eCommerce tasks to meet your budget and requirements.
You can hire these freelancers on an ad hoc basis to perform specific tasks as you need them done. For example, writing may not be your strongest point as a business owner, but you know how important creating written content can be for bringing traffic to your store and gaining conversions. You may want an SEO-friendly post writer to write an article for your blog, or a copywriter to edit your product descriptions for ultimate impact.
Having freelancers readily available can really help you scale your business beyond what your individual capabilities and limited time may allow.
Facebook Ads Automation
There are several services out there that offer Facebook Ads automation tools to help you eliminate manual tasks and harness data to make better advertising decisions.
- Facebook: Has its own automated ads capabilities which can make recommendations based on your business goals and how your previous ads have performed in the past. With a huge amount of ad data available to it, Facebook can make insightful suggestions and take the guesswork out of Facebook marketing.
- Smartly: This is software which allows you to highly customize your ad sets for specific audiences. It can generate thousands of different ad sets and monitor how well each performs comparatively so that you can understand what type of visuals and information on your ads are leading to the most conversions.
- Bidalgo: Bidalgo is similar to Smartly and provides data driven insights to help you make better marketing decisions. It streamlines your ads analytics in a user-friendly way so that it is easy to compare the performance of ads and which ones might need to be snipped or edited.
- Hootsuite: Is an integrated platform which automates and monitors a range of marketing processes across multiple social media accounts.
There are many other similar services available, so it’s best to do some research and find out which one might be the most useful for your needs.
Pros and Cons of Dropshipping
Advantages of Dropshipping
- You don't have to carry inventory, all the inventory is stored with your supplier saving your warehouse and rent costs
- The supplier will handle organizing and managing stock, saving you hours of labor
- All the packaging is taken care of and you don't have to waste time handling postage
- A lot of risk is removed as you only pay for what you sell
- You won't be stuck with an item if it doesn't sell
- You don't need to deal with minimum orders or hold initial inventory, meaning you don't have to invest a lot of cash when you get started
- You can offer a variety of products in your niche and sell them all on your site, without taking up the inventory risk
Disadvantages of Dropshipping
- When you sell in bulk, your margins will be higher since you bought them at a wholesale price
- You don't have control over your inventory which means you'll have to figure out a way to deal with your suppliers' potential sudden stock shortages
- If the supplier messes up, like shipping late or packing an item poorly, you'll be the one who gets blamed for it since the customers are dealing with you directly and not the suppliers
Dropshipping Business Case Studies: 5 Examples of Successful Dropshipping Stores
So we've covered step by step instructions on how to build a dropshipping store from scratch, but you might be left wondering if there are any case studies or examples of dropshipping stores that have actually gone on to make money. In this section, we're going to go through 5 successful dropshipping stores and what makes them so successful.
The dropshipping store, Warmly sells homegoods and unique decor through Shopify. They have a ‘lighting’ section which sells things like hanging lamps, LED lights, chandeliers, drop lights, etc, a ‘bathroom’ section that sells simple bathroom upgrades such as faucets and lamps, and a ‘furniture’ section full of modern decor such as TV cabinets and bookcases.
What makes this website interesting is that it doesn’t look like a dropshipping store at all. All the photos look very professional and you don’t see any of those stock photo pictures like they have on AliExpress. Plus, all the photos look like they’re in unison and all shot with the same style, which really helps with their branding and overall aesthetic. This is very difficult to do when you are dropshipping from AliExpress and from different suppliers that all have different images. This is the reason why most people run one-product dropshipping stores instead of a general store. In order to solve this problem, most business owners will take their own photos so that their photography style is consistent throughout the site.
In terms of traffic, according to SimilarWeb, Warmy has 75,000 monthly views with most of it being direct traffic or coming from Pinterest, which seems to be their main platform for marketing. Since Pinterest is a space where people look to when they want to do home makeovers or work on specific projects, this is why they’re heavily trying to utilize this platform to get more traffic.
One of their products, the ‘Indoor Modern Circular Ring Chandelier’ is being sold for $779.50 dollars, while it can be found on AliExpress for around $35-$125 dollars (depending on the size). This gives them quite a good margin - plus AliExpress offers free shipping from China to the United States on this product. However, shipping takes around a month, which is why the website states that you’ll need to wait 2-4 weeks for shipping.
Famous eCommerce YouTuber, Jordan Welch started Sleepbzzz with dropshipping before he went on to manufacture and create his own product. According to his YouTube channel, he would test products on his store, Nouveau through dropshipping and once he found a winning product, he would go ahead and create a new store solely selling that product with strong branding and enhanced marketing. That’s how Sleepbzzz was born.
He stumbled upon a similar product to Sleepbzzz (also a sleep headband with built in headphones) on a social media ad. The ad was getting a lot of buzz and lots of comments but when he clicked through to the website, it wasn’t a well-made site. The site didn’t look trustworthy which probably deterred a lot of customers from purchasing. So once he created a more trustworthy site and better ads, that’s where his opportunity came.
Sleepbzzz is a comfortable, sleep headband that you wear around your head when you sleep. It also has built-in speakers that help you fall asleep faster, and can play different types of music and sounds that help you relax.
Sleepbzzz has since added complementary products to its website that all circle around helping people fall asleep. They also offer bedding accessories such as pillows and blankets in addition to sleep aids such as lavender mist and snoring solutions. This allows Sleepbzzz to increase the average value of each basket, meaning that they can earn more for each order.
Jordan has mentioned that he does a lot of social media marketing to get the word out about Sleepbzzz, including viral videos that have hit 25 million views and a YouTube video that made him $300,000 dollars in sales. He made his own ads with his iPhone and was testing new audiences and ad copies almost everyday. 60% of his sales came from paid ads, including Facebook, Instagram, Youtube, Google, 30% came from organic and direct traffic, while the last 10% came from Email and SMS.
What made Sleepbzzz successful, according to Jordan, was focusing heavily on branding and customer service. In one year, the brand hit the 1 million dollar mark (in sales), which allowed him to sell his store within 2 years.
Articture is another multi-product dropshipping store that focuses on modern home decor. According to Similarweb, it has 107,000 monthly visits with most traffic coming from the US, Canada, and Australia.
This website has been used as a prime example of dropshipping by many eCommerce gurus. What makes this site successful in dropshipping is that it doesn’t look like a dropshipping store. The photos look like they belong with each other and it doesn’t look like the products are cheap.
However, when you really dive into the products of this website. You’ll find that a lot of its products are exactly the same as the ones found on AliExpress. For example, the light below is being sold on Articture for $189.00 USD with an original selling price of $299.00 USD.
Below, you can see it being sold for $117.41 USD with free shipping with the same exact plug choices. That means, Articture can make a profit of around $70 USD for every one of these lamps sold. Of course, it’s a rather high ticket item so the quantity might not be as much as if it were a cheaper priced item.
GalaxyLamps.co is another one of those single product dropshipping stores. Recently, all the dropshipping gurus have been talking about these lamps as great dropshipping products since they get a ton of traction on social media and have gone viral on TikTok and Facebook.
According to SimilarWeb, this product gets around 200,000 monthly visits with the majority of its traffic coming from the US, Canada, and the UK. Remember, unlike Articture, this is a single product store - meaning, they aren’t likely still testing products to find a winner. They’ve already found it and are hitting the ground running.
They sell 3 items in their store - a galaxy project at $79.99, a galaxy lamp at $49.99, and moon lamp at $49.99.
On AliExpress, you can find a product that almost looks exactly the same at $45.10. While it’s unclear if they started dropshipping this product first before creating their own product and adding their own branding, using dropshipping like this would definitely be a good way to confirm that there’s demand for this market before investing your own branding into it.
Perhaps the most famous dropshipping store that many YouTubers like to use as an example is Meowingtons.com. This dropshipping store sells everything related to cats, whether it’s accessories and essentials for cats or cat themed home decor or clothing for humans.
Despite targeting a very niche group, their monthly visits are 154,000, according to SimilarWeb with most of their audience coming from the US, Canada, and the UK. They also feature a ‘Print Your Pet’ section which allows pet owners to print their own pets and use their print on demand services, which could also very well also be dropshipped.
It seems that most, if not all, their products are dropshipped from AliExpress, and it works very well with them due to their heavy investment on branding and marketing. Designing adorable cat logos, diversifying into fun cat accessories, and building up their social media channels are just some things they work on to expand their dropshipping empire.
As you can see, the below cat ring is being sold for $12 USD on their website but only $1.81 USD on AliExpress with $2.18 shipping.
FAQs: Dropshipping for Beginners
There is no set answer to this question. However, a rough estimate is between $100-$1000.
Everyone's experience is different. If you are a beginner there’s no reason why you couldn’t make an extra $1000- $2000 a month. But there’s also no reason why you couldn’t make six or seven figures!
It really depends on your product selection, marketing, supplier and how much time and money you have invested into growing your business.
A few benefits include the small business start up fees, low risk, you don’t have to store stock, packaging and postage is taken care of and you only pay for what you sell.
It definitely can be if you find the right product, have awesome marketing and have invested time and money into growing your business.
Firstly, you need to believe in yourself! A can do attitude and willingness to learn are great skills to develop. Other skills include goal setting, planning, action taking and a general interest in dropshipping and the products you are selling.
One of the best ways is to use a directory like the one we have here at SaleHoo. We have over 8,000 trusted local and global suppliers who have been vetted and verified. Alternatively, you can use sites like AliExpress and Alibaba or search for them on Google.
It depends on where you live as each country has different requirements. It’s important to check your local governing body’s website and to find out what you need to do.
Most beginner dropshippers hold off registering as a business until they are making consistent sales. However, some suppliers will require you to have a tax ID before working with them which may mean you have to register as a business or at least get a sales tax ID.
Huzzah! We’ve reached the end and, by now, you should be well on your way to starting an eCommerce dropshipping 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- make sure to watch the tutorial to see how handy and easy it is to use!)
- 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 dropshipping 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.