The U.S. Small Business Administration Office of Advocacy reports that there are over 30 million small businesses in the U.S. It’s no wonder so many people are drawn to the idea of being their own boss. But starting a business isn’t a walk in the park. High startup costs and the fact that about half of businesses fail within five years can make it seem like a risky venture.
However, the rise of e-commerce has made it possible to start an online business without investing a lot of money or quitting your day job. One such business model is dropshipping, which allows you to run an e-commerce business without dealing with inventory, employees, or order fulfillment.
So, what exactly is dropshipping? Traditional e-commerce businesses operate like physical retailers, storing their own inventory and handling shipping and logistics. Dropshipping is different. In this model, you work directly with manufacturers to sell and ship products. When a customer orders from your dropshipping business, the manufacturer ships it directly to them. This allows you to focus on selling and building your brand without worrying about fulfillment.
Dropshipping also saves you from having to rent expensive warehouse space or hire employees for fulfillment. With a good inventory management system, you can manage complex product lines without the headaches of physical storage. In fact, almost a third of online stores use dropshipping. You’ve probably shopped at a dropshipping business before without even realizing it.
The simplicity of the dropshipping model makes it an attractive option for anyone looking to start a simple home business without needing startup funding or employees.
So, how do you start a dropshipping business? While it might seem simple on paper, you’ll need a plan if you want to succeed.
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Choose a Niche: Whether you’re starting a dropshipping store, a blog, or any other online business, choosing a niche is crucial. For dropshipping, your niche can make or break your store. In the early days of e-commerce, you could make a profitable dropshipping business by selling a variety of cheap, trending products without a strong brand identity. But e-commerce is more competitive now. Successful dropshipping businesses need to build a comprehensive brand and a cohesive store that attracts customers. This means choosing a niche you understand and that sells well online. Common dropshipping niches include clothing and accessories, garden products, home goods, sports and toys, technology and gadgets, jewelry and watches, and kitchenware. But these are broad niches. To create a strong brand and focus on a product you truly understand, you’ll need to "niche down" into a specific product category.
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Find Suppliers and Products: Once you’ve chosen a niche, you’ll need to find reputable suppliers with quality products, affordable prices, and reliable shipping times. Many dropshipping businesses use AliExpress and Alibaba to source products because of their wide selection and low prices. However, some businesses are moving away from Chinese suppliers to improve product quality and shipping times. Spocket is a popular option that lets you sell products from U.S. and EU manufacturers on your dropshipping store. When looking for products and suppliers, consider product reviews, shipping times, cost, and quality.
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Create Your Store: Next, you’ll need to create a website for your dropshipping store. This might sound daunting, but it’s actually quite easy and doesn’t require much technical knowledge. Shopify is a popular choice for dropshipping businesses. It’s beginner-friendly and offers features like secure payment processing, unlimited product listings, 24/7 support, and discount codes for products. Shopify also offers a range of free and paid themes you can use to create a beautiful storefront.
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Import Products: One of the advantages of dropshipping is that you can easily stock your store with products. Since you’re selling someone else’s products, you can import existing product images to your website. Many dropshipping stores use the Shopify app Oberlo to find and import products. Oberlo lets you browse millions of products across dozens of niches to add to your store. You can also import products directly from AliExpress.
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Finalize Your Store: Before you start promoting your store, make sure it looks professional and trustworthy. Your store should have an About page, a Shipping page, FAQs and Returns Policy page, and a Contact page. You might also want to create a blog to add content to your store that demonstrates your expertise. This can help build trust with customers and generate additional traffic from search engines, leading to more sales.
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Promote Your Store: To generate sales, you’ll need to attract visitors to your website. Many dropshipping store owners create social media accounts for their store. Instagram and Facebook are good places to start. You can also use Facebook Ads to quickly and cheaply test whether your products can sell online.
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Restart or Scale: If you test several products with Facebook ads and don’t get any sales, don’t be discouraged. This is part of the process of creating a successful dropshipping store. If you’re not generating sales after months of work, consider restarting with a new niche or focusing on free social media promotion instead of paid ads to cut costs. If you’re generating sales, reinvest profits back into advertising and store improvements.
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Consider Legal and Financial Implications: If you start generating revenue, it’s important to consider the tax implications and your legal structure. Registering as a limited liability company (LLC) or S corporation (S-Corp) are common choices for dropshipping businesses because they provide liability protection and allow profits and losses from the business to pass through to the owner. This can help you claim more small-business tax deductions, such as expenses for your website and home office.
Starting a dropshipping business is one of the cheapest and most accessible ways to make money. All you need is an idea and a website. But remember, most dropshipping stores fail. It takes time to find winning products and learn how to build an e-commerce brand from scratch. But if you stick with it and are willing to test multiple stores, there’s no reason why you can’t turn a dropshipping business into a lucrative side hustle.
