Dropshipping is a great way to run a business and generate income without the need to carry an inventory. You connect with a supplier of products that you feel you can sell online, create an e-commerce website for selling your goods, track the sales, and then send the orders to your supplier for them to ship on your behalf. Becoming a dropshipper has a low barrier to entry in terms of its upfront costs, and is relatively straightforward to set up.
You begin by defining your business niche, IE the type of goods you want to sell through dropshipping, and then identify where you want to sell your goods. Dropshipping enables you to sell beyond the US and make sales in other countries to improve your profitability. Once you've figured out what and where to sell, it's time to start building your business.
In order to start your journey as a successful dropshipper, you'll need to create an account with a supplier, build a website for sales, and pick the right business structure to pay taxes and stay compliant with national and international regulations. The following are six steps to guide you through the process of becoming a dropshipper and how to become successful in your chosen business niche.
1. Conduct Market Research and Competitor Research
The first step is to engage in market and competitor research to determine the viability of the products you sell and how saturated their markets are. You also need to look into the competition to find out how many are selling the same items. These actions help you make decisions related to the promotion and sale of a specific product.
Market research
Market research includes looking at the demographics of your potential buyers, regions and countries where the product is popular, and looking at sales data to find out how well the product is selling. Social media also provides information as to the general opinion people have about the product, something that can indicate how well the product will perform.
Gathering this data serves to inform you as to how much effort you want to put into promoting your product(s) of choice. Dropshipping reduces your exposure in that you don't have to purchase, carry, and ship inventory, but you also don't want to waste your time on something that doesn't sell well or at all. You may also find that the market for your chosen niche or product has heavy competition.
Competitor research
It's a guarantee that there are going to be other people selling the same or similar products to the ones you want to sell. You need to understand your competitors in order to determine if it's worthwhile to compete with them for market share. Start by searching for the product you want to sell and identify websites that are dropshipping the same products you want to sell. You may find that the market for your chosen niche or product has been saturated by other sellers, and outselling them is going to be an uphill battle.
That doesn't mean you should completely back out from dropshipping to a specific country entirely. Take a look to see what they're selling alongside the targeted product, and how they're selling it. Is the product prominently displayed, or is it alongside other products? Seek out weaknesses in the listing that you can use to your advantage in the form of better search ranking.
The goal is to position your product in a way that's attractive to the customer in terms of quality and price, while drawing their attention away from your competitors. However, you may find there's a demand for similar or supporting products, which can open up the possibility of your business dominating the sales for that particular product.
2. Find a Dropshipping Supplier
Engaging in the business of dropshipping requires entering into a partnership with your supplier. You need to know that the company you're working with is reliable, sells quality products, and delivers in a timely manner. Performing a simple search for "dropshipping supplier" generates results that include major dropshipping companies that you may already be familiar with, and ones that you're not. Narrow down your search by searching each company individually to find out how well they perform and to learn about experiences other dropshippers have had with them.
The nature of dropshipping gives you the opportunity to connect with multiple suppliers for your inventory. You can build out a selection of products that complement each other and delight your customers. In order to satisfy your customers' expectations, make sure the dropshipper ships to different countries, including the ones you're targeting for sales.
Modern technology has made it easier than ever to sell goods internationally, along with improvements in logistics and shipping. A dropshipping company can send goods to customers in just about all countries around the globe. This means more opportunity to find customers that are seeking the kind of goods you're selling. So if you are a logistics provider and offer dropshipping terms, please contact us.
Some of the best dropshipping suppliers include:
- Spocket
- SaleHoo
- Doba
- Modalyst
- Sunrise Wholesale
The list of reputable dropshippers is extensive, with many focusing on dropshipping products from a specific niche. You can narrow your search by using specific terms for the products you want to sell, add the word "reviews" to learn about people's experiences with a specific company, and look at how popular their product lines are.
3. Set Up Your Dropshipping Store
You need an online store to sell your chosen products, monitor sales, and track administrative processes among other duties that come with running a dropshipping business. Other aspects to take into consideration are creating a logo for the business, deciding on a cohesive theme that brings the pages together, and implementing a brand identity. Your front end, or what customers see, has to mesh with your back end, so you can track your sales and make sure they're fulfilled properly.
To begin building your dropshipping store, you'll need to identify a content management system (CMS) provider that registers your domain name, hosts your site, and integrates with your dropshipper of choice. The provider should also have a payment gateway in order to handle various forms of online payments on your behalf. Shopify is one of the more well-known e-commerce site providers, but many website hosting companies have similar offerings. Take the time to look around, investigate what kind of subscriptions and services are offered, and open an account with the hosting company that suits you best.
4. Building Your Dropshipping Website
Once you've selected an e-commerce site, you need to make it look professional and make the shopper feel confident that they'll receive their goods. Start with creating a brand identity and use a logo that reflects your business niche in a tasteful manner. Make sure that the products have their own categories, and there are enough products to give depth to the site as a whole.
You can use product photos from the dropshipper, or you can buy the products for yourself and take your own photos. An added bonus of taking this step is that it helps you stand out from your competition. Make sure the product description reflects the product that's being sold, has information such as dimensions and weight, and is of a reasonable length.
5. Be Aware of Taxes and Fees
Engaging in the business of dropshipping brings with it taxes and fees that are different from country to country. You also have to pay your supplier certain fees, and you'll also have to make sure that sales taxes are paid. This is an issue you need to stay on top of, even if you only intend to sell within your own country.
Customs fees are something that you'll encounter when selling to another country. These are typically paid by the customer, but you may decide to cover them if they're low enough as an incentive to sell your products to overseas markets. You'll need to engage in research for your home country and the countries you're planning to sell your products to in order to stay compliant and out of trouble with tax authorities.
6. Choosing a Business Structure
When you engage in the act of selling goods to the public, and you haven't incorporated, you're operating a type of business known as a sole proprietorship. You don't have to do anything to start a sole proprietorship apart from filling out Schedule C on your tax return. The sole proprietorship makes it easy for you to get your business started, but it doesn't provide the protection that other corporate structures can.
It's important to pick the right business structure before getting the business started. The most common types of corporate structures include:
- Sole proprietorship
- Partnerships
- Limited liability corporation (LLC)
- S corporation
- C corporation
As previously mentioned, the sole proprietorship is the simplest and most basic of corporate structures. A partnership requires two people participating together to run the business, but gets treatment that's similar to the sole proprietorship. If you don't intend to work with a partner, but you want to protect your personal assets from a lawsuit or other legal action, forming an LLC is your best option when getting started.
Forming an LLC is a straightforward process that lets you separate your dropshipping business from your personal life. It's known as a pass-through entity for the purpose of taxation in the US, and is formed at the state level. The LLC also makes it easier to create business bank accounts, open accounts with suppliers, and interact with government entities.
In Conclusion
Starting a dropshipping business is one of the easiest ways to become a retailer and earn money on the side or become a full-time entrepreneur. These steps are designed to help you get started, find a supplier, and get your business incorporated, so you can run your website with corporate protection from day one. With a bit of focus and determination, you'll find yourself improving and growing a successful dropshipping business that you can be proud of.
