The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
Want to start a business online without any upfront investment or stock to warehouse and ship? Perhaps you’re looking for a venture that you can get up and running in minutes. As e-commerce business continues to grow, it’s no wonder merchants are drawn to the fulfillment model known as dropshipping.
What is dropshipping? With high profit margins and low overhead costs, dropshipping is a popular method of online selling often described as a passive income stream. But that doesn’t mean it’s a get-rich-quick scheme. To successfully run a dropshipping business, you must focus on driving reliable sales, building long-term strategies, and setting excellent customer service standards.
Although success with dropshipping can come quickly, if you’re not aware of some of the pitfalls, the problems can grow just as fast. So whether you plan to make dropshipping your full-time job or side hustle, here’s everything you need to know about the dropshipping process.
First, dropshipping explained: Dropshipping is a business model where a business commissions manufacturers or wholesalers to “drop” shipments directly to customers on their behalf. By using a dropshipping fulfillment strategy, wholesale business owners aren’t responsible for storing inventory, renting warehouse space, and coordinating deliveries. This is why dropshipping is a low-risk option for people wanting to start a business without an upfront investment.
It may sound like a breeze, but the dropshipping process can be complex. To start a dropshipping business, you’ll need to create an online store, choose reliable suppliers, market your products, build a strong customer base, and offer excellent customer service.
To illustrate exactly what’s involved, we’ve put together the following step-by-step breakdown of how dropshipping works.
First, choose the product you want to sell. For example, you might consider selling print-on-demand clothing, car accessories, sustainable kitchenware, office supplies, or holiday decorations. Most importantly, look for a niche with an engaged customer base and high demand but low levels of competition. This way, you can stand out in the market and begin driving sales.
If you need help brainstorming, you can also use helpful tools like Google Trends, keyword research programs, social media apps, and online marketplaces to see which product categories and searches are most popular.
Research reliable dropshipping suppliers who can ship the products that you want to sell. Do your due diligence by comparing their prices, services testimonials, and fulfillment timelines. For example, you may want a supplier who can offer next-day shipping and manage returns on your behalf.
When doing your research, you can also request samples from suppliers to check their quality. Remember, your supplier will likely handle your warehousing, packaging, and shipping. You want to be sure that they’re trustworthy and communicative throughout the logistics process.
Next up, build your e-commerce site where you can list your products and invite customers to make a purchase. Make sure to choose a user-friendly platform that’s customizable to create a smooth checkout process for shoppers. Your website might include separate product pages and descriptions, testimonials, and shipping and returns information.
Building out your e-commerce site is also an opportunity to develop your brand voice and identity, like a logo and color palette to share across your campaigns.
Unless people know about your website, they may have a tough time finding your products. To market your dropshipping business, launch ad campaigns across a range of platforms. If you’re unsure where to start, conduct research to see where your target audience is most active and what types of content they engage with.
For example, you might try reaching shoppers with social media and search ads, influencer partnerships, and email newsletters. You can also use search engine optimization (SEO) strategies to ensure your website is easily discoverable by search engines.
Once you receive an order, it should enter into your supplier’s ordering system and your customer should receive a confirmation. Then, the dropshipping process comes into play: Your supplier picks, packs, and ships the product to the customer so you don’t have to. This might involve using specific packaging, such as for fragile or refrigerated items. At this point, your supplier should also provide the customer with shipping and tracking information so they can track their delivery and reach out with questions.
Once your customer receives their product, you might consider sending them a follow-up email to find out if they’re satisfied or ask them to submit a review for your website. You can also reach out with recommended products for cross-selling and upselling or share helpful content for how to best use their new purchase.
If a customer isn’t happy with their order, it may be up to you to resolve any complaints and manage returns. Work with your dropshipping supplier to establish return policies ahead of time and decide who owns each step of this process. For instance, will the supplier receive and refund returns for you? Is there a time limit for when customers need to submit returns? Is it more cost-effective to let customers keep products if they’re damaged or faulty? Answer these questions before you start to sell so you’re ready to proceed when and if returns come in.
With so few set-up costs, it’s easy to see what makes dropshipping such an appealing option for retailers who want to sell online. But, like any business, there are pros and cons, so let's look at the advantages and disadvantages of dropshipping as a business model.
There are many advantages to low-cost business ideas like dropshipping. You don’t have to store stock, worry about inventory, or manage shipment of your product. But the perks don’t end there.
The biggest benefits of dropshipping include:
Despite all of its upsides, dropshipping also comes with e-commerce challenges. Competing with other dropshippers on price, for instance, can quickly become a race to the bottom. And if you rely on paid advertising channels to drive traffic to your website, your profit margins may be lower still. But there are other pitfalls to be aware of, too.
Going further, notable dropshipping risks include:
If you’ve weighed the pros and cons and decided a dropshipping business model is right for you, it’s time to take the next step. But before you launch your online store, there are certain best practices and tactics you can use for dropshipping success.
Consider these dropshipping tips to get started:
Even with this information to guide you, you might still wonder, “Should I start a dropshipping business?” If that’s the case, ask yourself these questions:
Dropshipping has become a popular business model for a reason. It allows people to launch their own companies with minimal upfront costs and administrative hassle. All you need to start a dropshipping business is a strong product idea and an engaging e-commerce website. The actual product manufacturing, storing, and shipping is handled by third-party companies.
Still, there are certain roadblocks to dropshipping success, and it’s important be aware of them before you dive in. As with any business, dropshipping comes with its own unique challenges, like high competition and quality control issues. But, with the right strategies, research, and preparation, it is possible to start a dropshipping side hustle or full-time business that drives revenue for years to come.
Ready to try it for yourself? Learn more about how to start a dropshipping business.
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