How To Start A Dropshipping Business In 5 Steps (2024)

Starting a dropshipping may seem easy to many people, and in a rush, they start the business without proper planning. That’s why most dropshipping businesses fail within six months of starting it.

Dropshipping businesses are going to grow up to $557.9 billion by 2025, and you can become successful with it only if you follow a structured approach. To help you start planning for your business, I have shared this five-step guide on how to start a dropshipping business.

I have also busted a few myths about the dropshipping business and shared the benefits of starting it in 2024. So don’t miss all the details and read on till the end. 

What is a Dropshipping Business?

Dropshipping is a form of online business wherein online store owners are not required to manage product stocks. The store owner will pass the information to the third-party supplier when the customer places the order. The entire order fulfillment portion is taken care of by third-party distributors.

Dropshipping is the perfect business model for novices who want to start their own business with a tight budget. Besides that, you can also test out different niches with a minimal budget. Before starting the dropshipping business, you need to know things like the Niche you sell, Financials, steps to set up and run the online store, marketing, etc. Now, without further delay, let’s discuss how to start a dropshipping business. 

How Does Dropshipping Work?

The dropshipping model relies on three aspects: the customer, the dropshipper, and the supplier. For example, A customer buys a product on an eCommerce website and pays the price for it. The dropshipper will receive the order; in that case, it will be you. Now all you need to do is pay the wholesale price of that product to the supplier and give them the customer’s address. The supplier will dispatch the product and send it to the customer directly. 

In this process, you can set the price of what the customer can buy and make a profit from it. The supplier will get the wholesale price set by them from you. If something goes wrong with the product, the customer will contact you for customer support, not the supplier. So this is how the complete dropshipping model works.

Is Dropshipping A Profitable Business?

If you don’t want to take a lot of risks starting an online business, then you should start a dropshipping business. You don’t have to pay a lot to get started; you will have to pay only when a customer buys a product from you. You don’t have to worry about other costs like managing inventory, creating products, shipping & delivering, and managing the workforce. All these reduced costs make dropshipping a profitable business model.

To earn good profits from a dropshipping business, you must find an amazing supplier for your products who will deliver products on time and manage all the costs to a minimum. It will ultimately lead increase in your profit margin. Plenty of dropshippers are earning well over $100K in a year with their dropshipping store. 

If you are interested in buying well-established dropshipping businesses, then take a look at these dropshipping stores on sale.

5 Steps to Start the Dropshipping Business

Here are a few steps on how to start a dropshipping business here.

Step #1: Choose a Niche for Your Dropshipping Business.

Choosing a niche is the most fundamental aspect of starting your dropshipping business. It is hard to choose a niche because you cannot sell the products you like; you need to sell what customers want. You need to invest much of your time in this step to get better results. But the biggest question is how to choose the Niche. 

Perform in-depth market research to understand market trends before selecting a certain niche. Pick a market that has the greatest demand from consumers. Go through all the existing dropshipping stores and the products they are selling. It will help to get a clear idea about which Niche to start the business. Try to choose the demanding products that are not easily available in offline shops.

Step #2: Setup an Online Store

Multiple platforms are available for creating an online store; you should choose the one according to your requirements. Some well-known platforms for creating an online store are Shopify, WooCommerce, Bigcommerce, Wix, etc. 

Important aspects to consider while selecting the platform are easy to use, features, pricing, security, etc. The steps to create the online store are:

• Create an online store.
• Design your store according to the Niche.
• Choose a trustworthy dropshipping supplier app and connect it to the online store. 
• Choose the products you want to sell in your store and ask for sample products.
• After getting a sample, ensure the product is of good quality.
• Import the products you want to sell to your online store.
• Set up your store with appropriate features, such as international shipping, payment methods, etc.
• Now your dropshipping store is ready to sell the products.

These are the key steps to be followed while starting a dropshipping online store. The above steps might change a bit on certain platforms like WooCommerce. 

Step #3: Get licenses and EIN

If you wonder if your dropshipping store requires a license and EIN? Yes, the license and EIN are mandatory for all online businesses. After building the online store for the dropshipping store, obtaining a license is the next step. It would help if you had a business license and EIN from the country where you choose to operate your dropshipping business. 

Three types of business structures exist Sole Proprietorship, Limited Liability Company (LLC), and C Corporation. However, most dropshippers choose to go for Sole Proprietorship or a Limited Liability Company, which is safe for a dropshipping business.

Here are a few simple steps to obtain the business license for your dropshipping store:

• Open the SBA website.
• Select the type of business you want to run from the list.
• Fill in all the details asked on the website and apply for the license.
• You will receive your E-Commerce business license.
• It is important to renew the license after it expires. 

Coming to the EIN part, these are the fundamentals to follow to get the EIN

• Visit the IRS website.
• Apply EIN through online mode by checking all the rules to apply for EIN.
• You will now land on the EIN Assistant page; begin to apply 
• Answer all the questions asked in the application about the business.
• After filling in all the details, submit the application form.
• Once the information is submitted, you can get the EIN.

Step #4: Financials required to set up Dropshipping business

As a dropshipper, you will incur numerous expenses, such as E-Commerce platform fees, extra features, marketing costs, etc.

When building an online store, the pricing of each online platform varies according to the features they provide. The table below shows some platforms you can use to build a dropshipping store.

S.no	Platforms	Pricing
1	Shopify	$39 to $399 per month
2	Magento	$50 to $160 per month
3	WooCommerce	$110 to $2000 per year
4	Squarespace	$23 to $65 per month
5	BigCommerce	$39 to $399 per month
6	Wix	$16 to $500 per month
7	PrestaShop	$4 to 14$ per month

You may need extra functionalities like Product reviews, variations, and Integrations to improve the store’s performance. The price of these products varies in price depending on their characteristics. You may have to pay additional charges to make your online store better.

Allocating the budget for marketing the products is a crucial part of the business. 

You can use many marketing tools for a dropshipping business, like Facebook Ads, Instagram ads, Email Marketing tools, etc. Each business will have a different marketing approach, so it is impossible to give a precise number for marketing. You should invest more than other mark forms if you run ads. So I recommend making a proper marketing strategy before calculating the budget to get a clear idea of the expenses.

Step #5: How To Market Your Dropshipping Store?

Marketing is the next step when the dropshipping store is ready. The main factor in marketing is understanding your target audience and figuring out how to reach them. There are multiple methods to bring traffic to your online store like running ads on social media, SEO, Social media marketing, influencer marketing, etc. 

1. Running ads on social media: It is one of the most chosen methods to drive traffic to the online store. Due to its ability to filter the target audience based on age, gender, location, and many other demographics. So choose the platform where you can find most of your target audience.

Those interested in your products will be able to find out more about them and purchase them if they are truly in need of them. It is possible to run retargeting ads once a person visits the site and leaves without purchasing anything.

2. Social media: Social Media platforms are the best place to launch and exhibit your products online. It works wonders for B2C products since they can reach consumers directly. It is common for brands to share videos on their social media accounts to get more engagement.

Some companies choose to conduct workshops related to products from experts to help the customer. Performing all these will also help to build trust from the target audience. The most common videos will be how-to guides, which are the most useful for users.

3. Influencer marketing: It is currently the most popular marketing trend. The only way to efficiently use influencer marketing is to select ideal influencers for your brand. This trick will work like magic when the influencer can build trust with your target audience about the brand.

A study has shown that 8 out of 10 consumers will buy products from influencer marketing if they find them useful. Influencer marketing is preferred because it operates more efficiently than traditional marketing strategies. Learn how you can use influencer marketing to promote your eCommerce business from this guide.

4. Organic marketing: It could take some time to produce results once it is executed effectively. It gives you ongoing benefits without requiring capital. Putting efforts into best SEO practices can also provide excellent results for your business. Writing blogs with relevant keywords is the best method to achieve this. People believe blogs to be the most reliable resource because they assist them in finding solutions to those problems. 

Here are a few marketing tips that add value to your dropshipping store.

• Use upselling marketing tricks on your store, like product recommendations.
• Use testimonials as an indicator of trustworthiness.
• Make retargeting ads to make the prospects come back to your store.
• Write blogs related to your products.
• Use newsletters to increase the traffic from current customers.

You should understand these fundamental marketing concepts to promote your dropshipping business.

Benefits Of Starting A Dropshipping Business

Dropshipping business is one of the best business models to get started with. Here are some of the benefits of starting a dropshipping business:

• Low Investment: The dropshipping business does not require you to stock an inventory of products. You don’t need to spend on buying products; you can start selling them right away.
• Low-Risk Model: There is not a lot of risk doing dropshipping business cause you can easily switch the poor-performing product from another one from your dropshipping supplier without spending anything.
• No Inventory Management: You don’t need to manage an inventory or deal with shipping or delivery in this business model.
• Flexibility: This business model is so flexible that you can do it from anywhere in the world. You just need to manage your online store, and you can do that with your laptop and an active internet connection.
• Different Product Options: You can add as many products to your dropshipping store and give diversified options to your visitors and customers.
• Scalability: You can scale your dropshipping business very quickly since you don’t have to handle the shipping and delivery of the products, so you can take as many orders as possible.

Myths of Dropshipping

1. People do not buy from dropshipping stores.

Most people hold the misconception that consumers do not shop at dropshipping shops. If people find value in the products, they will buy them anyway. Hence this statement is a false assumption. Further, more people these days shop online rather than in physical stores. If you are doubtful about this, you can increase the trust of your store by adding testimonials from satisfied customers. 

2. Dropshipping is simple.

When you have a basic understanding of dropshipping, it could appear easy. But it is not easy as you think. It would help if you frequently tried things out to decide which is best. Selecting a trustworthy dropshipping supplier is a tricky task. A great experience is necessary to create an appealing online store. After starting a dropshipping business, you can comprehend the business’s ins and outs. But if you handle everything well, success is guaranteed.

3. Dropshipping takes more time for shipping.

Since many dropshipping suppliers may be from different countries, most people believe this myth. But it doesn’t affect the shipping time of the product. It might take a maximum of 1 week to deliver the products and not more than that. Therefore, I will clarify that this myth is untrue and does not apply to the dropshipping business.

4. Dropshipping gives you instant results.

You cannot expect quick results from dropshipping until you completely understand how it operates. Dropshipping is about trying different things and figuring out what works best for you. Therefore, if you are starting and have no experience with dropshipping, do not expect immediate profits.

5. Dropshipping is limited to one country at a time.

Dropshipping is sometimes misunderstood by those unfamiliar with the process. However, the truth is that you have endless potential for growth in your dropshipping enterprise. The supplier will deliver the products to the address you specify. So I would say this is one of the common misunderstandings about dropshipping.

Conclusion: Start A Dropshipping Business To Generate Passive Income

I hope the above guide on How to start a dropshipping business will help you set up your business. Dropshipping has been the most accessible business model for all aspiring entrepreneurs. But it’s important to remember that dropshipping won’t make you rich overnight. So do not rush to start the business without knowing the fundamentals.

Before starting the dropshipping business, analyze and experiment with every aspect discussed in the article and understand what works for you. If you can follow all the steps mentioned in your dropshipping business, you will undoubtedly succeed in your dropshipping journey. 

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