How to Start a Profitable Dropshipping Business in 2021

by Nov 8, 2020eCommerce0 comments

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The dropshipping business model is an effective way for internet entrepreneurs to build a sustainable source of income in 2020.  The ease of fulfilling orders and low start-up costs makes dropshipping an appealing option for anyone who wants to launch a business without the need to invest thousands of dollars. Today we’re going to walk you through how to start a dropshipping business without any money.  

Dropshipping is a great first step into entrepreneurship.  You can pick your own products, set your own prices, and no inventory is required.  You can quite literally work anywhere when you run a dropshipping business.  If putting in the work isn’t a problem for you, you’re going to love running a dropshipping business.

This article is going to cover everything you need to know about starting an online dropshipping business.  Bookmark this article and come back to it as you work through the steps to launch your dropshipping business!  For a PDF version of the article click here.

What is a Dropshipping Business

The dropshipping business model allows you to promote and sell products without the need to hold onto any inventory.

The customer purchases the product at retail price, you then take the order with the supplier at wholesale price and they fulfill the order.  Your only job is to set up an online e-commerce store,  add your products, and promote sales.  Once the order comes in it goes directly to your supplier to ship.

How Does the Dropshipping Business Model Work?

There are 3 parties involved in the dropshipping business model:  The supplier/manufacturer, the retailer (you), and the customer.  

The Manufacturer is responsible for creating the product, housing the product, and fulfilling the order put in by the customer.  From the manufacturer’s perspective, the dropshipping model works because they don’t have to put work into marketing and selling their own products, that’s your job.  

Again, your job is marketing and sales.  You place the inventory of your supplier into your online store.  You then drive traffic to that store to drive sales of those products.  

The customer has the easiest job throughout this process.  They see a product, add it to the checkout, and place an order.  The easier it is for them to place an order, the more successful your business will be.  Questions about the product, including returns, are handled by you, the retailer. 

Why Start a Dropshipping Business?

Compared to other business models, dropshipping is extremely low risk.  Aside from the basic costs of getting a website set up, you only pay for products that customers buy at the time of order.  Since you’re not housing an inventory or manufacturing your products, you can run this type of business anywhere, anytime.

Additionally, processing orders can be relatively automated.  You will need to take some time to get everything set up.  Once you’re up and running and you find a winning formula, you can essentially let the business run on its own.

Is Dropshipping Profitable?

This is one of the most common questions surrounding dropshipping, and any other online business model for that matter.  The answer is it depends.   There’s been plenty of dropshipping failures, but there’s also been a TON of winners.

One thing is certain, if you do not put in the work, you’re destined for failure.  The opportunity to source profitable products and ride profitable trends can allow anyone to generate thousands of dollars in profit every month.

Most successful drop shippers fail a few times before finding a product that takes off.  Don’t become married to your ideas.   Be willing to scrap it if you’re not seeing results, use your experiences as learning experiences and move on to the next store.

How to Buy a Dropshipping Business

Maybe you don’t want to build a store from scratch.  No worries, you can buy an already established dropshipping store that’s already profiting.   Exchange is a marketplace for people looking to buy and/or sell Shopify stores.   They offer more than just dropshipping as well.

A word of caution if you decide to go this route: do your research.  There’s a lot of variables to consider when deciding to purchase a dropshipping business.  Factors like niche, type of business, penalties, profitability, design, age of the site, and cost are key attributes that can dramatically shift the potential of a website.

Niche: in the world of drop shipping,  retailers ride trends and sell once the trend dies out.  You don’t want to be on the other side of a trend that’s lost its flame.  Be on the lookout for this as you consider a niche you want to sell in.

Design: take careful consideration as you browse the website.  Does it look like it was thrown together? Or does it look like a professional took their time and created a beautiful, easy-to-use store for their customers?

Age: A website that is older and established online will have an easier time ranking organically in the search engines.  Keep in mind age isn’t necessarily a good thing if your product is a dying trend.

Profitability: Revenue can be misleading.  Be sure to check the amount used on spend to find a product that is profitable.  You don’t want to be stuck with a product that profits .50 cents on the dollar.  Exchange allows you to look at the trend of profits over time.

Cost: Fun fact – there are actually costs associated with building a store after your initial purchase.  So if you’re pinching your pennies to purchase a store, you probably shouldn’t buy it.  Also, when you’re in a serious consideration phase of buying, negotiate.  You’d be surprised by how much site owners are willing to discount.

7 Steps to Starting a Dropshipping Business

Step 1: Make the Commitment 

Purchasing a dropshipping business shouldn’t be an experiment or a way to spend extra money.  Turning a dropshipping business profitable takes a heavy commitment to make it work.  Not everyone hits a home run and the first time to get a great return on ad spend.  Your commitment level will determine how successful your business is.

Keeping your expectations in line with how profitable you could be is also important.  Keep things in perspective, if you expect 6 figure profits in month 1 you’re probably going to be very disappointed.

A piece of advice about your commitment level…

If you’re rolling up your sleeves and working on every aspect of the business such as development, marketing, sales, etc.  You’ll have a much better grasp of your business.  Some people prefer to rely on outsourcing every aspect of the business, we do not recommend this approach.

Chances are you’re not going to be able to quit your job for a while after purchasing the business.  A 1-2 hour commitment every day to the business should be plenty of time for you to keep scaling the business and get closer to full-time profits.

In our experience, you should expect to work 15-30 hours per week for about a year until you’re able to start generating profits significant enough to quit your job.

Step 2: Choose a Dropshipping Business Idea

Passion or Profits?

One of the most commonly asked questions when starting a dropshipping business is deciding whether to go with a niche you’re passionate about or a niche that is known or be underserved and profitable?

The answer is a mix of both.  Some people refuse to muscle through the work of building a store with products they’re not passionate about. Some people just want to see the numbers in their bank account go up, regardless of what they’re selling.  Whatever your reasons,  find a niche that will keep you motivated and building.

For the sake of keeping things short, I’m going to skip teaching you how to discover a niche you’re passionate about.  As for finding a niche that’s profitable?  There are books written on this one topic alone.  So for now, we’re just scratching the surface.

To keep it simple I always like to voyage over to Amazon.  While on Amazon check out the “Best Sellers” section.  This will give you a great idea of the products you’d like to sell.

Step 3: Validate Demand 

In essence, part of your job in validating demand is already done if you pick a few items from Amazon’s Best Sellers section.  If you decided to go with a passion niche or didn’t use the best sellers section to choose a niche, there’s a couple of ways we can validate demand.

The first is by going to Google Trends.  This tool is extremely helpful to see what’s trending, and what trends may have already passed.  As you see below, if you decided to build a store focused on selling fidget spinners, you’d be fighting a long uphill battle.

On the contrary, if you decided you wanted to build a dropshipping store focused on selling equipment for at-home HIIT workouts, you’d be in good shape, according to Google Trends.

Another way of validating the demand for your product is to do your basic research to see how much interest surrounds this topic.  Look at the number of orders placed on Amazon for your product. Or go to YouTube and look at the number of views for a video relating to your topic.

Step 4: Competitive Analysis

If you lack an effective marketing strategy, chances are you’ll be eaten up by your competitors.  That’s why it’s vitally important to understand the channels that are generating sales for your competitors.

The first step of any competitive analysis is to identify your competitors. Finding your competitors shouldn’t be too difficult.  A simple Google search for your product will bring up a variety of businesses that sell a similar product.  Another way is through Facebook.  Since a lot of drop ship companies rely on Facebook ads, start following pages and groups that relate to your product.  It’ll only be a matter of time until you start getting targeted with some ads.  Boom, there’s your competitors.

Once you identify your competitors, research like crazy! Go to their website, take note of their design, prices, product images, call-to-actions, discounts, promos, etc.  The more you understand about your competitors the better you can speak to your target audience.

I love using a website called SimilarWeb.  On Similar Web, all you do is type in the domain name of the competitor you’re researching, and you’ll get heaps of information about the website. Most notably, what channels and social media networks they’re getting most of their traffic from.

Once you identify the most popular sources of your competitors’ traffic, go to their social accounts, and look at everything they’re doing.  Facebook ad transparency allows you to look at the exact ad they’re running.  This is a great way to get started selling your product.  Use the roadmap set by your competitors to start a dropshipping business, don’t try and reinvent the wheel here.  

Step 5: Find a Supplier 

Suppliers are a critical ingredient when you start a dropshipping business.  Picking the right supplier can have huge impacts on your profit, product availability, and customer service.

Now that you have a product (or products) that you want to sell, let’s find the best place to source those products.  There are a few things you should expect as you vet out potential suppliers.  The first is minimum order size, to help prevent consumers from looking for good deals.  The second is pre-order fees. Since shipping one product is so much more expensive than bulk ordering, it’s industry standard to charge a pre-order fee.

Top Dropshipping Suppliers

1. Spocket – For new dropship suppliers, Sprocket is great.  Sprocket easily integrates into Shopify and Woo-Commerce.  Additionally, delivery times are 1 week and suppliers are vetted from the US and UK.

2. AliExpress – AliExpress is a huge marketplace with most suppliers residing overseas.  Delivery times are 2-3 weeks with AliExpress but the products available to choose from are plentiful and offer a wider variety than Spocket.

3. SaleHoo – SaleHoo is a subscription model that costs around $70 per year.  Like Sprocket, SaleHoo works with wholesalers mainly from the US, UK, and Australia.  They have a database of over 1.6 million products and are also a great option for people just starting out with dropshipping.

Step 6: Build an E-Commerce Dropshipping Storefront

Deciding on which e-commerce platform you want to go with is a big decision, one that can create (or save) a lot of headaches down the road.   So what makes a great e-commerce platform?

A good e-commerce platform will allow you to build your store from the ground up without having to do a bunch of code.  You’ll want something that is simple, and extremely easy to use.  Additionally, you’ll need the ability to process payments, track orders, and integrate other 3rd party tools.  Lucky for you, there’s a lot of these types of providers out there.  

Here’s our Top 3 E-Commerce Platforms

1. Shopify is great for anyone who wants to get a store up and running quickly.  Literally, all you do is sign up, pick a theme, and add your products.  You can be up and running within minutes!  One of the drawbacks is that Shopify runs on a subscription-based model.  The starting price is around $30 per month (a Free 14-day trial is offered).  Additionally, a lot of high-quality themes can cost hundreds of dollars.  Nonetheless, it’s a worthy investment if you’re serious about building your store the right way.

2. Woo-Commerce is for anyone who already has (or is planning on building) a WordPress site.  WordPress powers about a third of the internet and is by far the most common CMS on the market.  While there’s a slight learning curve to WordPress, the payoff will be big, as your website will be built on a stone foundation.  WordPress is also free!

3. BigCommerce is for people who are looking for a simple easy turn-key solution to building a store online.  BigCommerce has amazing support and tons of pre-built templates to choose from.  Customization is a bit of an issue, along with SEO shortcomings.  This steers a lot of experienced store builders away.

Step 7: Start Driving Traffic and Making Sales! 

Now the fun part really begins.   Marketing and sales are the lifeblood of any business.  While this might be just one step – but it’s a crucial one.   There are a number of different ways to start driving traffic to your store.  Some of the most common are social media advertising, influencer marketing, Amazon advertising, Google Adwords, SEO, and the list goes on…

We can’t tell you what’s going to be best for your business.  It’s on you to decide where you want to start.  Each platform has its own unique benefits.   Take the time and learn what is best for you and where you’d like to start driving traffic from.  

Summary

There you have it! 7-Steps to start a dropshipping business.   We hope you found this guide helpful! Please share your thoughts below.  Was there something you’d like us to talk about more, please let us know in the comments!

So long, for now, best of luck building your dropshipping empire.  As always if you have questions for us please don’t hesitate to contact us.

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