Becoming an entrepreneur or starting a business online, used to be what many people think is only for select few, as the entry bar used to be very high. But thankfully, more and more people are going into entrepreneurship and becoming their own bosses, as new business models such as drop shipping are been created.
Drop shipping business model is among the new kids on the block, which has given many aspiring entrepreneurs the opportunity to finally start their own business. Drop shipping business is a business model, which allows you to sell products, without the need to have a warehouse or even manufacture the products.
Drop shipping business model basically has to do with three key actors: The manufacturer/wholesaler, the retailer and the customer. The manufacturer creates the product, holds inventory, and handles shipping. While the drop shipping business owner, can simply sell any products of choice, set own product prices, market own brand, without paying for inventory or necessarily getting involved in the logistics process of manufacturing the goods or delivering them to the customers who ordered the products directly from the retailers website.
According to reports, eCommerce sales amounted to nearly 3.5 trillion dollars worldwide in 2019 with a projection of $4.48 trillion by 2021. More research findings shows that 22-33% of online retailers have adopted drop shipping as their primary business model and drop shipping also accounted for 34% of products sold on Amazon in 2011. That’s $14.2 billion of drop-shipped products from just one online marketplace. Furthermore, the average profit of a manufacturer that drop shipping is 18.33% higher than a manufacturer that uses traditional retail models.
So, if global stats on eCommerce are any indication, starting an online business is an increasingly lucrative option right now.
In this practical guide, we will be looking at the step by step process on how you can start a drop shipping business, scale it up and profit from it within the shortest possible time.
If you are willing to go through with the in-depth steps outlined below, by putting in the hard work, you will have your drop shipping business up and running in no time.
- CHOOSE A DROP SHIPPING BUSINESS IDEA
The first and most important step in achieving drop shipping business success is to choose a business idea. When it comes to drop shipping, what you sell matters, which may not necessarily has anything to do with a niche you are passionate about, but rather what customers are buying.
Contrary to popular opinion, drop shipping is not just about passion, but a mix of passion and profit. So your key step is to choose a profitable drop shipping business idea, then with passion work your business and make it profitable.
You can look at niches like Fitness, fashion, jewellery, beauty, tech, as the possible niches to get your business idea, then choose a product, and start selling the product.
Some examples of a niche drop shipping store could be:
- Dog bow ties for dog lovers
- iPhone cases for iPhone owners
- Camping gear for campers
- Exercise equipment for fitness folks
Here are some points to consider when selecting your niche:
- Seek attractive profits.
- Low shipping costs are very important.
- Make sure your product appeals to impulse buyers with disposable income.
- Make sure people are actively searching for your product.
- Create your own brand.
- Sell something that is not readily available locally.
There are platforms like Oberlo, where you can find curated lists of hot selling product ideas or you can come up with your own product ideas by using any of the following tools.
- Google Trends
- Use Ubersuggest Keyword Tool.
- Browse popular websites within your niche.
- Check order volume for products on popular sites.
When choosing your business idea, it is very important to note that the most profitable drop shipping business ideas may not be trends, but they can be found within trends. For example, a particular type of pants can be a trend within the fashion niche, or eyelashes as a trend within the beauty niche.
- DO YOUR COMPETITOR ANALYSIS
You have succeeded in choosing a business idea, the next important step is to do an analysis for the competition. You have to find out as much as you can about the competitor selling the product, how they are selling it and use the information to figure out a way you can do it better.
There are few simple steps you can take to find out who your competitors are. For instance, you can enter the name of the product you want to sell on Google, and with a quick search, you will see the top ten competitors in that niche. You can also use tools like Alexa, SimilarWeb or social media to get details on your competitor analysis, what products they are selling, the type of advertising they are doing, their followers engagement, etc.
But if you will be selling a product in a location different from where you are based you can use third party tools like SEM Rush or Ahref to get information about search results in different locations around the world.
- REGISTER YOUR BUSINESS
If you truly want to take your business serious and run it professionally, it is then expected that you get the business registered by choosing a business structure that is best fitted for your business purposes. You can simply reach out to the company house of your state or country and get your business registered. You may have to seek for the advice of a lawyer on the best legal structure suited for your business.
You can choose from the following business legal structures:
- Sole proprietorship
This is the simplest business structure to implement but also offers no personal liability protection.
- Limited liability company (LLC)
It offers increased protection of your personal assets by establishing your business as a separate legal entity.
It offers more protections, but very expensive to register
We will however recommend that you register your drop shipping business as a limited liability company, but you should however seek the counsel of a lawyer for professional advice.
With your registration done, you should apply and obtain Employers Identification Number (EIN), depending on your country as U.S based businesses are required by the IRS to have EIN, which serves as s a Social Security number for the business. The EIN is needed for the purposes of filing for taxes, applying for wholesale drop shipping account and more importantly to open a business account for your business.
- FIND A PRODUCT SUPPLIER
There are many easy ways to find a supplier or manufacturer for your product idea. Two common ways to find a supplier for your drop shipping store are:
– Through a supplier database, like Dropship Direct, Alibaba, or AliExpress.
-Using an integrated supplier directory in your store’s back-end, like Oberlo.
You can simply do a search on Alibaba for a list of manufacturers and wholesalers for the products you want to sell and contact them. You can also find lists of suppliers in platforms like Oberlo. Once you choose a supplier, contact them, asking questions like what the minimum order quantity is and shipping times and any other details, depending on your location and delivery policies.
After you have reached an agreement with the supplier, you should then proceed to place a sample order, as this will help you test the product quality, packaging and shipping duration, so you can have an idea what your prospective customers will be expecting when you finally start your drop shipping business.
One thing to keep in mind, if you are selling products from Oberlo, is to endeavour to sell products that provides ePacket shipping if your supplier is from China. EPacket is an affordable shipping strategy for drop shipping items from China to countries like the US, the UK, and Canada. With ePackets, rather than wait for months for a package to arrive from China, your customers waiting time will be reduced to few weeks with them just paying extra few dollars.
- OPEN A BUSINESS ACCOUNT
There is always the temptation of many business owners wanting to use their personal bank account as their business bank account, it is a bad practice and should be avoided at all cost. It is then advised that you open a business account for your drop shipping business. Opening a business account will save you many troubles in the future when it is time for auditing or filing for taxes.
You can open any of the following business accounts:
- Business checking account
- Credit card
Depending on the state or country you will be operating from, it is important to find out if your business will be allowed to collect sales tax. You should contact the chamber of commerce to find out more information on sales tax collections and apply for all necessary permits and licenses.
- HOW TO BUILD YOUR DROP-SHIPPING BUSINESS STORE
Building your drop shipping storefront is the most important step of the whole process, as your store front is where your customers will be ordering the products from. A storefront that is appealing will attract more customers, while an appalling one will drive customers away.
The process of building a storefront however has been made easy, because of the various eCommerce platforms, where some of them have all in one features.
Your first step then is to get a domain name, which may not necessarily has to be same with your product name, but it will be great if you can have a keyword of your niche idea as part of the domain name that is broad, rather than having it very specific so you may not have to change your domain name in the future, when you are expanding your product lines.
For example, it will be better having www.bestfashion.com as domain name if your product niche is fashion, rather than having www.justclothes.com while you are in the fashion niche, as you may decide to add more products in the fashion niche in the future. Also try not to use your name as your domain name, as you may lose the right to your name if you decide to sell the business in the future.
After securing your domain name, you can sign up with Shopify, as Shopify has an all in one feature and is the most comprehensive eCommerce platform. Shopify gives you the tools to easily import products from your suppliers into your Shopify storefront, as that is where your customers will be ordering the products from.
Shopify will also give you access to customizable themes, both free and paid, which you can use to build your storefront to your taste. The basic Shopify plan starts at $29 monthly, with 14 days free trial, and with just a few clicks, your store will be up and running.
You can also use a platform like Oberlo, as Oberlo drop shipping allows you to find products online you can start selling the same day. More so, you can easily import the products from Oberlo into your Shopify shop.
If you don’t want to build a drop shipping business from scratch, but rather prefer to buy an existing one, you can always find a drop shipping business for sale on Exchange, which is Shopify’s marketplace for buying and selling online stores. In Shopify exchange, there are over 10,000 online stores for sale, so there is a possibility of finding a drop shipping business that matches your interests and budget and you can start running it right away.
There is however no law stopping you from building your own storefront from the scratch using platforms like magneto, Bigcommerce or Woocommerce, but it is very important that you choose a platform that can easily integrate with existing marketplaces.
- MARKETING YOUR DROP SHIPPING BUSINESS
You may decide to choose the most expensive Shopify theme and enterprise plan and also select the best of products from Oberlo, but if you don’t market your products, no one will know if your products or storefront exists, hence marketing is and should be seen as the heart and soul of your drop shipping business, and every effort should be made to give the necessary visibility to the business.
As a new business owner, you may not have the huge budget to market your products, but we will look at the following creative ways you can adopt in marketing your products and achieve reasonable results.
- Facebook Advertising: Facebook gives you the opportunity to set a minimum daily budget to promote your products, so you can spend as low as $10 daily or as high $10,000 daily, it all depends on your advertising budget. So simply keep your advertising budget low at the beginning, but create many adverts, so you can see what works and, with that you can then twerk your advertising plan and budget. As your business grows, you can then increase the budget and repeat the process.
- Retargeting Ads: Using retargeting adverts is a good option of marketing your products, as the cost is generally low. You can write a blog post for instance or promote your store for free on Pinterest, with the retargeting adverts, you can convert the free traffic into paying customers.
- Influencer Marketing: You can reach out to influencers in your product niche and have them help promote your product. Some of them may request for payment or accept product samples, it all depends on the agreement you were able to reach with them. Aside outright payment or product sample, you can negotiate an affiliate commission with the influencer, and if they have real followers, they will make more money by taking commission from sales coming through them, while you are at the same time using the influencer to build your brand social proof.
- Get free media coverage: There are easy ways you can get free media coverage for your product/storefront. You can use free tools like HARO (Help A Reporter Out), to subscribe to email list, where reporters reach out to you to get stories for their articles. Some of the requests may be on product recommendations, or seeking for the opinion of some influencers in a specific niche. So if you can meet up with the requests, your article or product will be featured in a major media outlet, thereby driving massive traffic back to your storefront.
- Word of Mouth: You can use the freest form of marketing, which is word of mouth to reach out to friends, family, colleagues and everyone in your network, telling them about your products and also asking them to help tell others.
- Content marketing. If you can write a blog that educates or entertains your target audience for instance or get a freelancer to get one for you, it will help drive traffic to your storefront, which some of them will eventually become customers for your business. You can also start a YouTube channel, create infographics, or start a podcast, so you can spread the word about your products and storefront.
- Communities/Forums. You can get involved in forums and communities that are passionate about your niche. If you can through your participation in the communities/forums, you will build relationship, and they will end up following you back to your storefront to buy your products.
But no matter the channel you decide to adopt, your message and tone should always be key, and always ensure that your advertising messages is resonating with your target audience, using the channel where they spend most time on.
- OPTIMISE YOUR STOREFRONT
With your marketing efforts on top gear, which already would have started generating sales, it is now time to do a proper analysis of your storefront to see the trend of your marketing efforts and generated results. Your analysis will help you understand which marketing efforts, that are successful and those that are not. The analysis can also help you compare your pricing against that of the competition, and make any upward or downward adjustments as the case may be.
Available for your analysis are tools like Google Search Console or Analytics, which helps you to evaluate your online traffic. You can also your email marketing if you have an email marketing plan, or social media reporting tools to see the position of things with your storefront and do the necessary adjustments.
Overall the most important part of a successful online eCommerce store is to test and optimise in order to increase the revenue. So with your best efforts, please make sure that your website does not fall behind best practices and always strive to keep ahead of your competitors.
We promised to provide guidance and value on how you can start a drop shipping business with this guide, and we can boldly say we have done that with this practical guide, with the step by step process. So if you can apply some of the advice from this practical guide into your starting of your own drop shipping business, you will surely be on your way towards building an online empire in no time.
Building that dream online empire will always remain the desire and aspirations of many, but simply dreaming about it, will in no way help you achieve it. Are you among those people that will read millions of pages of practical guides online, and still not be able to make up their minds? Or you are someone that is willing to step out from the comfort zone, knowing there will be challenges and obstacles along the way, but still decides to give their dream a shot?
Let the action you will take from what you have learned from this guide, prove the category you belong to. Action is cure, take the right step and get started right now in your drop shipping business.
What are your thoughts with regards to this guide and is there any business idea you want us to write about? Let us know in the comment section.