Starting a dropshipping business is an excellent way to dip your toes into the world of entrepreneurship. It allows you to sell products without needing to stock inventory or make upfront payments. And with dedication and hard work, this business model can lead to a steady income over time.
This complete dropshipping guide details essential business and financial steps to consider. Some steps are necessary from the beginning, while others are beneficial. Considering them early on will save you time and headaches down the road.
What is a dropshipping business?
Dropshipping is a business structure that allows you to operate your store without holding any inventory. Once you’ve made a sale, your supplier will ship the products from their warehouse directly to your customer’s doorstep. This eliminates the hassle of storing, packaging, and shipping products yourself.
How does the dropshipping business model work?
Dropshipping is an order fulfillment model that enables online stores to sell products to consumers without holding any inventory. When a customer buys a product from their catalog, a third-party supplier ships it directly to them.
The selling process involves setting a retail price higher than the wholesale price you pay the supplier, with the difference being your profit. There’s no need to handle products directly or invest in inventory.
To start selling, you only need to set up an account with a supplier.
To find suppliers for your dropshipping business, you have three main options:
- Supplier databases. Platforms like Alibaba or AliExpress enable you to find a diverse array of suppliers.
- Integrated supplier directories. Tools such as DSers directly integrate with your store’s back end, simplifying the process of browsing and selecting suppliers.
- Print-on-demand services. Services like Printify give you access to a network of print-on-demand suppliers who can customize products with your designs upon order.
The simplest dropshipping method for Shopify store owners is using DSers. It lets you find and add millions of AliExpress products to your store with one click.
In dropshipping, your tasks include developing your website and brand, selecting and promoting your products, handling shipping costs, and setting prices that ensure profitability.
What are the advantages of dropshipping?
A dropshipping business is a profitable business model where you only pay for the products that you sell. This means you’re not burdened with the cost of creating products or carrying inventory. As such, the startup costs of running a dropshipping store are quite low compared to those that come with operating a standard ecommerce business.
In this business model, you also avoid the costs of maintaining unsold inventory and employing staff for packaging and shipping products. While it will require daily work when it comes to processing orders, most of the order processing steps are automated and only require the click of a button. The dropshipping business opportunities are endless—you just need to take the first step.
How to start a dropshipping business: The 11-step dropshipping business plan
- Figure out if dropshipping suits you
- Choose a dropshipping business idea
- Do competitor research
- Find a dropshipping supplier
- Choose products and set prices
- Set up your dropshipping store
- Create a brand identity
- Decide on a business structure
- Market your dropshipping business
- Streamline your finances
- Test and optimize
1. Figure out if dropshipping suits you
Dropshipping is just one way to run an online store. Before jumping in, make sure it aligns with your goals.
It’s a good choice for those with marketing skills who want to start a store with minimal upfront costs. You won’t need to stock products or manage shipping, so you can get started with just a laptop and internet access.
However, there are tradeoffs. You’ll have less control over the products, and competition can be intense since others might sell similar items.
If your focus is on marketing and you don’t need a standout product, dropshipping might be a good fit.
2. Choose a dropshipping business idea
After deciding to start a dropshipping business, the next step is to thoroughly research your market. Market research involves analyzing factors like competition, product demand, and target audiences. Your goal should be to find a dropshipping niche that fits your interests and has strong potential for success.
Products in specific niches often attract a dedicated customer base. This makes them easier to sell and can lead to higher profit margins for your dropshipping business.
Examples of niche dropshipping products include:
- Handcrafted leather wallets for minimalist enthusiasts
- Organic skin care products for eco-conscious consumers
- Customized meal prep containers for health-conscious individuals
- Sustainable fashion accessories for trendsetting shoppers
By focusing on niche and trending items, you can catch the attention of potential customers and gain momentum without competing directly against larger, established ecommerce brands.
How to validate your business ideas
To make sure your niche is worth pursuing, use these tools and tactics:
- Google Trends. Google Trends is a valuable tool for learning about product trends. It provides insights into whether an item is trending upward or downward over time, as well as the seasons when it tends to be most popular. Although you don’t see the search volume for a specific term, you get enough data to conduct keyword analysis and assess the product’s popularity in search.
- DSers order volume. DSers lets you search for products based on order volume. A higher order volume indicates a stronger demand and potential success for your business idea.
- Keywords Everywhere. Keywords Everywhere reveals monthly search counts and competition level for your products. This data helps you understand your dropshipping idea’s popularity and can spark ideas for future products.
3. Do competitor research
Once you have decided what to sell, you now need to educate yourself on who your competitors are, what they sell, and how they sell their products. Market research is an essential part of this step, and there are many ways to do it.
Run a Google search
Begin by searching for keywords related to your niche to see which businesses come up. For instance, if you’re launching a dropshipping store in the home decor niche, try searching for terms like “wall art,” “throw pillows,” or “table lamps.”
Notice which businesses repeatedly show up in the results. These are likely your key competitors in organic search. For more detailed insights, consider using an SEO tool.
You might find that top competitors are focusing on long-tail keywords, which are more detailed search phrases that customers are using.
These longer keywords usually have less competition, giving smaller dropshipping sites a better chance.
For example, your analysis might reveal that “candles” is crowded with big names, but “soy candles” has fewer players—and “soy candles for meditation” has even more room for your business to grow.
Browse social media
Keep an eye on competitors’ social media. See how they engage with followers. Focus on the posts that get the most likes, comments, and shares.
For instance, if a competitor in the fitness niche is getting traction with home workout tips, try something similar. Look for gaps too—maybe there’s a need for content on nutrition advice.
Use competitor spy tools
Online tools like Similarweb are invaluable for tracking your competitors’ online presence. Use them to get a detailed snapshot of competitor website information, including their visitor counts, main traffic sources, social media engagement, and main competitors. This information can help you strategize and position your business more effectively.
Study your main competitors thoroughly: website, pricing, marketing strategies, product details, and reputation. Organize this research in a spreadsheet for quick reference when deciding on your store’s strategy.
Check marketplaces
Another way to gather insights is by checking sellers in your niche on platforms like eBay, Amazon, and Etsy.
Note how many merchants are selling items similar to yours. If the market seems saturated, think about ways to distinguish your listings from others.
For example, you can offer a discounted bundle or add personalized packaging to attract more buyers to your store.
4. Find a dropshipping supplier
A dropshipping supplier handles inventory, processes orders, and arranges shipping to customers.
Given the importance of these tasks, the reliability of the supplier you choose will significantly impact your business’s success.
You might choose to work with a single supplier or partner with multiple suppliers, depending on your niche and the products you sell.
Supplier directory apps and websites can link your store to a wide range of dropshipping suppliers.
For example, the DSers app connects Shopify users with AliExpress, a global marketplace for dropshipping.
5. Choose products and set prices
Your store’s products depend on your supplier’s inventory. Since many dropshipping stores carry similar items, it’s key to select products that connect with your niche audience.
A thoughtful product selection can lead to cross-selling and upselling, where customers add more items or higher-priced products to their carts.
When choosing products from a marketplace or app, check out reviews from other sellers and examine the supplier’s track record. After narrowing down your choices, order samples to verify quality and consistency.
If you plan to work with overseas suppliers, look for products eligible for faster shipping options, like ePacket. This can help cut down on delivery times.
Setting prices for your dropshipping products
Whether it’s home décor, beauty products, or tech accessories, you need a pricing strategy that keeps your dropshipping business profitable.
For each product, establish a profit margin by factoring in your costs, including what you pay your supplier and other business expenses. Compare these prices with similar items to ensure your store remains competitive.
6. Set up your dropshipping store
There are a few components to building a dropshipping business store the right way:
Domain name
Your domain name is especially important if you’re building a long-term brand. You can use a free business name generator to simplify the process. Choose the .com domain as it’s the most recognizable extension among online audiences.
If you want your niche to be a keyword in your new domain, make sure it’s broad—like “beauty,” “jewelry,” or “fashion”—rather than specific. This way, you won’t need to change your domain name down the road.
Ecommerce platform
Shopify is the most comprehensive ecommerce platform on the market. With new features, tools, resources, and apps being added regularly, you’ll find it easy to run a business on the platform. Plus, Shopify connects with print-on-demand services, should you choose to diversify your dropshipping approach
Theme
As a Shopify user, you get access to ree themes. One of these is Motion. It offers a clean and user-friendly interface, perfect for those just starting out with store design. As your store begins to generate revenue, consider upgrading to a premium theme to further improve your store’s appearance.
Pages
You’ll also need a few key web pages to make your store look legit:
- Terms and conditions. Lay out the rules of your store and protect your business by clarifying the rights and responsibilities of both parties.
- Privacy policy. This shows your customers that you take their data seriously. Outline how your store collects, uses, and shares their personal information.
- Return or exchange policy. Help ease the worries of customers who can’t see the product in person. Assure them they can return or exchange items if they’re not satisfied.
Dropshipping app
To manage your inventory and place orders efficiently, you’ll need a reliable dropshipping app. DSers is a solid choice that allows you to explore products in a variety of popular niches. When starting out, it’s advisable to focus on 10 to 25 products, as writing descriptions for a larger inventory can become overwhelming. If you have questions or need guidance, you can turn to the DSers blog, its social media pages, or Shopify’s own support line.
AI
AI is integrated into every Shopify store to help you manage products and boost sales. You can use AI to add richer content to your product listings than what your supplier provides.
Enter a few keywords into Shopify Magic, and it will craft product descriptions that are appealing, SEO-friendly, and tailored to your audience.
Transform supplier images into branded visuals with unique backgrounds using AI-enhanced editing tools. These custom images give your product pages a distinct look.
Click the star icon in Shopify Admin to access Shopify Magic for your dropshipping business.
7. Create a brand identity
A successful dropshipping business needs a solid brand to connect with its audience. Branding helps your business become memorable and trustworthy. Here’s how to create a brand identity for your dropshipping business:
Pick a business name
Choosing the right name for your dropshipping business is the first step in building a strong brand. It’s how customers will remember you, and what they’ll search for online.
Your business name should be simple, easy to spell, and reflect what you offer. If you’re feeling stuck, use the Shopify AI business name generator for ideas. It’s a quick way to get some inspiration.
Remember, your name is your brand’s first impression. Make sure it’s a good one. Something that feels right for your business and resonates with your audience.
Design a logo
Creating a logo for your ecommerce store doesn’t need to cost a fortune. You can actually design something professional on your own.
Start by choosing a style that reflects your brand. Select fonts that are clear and easy to read. Pick colors that align with your business’s theme and appeal to your target audience.
For those without design experience, using a tool like Shopify’s free logo maker can be a practical solution. It allows you to create a professional logo that you can display across your website and other marketing materials.
Develop a unique brand voice
A brand voice is how your business speaks to its audience. It’s the tone and style that makes your brand unique.
You can create your own brand voice by thinking about what you want to convey. Are you friendly? Professional? Casual?
Consistency is important. Use the same tone across all your channels—website, social media, and emails.
Work on your positioning
Ever wonder why you always think of Nike when you need new sneakers or Starbucks when you crave coffee? That’s brand positioning in action.
Brand positioning defines what makes your brand unique. It’s how customers see you compared to others. It shapes their perception, whether you’re faster, cheaper, or better.
To get brand positioning right, you need to start by understanding your target audience. Know what they care about and what drives their decisions. Once you have that clarity, craft a message that directly addresses their needs and desires.
8. Decide on a business structure
If you’re dedicated to your project, consider creating an official business entity. Here are three business structures to consider:
Sole proprietorship
This is the simplest form of business structure, but it lacks personal liability protection. If your business is sued, your personal assets could also be at risk. The filing requirements are minimal, and you just include your business’s income on your personal tax returns. There are no additional state or federal business filings required.
Limited liability company (LLC)
Most dropshipping companies prefer forming an LLC. This structure better protects your personal assets by recognizing your business as a separate legal entity. Although the liability protection isn’t perfect, it’s stronger than that of a sole proprietorship. You’ll need to meet more filing requirements and pay both incorporation and ongoing fees.
Related: Sole proprietorship vs. LLC: A Breakdown
C corporation
Most major corporations are established as C corporations, which offer the greatest liability protection when set up correctly. However, they are more expensive to start and C corps face double taxation, where the business’s income is taxed at both the corporate level and again as it is distributed to shareholders.
You’ll want to consult with a lawyer before making any incorporation decisions. These professionals know the ins and outs of each structure and can help you choose the ideal one for your dropshipping business.
Request an EIN number
You’ll need an employer identification number (EIN) number, which the IRS requires every business to have. It works like a Social Security number, but for your business. You need it to file taxes, sign up for wholesale dropshipping accounts, open a bank account, and do other business tasks.
The good news is, getting an EIN is simple and doesn’t cost anything. You can apply for it online.
9. Market your dropshipping business
You’ve selected your products and set up your store. The next step is to market your dropshipping business.
This is a crucial component of any dropshipping business plan. For those just starting out and likely on a tight budget, it’s worth noting that effective marketing doesn’t have to be expensive. Here are some methods to explore:
Facebook and Google ads
Facebook ads tap into the impulse to buy, are scalable, and can highlight your products well. Google Shopping Ads allow targeting of long-tail keywords to attract ready-to-purchase shoppers. You can test both platforms to see which advertising method leads to better results for your business.
Influencer marketing
If you’re just starting and have a tight budget, influencer marketing is a cost-effective way to reach your audience. People often trust influencers more than traditional ads. Instead of paying influencers a fixed amount, consider a deal where they earn for every sale they bring. This method is more affordable for you and rewarding for them.
Content creation
To keep visitors coming to your store, start creating content. Launch a blog focused on your niche. Aim to both entertain and educate your audience. Other options include making YouTube videos, creating infographics, or starting a podcast to raise awareness of your brand.
Community engagement
Join groups passionate about your niche. Start discussions with potential customers on Reddit, Facebook groups, or forums. Focus on being helpful, not just selling. This approach builds trust and makes people more likely to buy from your brand.
Email marketing
Email marketing is a powerful tool for building long-lasting relationships with customers and driving repeat purchases. Consider sending personalized content, such as product recommendations, promotional offers, and informative newsletters, to increase engagement and boost sales. Shopify Inbox is available at no cost for managing these communications in your Shopify store.
SMS marketing
SMS marketing is another way to get the word out about your dropshipping business. You can send out exclusive offers or updates as well as create a sense of urgency with limited-time deals. Consider building a subscriber list so you can reach your audience directly with personalized messages.
10. Streamline your finances
Starting your own dropshipping business comes with a crucial financial management step: separating personal and business finances. Mixing these can lead to confusion, complicate accounting, risk personal assets, and attract IRS scrutiny during audits.
Creating distinct accounts for your business is the best practice. This includes:
Business checking account
This account should handle all your business transactions. All business income goes in, and expenses come out, streamlining your accounting processes.
Business credit card
Opt for a credit card dedicated to business expenses, especially useful for buying dropshipping inventory. Choosing a rewards card can earn you significant benefits from frequent supplier purchases.
Sales tax collection
You need to collect sales tax if your state requires it and you sell to someone in your state. For sales outside your state, current laws may exempt you from collection, but keep an eye on potential legal changes.
If collecting sales tax is necessary, register with your state’s department of commerce as an online retailer to understand your obligations.
Local business licenses
Many places require a business license, which might vary for home-based businesses. Research your local requirements to ensure compliance.
Incorporating outside the United States
For international merchants aiming to enter the US market, setting up a business in the United States is possible but requires understanding and fulfilling specific legal requirements. This might involve traveling to the US, partnering with someone in the country, or hiring an agency to manage the setup.
11. Test and optimize
Once you’ve invested time in your website, brand, and marketing efforts, it’s essential to analyze how well they’re performing. You may discover that some marketing efforts bring great results, while others might not be as effective. It’s also a good idea to compare your prices with competitors to see if you can be more competitive.
Use tools like Google Search Console or Google Analytics to monitor your online traffic and ensure it’s growing. If you’re using third-party tools for email marketing or social media reporting, set up automatic weekly or monthly reports to keep track of your progress. Even a quick look at this data can help you decide if a campaign is worth continuing.
Overall, the most important part of a successful online ecommerce store is to test and optimize. This ensures that your website will not fall behind best practices and keeps you ahead of your competitors.
Tips for launching a successful dropshipping business
Starting a dropshipping business takes planning and focus. You need to set things up correctly from the start. Here’s how to launch your venture successfully:
- Start small with just a few products. Create a simple storefront that you can easily update. Adjust it based on what your customers like and need.
- Sell where people are buying. Social platforms like TikTok and Instagram are key. Make sure your products are visible and accessible there.
- Expand your reach by using multiple platforms. List your products on big sites like Amazon. The more places you’re selling, the better your chances of success.
- Build strong relationships with your suppliers. Keep in regular contact so they prioritize your orders. You might even get better deals, which can help you stay ahead.
- Pay attention to customer feedback. Regularly read reviews and comments. Use what you learn to improve your products and service. Satisfied customers are more likely to return.
- Optimize your website for online selling. Use clear keywords and descriptions to improve search engine visibility. Ensure it’s mobile-friendly so customers can easily browse and buy from any device.
Dropshipping mistakes to avoid
Running a dropshipping store, like any retail business, comes with its own set of challenges. To keep your business thriving, steer clear of these common mistakes:
Skipping SEO
Your online visibility is key, whether customers find you through Google or social media. It directly affects your traffic and sales.
Ignoring SEO can limit your growth. Focus on:
- Crafting unique, valuable content for your product pages
- Speeding up your website’s load time
- Ensuring your site works smoothly on mobile devices
Shopify stores come with quick-loading, mobile-friendly designs. Use tools like Google Search Console to track your site’s performance and spot areas for improvement.
Not planning for growth
If you’re not planning for future growth, you could end up limiting your business. Build your store to handle next year’s orders, not just today’s. Avoid these roadblocks:
- Manually processing orders. Use a dropshipping app to automate this.
- Relying on a single supplier. Always have backup options to keep products available.
One advantage of dropshipping is the ability to scale up without heavy investment. Make sure you’re ready to manage more orders as they come in.
Neglecting unhappy customers
Even though dropshippers don’t handle inventory, they are the main contact for customer support. Ignoring dissatisfied customers can lead to bad reviews and high return rates.
To improve customer experience:
- Make sure your contact info is easy to find
- Write clear, honest product descriptions
- Respond to all customer questions and issues
- Process returns and refunds quickly, before involving the supplier
New AI tools and chatbots can help you respond to customers instantly, keeping them happy and your reputation strong.
Ignoring sales data
One big mistake new dropshippers make is overlooking what their sales data is showing them.
Always monitor sales closely and be ready to adjust your store for better profits. Regularly check:
- Which products are flying off the shelves and which ones are just sitting there
- Which items are giving you the best bang for your buck
- How much your ads are actually bringing in
- How consumer preferences shift over time
- Where your customers are coming from and what devices they’re using
Where to find dropshipping businesses for sale?
If you don’t want to build a Shopify dropshipping business from scratch, you can easily find a dropshipping business for sale on Flippa.
Flippa is a marketplace of websites for both people looking to invest in a fully functioning business and those who want to skip the building phase and start directly with marketing. Flippa has a great collection of online stores, including dropshipping ecommerce businesses, of varying price ranges and niches that you can choose from depending on your budget and interests.
So, if you’re looking for a dropshipping business for sale, Flippa has got you covered.
Factors to consider when buying a dropshipping store
When choosing to buy a store, take into account the cost, the design, the age of the website, how much money it has made, the popularity of the niche, penalizations, and the type of business.
Type of business
If you plan on buying a dropshipping business, you need to select the ecommerce filter on Flippa. Other options may require you to buy and hold inventory, which can cost more money over the long term, especially in unsold inventory.
Cost
Do you have a budget that covers not just the cost of a premade store but also allows for its growth? If so, you need to work out what your budget looks like. What price are you willing to pay for a business? Is there room to negotiate a better deal?
Design
Does the store look like it was designed by a professional or by a new entrepreneur who’s looking to make a quick sale? If the store design looks professional, clean, and easy to navigate, it may be worth pursuing.
Age of website
On Flippa, you can choose an ecommerce business based on its age. An older website will typically have a better chance of ranking online than a newer one.
Earnings
Sometimes you’ll see that a store made a lot of money. However, a question you need to ask is, “How much money was it making at its peak, and how much is it making now?” This will help you understand if the dropshipping business is growing or dying.
Niche popularity
You probably don’t want to be selling fidget spinners anymore, or any trending product. However, if a store is within an evergreen niche and sells trending products, it could work out well. Broad topics (beauty) tend to perform better than stores focused on a specific type of product (makeup brushes).
Penalizations
Before buying a dropshipping business, you need to double check that the website hasn’t been penalized (removed from Google’s search index). You can use a tool like Is My Website Penalized to determine if a website has been penalized by Google. If a store has been penalized, it may be harder for you to rank in search engines. You also want to ask, “Were any of the business’s Facebook ads banned?”
Getting started with dropshipping
Whether you’re new or seasoned in business, dropshipping with Shopify is your low-risk gateway to online sales. Sign up, choose your plan, add DSers, and select your niche products. Customize, import, and sell—your ecommerce journey begins now.
How to start dropshipping FAQ
What are the benefits of starting a dropshipping business?
- Low risk
- Easy to start
- Wide selection of items to sell
- Flexible location
- Highly scalable
How do I start a dropshipping business?
- Choose a dropshipping business idea.
- Research your competitors.
- Find a reliable supplier.
- Establish your online store.
- Market your dropshipping business.
- Assess and optimize your store.
Do I need to incorporate a dropshipping business?
Incorporating a dropshipping business has clear benefits. It separates your personal and business finances, protecting your money if the business runs into debt. Additionally, incorporating gets you an employer identification number (EIN), which makes it easier to file and pay sales tax. So if you’re planning for long-term success, think about incorporating. It’s a good way to manage your finances and taxes.
Is dropshipping really profitable?
Dropshipping can be a highly lucrative business, as it allows you to avoid the substantial overhead associated with traditional wholesaling. You bypass the costs of bulk purchases, storage, and shipping logistics—and can earn a good profit margin with the right suppliers.
Many dropshippers earn up to $50,000 per year as a side hustle. To hit such figures, you’ll need to pick the right suppliers and build a strong brand.
Keep in mind that dropshipping can be highly competitive. Because the barrier to entry is low, you may encounter numerous brands offering similar products at competitive prices.
Is dropshipping worth it?
The value of dropshipping depends on the time and money you invest in it. If you dedicate time to growing your online business, you are more likely to reap the rewards. Setting up a dropshipping business involves multiple steps: You need to set up a store, import products, decide on your pricing strategy, and start selling. All of this requires effort and commitment for your business to be successful.