What Is Dropshipping? And The Best Way To Start It

Have you thought of starting your own business but don’t know where to start? If that’s the case, the drop shipping business will be a great and expedient choice for you. You will be able to offer products to customers, set your prices, and market your brand. You don’t have to pay for stocks until it has been sold to a consumer.

You can also read about the top dropshipping companies to start your dropshipping journey.

In this blog, you’ll know about what a drop shipping business is and the steps to start a dropshipping business.

What Is Dropshipping?

Dropshipping is a business approach that allows you to operate your store without ever storing goods. Once you’ve made a sale, your supplier will deliver your products directly to your customer’s door from their warehouse. You won’t have to bother about storing, packaging, or delivering your products.

Because it requires less working capital, dropshipping is beneficial for businesses. You are not required to create a physical store, hire workers, keep the lights on, pay maintenance, or stock merchandise. Instead, you set up an online store and buy in bulk from suppliers that already have merchandise and warehouse space.

Simply put, these three steps:

• A customer orders at the retail price stated on your online store.
• You pay a wholesale price to the supplier.
• The goods are shipped straight to your consumer under your brand name by the supplier.

This implies you only need to set up a dropshipping site and list products from vendors. The dropshipper will handle everything, including design (if it’s a print-on-demand product), branding tags and labels, and order fulfillment.

Reason To Start Dropshipping Business

1)Minimal Startup And Maintenance Expenses

Again, the dropshipping business concept is simple to implement. To begin, you will not be investing much of your financial resources. Furthermore, because you are drop shipping, you are not manufacturing anything. You are not required to pay for packaging, storage, or warehousing.

A low capital indicates a higher likelihood of a profitable enterprise.

2)Location independence

You can begin selling instantly after creating your store on a platform. You can fulfill orders if you have an Internet connection and a laptop.

Furthermore, the products do not have to be from the same country as you. You’ll be fine as long as you have trusted suppliers.

3)Product Adaptability

Dropshipping allows you to sell anything in your internet store. And, if the markets or demand shifts, you can quickly adjust what you’re selling.

A successful dropshipping business can adapt to changing times!

4)Time Involvement Is Minimal

It will take some time to set up an eCommerce platform for the first time.

However, after you’ve mastered your method, you can sit back and watch your profit margins progressively increase.

Most of your time will be spent dealing with customers who have logistical issues (which you must resolve with your suppliers). That is why you will need to thoroughly check your vendors.

Key stakeholders in the dropshipping industry

1. Dropshippers – individuals or businesses that run a dropshipping operation by sourcing products from a supplier and selling them to customers.
2. Suppliers – companies or manufacturers that provide the products that dropshippers sell.
3. Customers – the end consumers who purchase products from dropshippers.
4. Payment processors – companies that facilitate the financial transactions between dropshippers, suppliers, and customers.
5. Shipping providers – companies that handle the logistics of delivering products from suppliers to customers.
6. E-commerce platforms – companies that provide the software and infrastructure for dropshippers to run their business, such as Shopify, Amazon, and Alibaba.
7. Marketplaces – online platforms where dropshippers can sell their products, such as Amazon, eBay, and Etsy.
8. Digital marketing agencies – companies that help dropshippers with digital marketing strategies, such as SEO, PPC, and social media advertising.

Advantages and disadvantages of Dropshipping

The advantages of dropshipping are:

1. Low startup costs – As dropshippers do not need to pre-purchase inventory, the costs of starting a business are much lower than traditional retail models.
2. Flexibility – Dropshippers can sell a wide range of products without having to store them, allowing for easy product diversification physically.
3. Scalability – As dropshipping businesses are not limited by the amount of inventory they can hold, they can easily scale their operations.
4. Location independence – As dropshipping businesses can be run online, entrepreneurs can operate from anywhere with internet access.

Disadvantages of dropshipping are:

1. Low-profit margins – Due to the added costs of sourcing products and shipping, dropshippers may have lower profit margins than traditional retailers.
2. Quality control issues – Dropshippers may have limited control over the quality of the products they sell, as they are not directly involved in the manufacturing process.
3. Dependence on suppliers – Dropshippers rely on the reliability and consistency of their suppliers, which can be a risk if suppliers do not deliver products on time or at all.
4. Limited control over branding – Dropshippers may have limited control over the branding of the products they sell, as they are not involved in the manufacturing process.
5. Competition – With the ease of entry, the market could be over-saturated with dropshippers selling the same or similar products, making it harder to stand out and be profitable.

How To Start A Dropshipping Business

Here are six steps to starting a dropshipping business:

1)Choosing A Dropshipping Business Idea

A business concept explains what you are offering and to whom you are delivering it. Because dropshipping offers so many alternatives, you should begin with a small number of products that you believe will sell well to a specific audience.

As you consider dropshipping company ideas and items, take into account that focusing on specialized products can improve marketing performance, help your website rank high in topic-specific search results, and boost eventual buying intent. Also, consider how your business concept and related offerings will help your buyers address challenges.

For example, If you are offering a coffee machine, you can add coffee mugs, travel mugs, and coffee beans if you identify the correct supplier!

2)Products To Look For

A business plan does not ensure that you will be able to purchase the products required to meet the needs of your target market. Take the time to explore products before creating a website. To discover the greatest wholesale pricing for a product, look for multiple distributors who sell the same product.

The following are some of the most popular marketplaces:

• AliExpresss
• SaleHoo 
• Megagoods 
• Doba

Look for print-on-demand clothing, household products, or books as well. Print-on-demand garment firms print a creative graphic onto a variety of clothing brands and styles, such as T-shirts, socks, and jackets.

Choose a product that fascinates you, has a large profit margin, and appears good in the website images. Many of these suppliers also provide popular item information, allowing you to select items that are more likely to sell because there is already a market for them.

3)Choose Suppliers

Once you’ve identified the things you wish to sell, it’s important to select the supplier who will transport the products to your clients. When choosing a supplier, consider the following factors:

Quality

Select a supplier that provides the level of quality that you want your firm to portray.

Profitability

The product should allow you to generate a respectable profit. In your calculations, including shipping and transaction charges. Most dropshippers aim for profit margins of 15% to 20%. Of course, it’s excellent if you can raise your profit margins.

Reliability

You want to work with a supplier who supplies products on time and with affordable shipping costs and times. Many suppliers are located overseas, and you must decide whether you want your customers to wait for products. 

You also need a supplier who keeps a product in stock because it is inconvenient for both you and your customer to have an order that cannot be filled. Ordering a few things from the source and noting the procedure is the best approach to test for dependability.

Return Policy

When possible, look for a supplier who has a return policy. Many don’t so double-check before making any final selections. Based on what the supplier gives, you must decide how you will define your return policy.

The majority of dropshippers choose online marketplaces since they have a larger assortment of products from trusted vendors. If you have a specific product in mind, you can find a direct source supplier. This involves some additional work to determine who is selling the goods for the producer and frequently requires a minimum quantity of monthly sales to be qualified.

4)Create An Online Store

You’ll need to design an e-commerce website to sell your items. An e-commerce site is a website that allows you to visually present the products for sale while also offering the shopping carts required to complete the purchases.

You can also read the top e-commerce website builders to start building your e-commerce store.

Building a store can be challenging for a beginner. This is due to the numerous moving parts.

To create a website, you will require the following items:

• Content management systems include WordPress, Shopify, and Squarespace (CMS).
• Web hosting with a domain name (if using WordPress)
• Integration with your preferred dropshippers
• An integrated payment gateway for accepting online payments.

You can also read the WordPress vs Shopify comparison.

You should also consider selling your things on other channels, such as Etsy, Amazon, or even social media (i.e., Facebook or Instagram). Multi-channel selling increases your company’s exposure and sales, so it’s generally recommended.

5)Register Your Company

You must establish the corporation as a separate entity from your assets. This entails coming up with a name (typically the domain name you choose) and registering an LLC or corporation with your secretary of state.

After properly submitting your online application, the IRS will issue you a tax identification number (TIN). Open a bank account that is linked to your payment gateway using this TIN. This bank account will receive all deposits and be used to pay the company’s expenses, such as web hosting and maintenance. When a product is ordered, it is also the account that pays the supplier.

The state tax agency should also issue you a sales tax ID, often known as a reseller’s permit. The majority of states require you to pay sales tax on items sold. You may also be required to pay sales taxes in the states where your products are sold.

6)Promote Your Company

You can’t just make a website and expect thousands of individuals to find it. You must market your new business. Since it is online, you will most likely go far beyond what you would normally do with other local businesses in terms of word-of-mouth promotion.

Join relevant social media communities for your business and begin participating actively. Don’t just try to sell; truly assist individuals with any inquiries they may have. To be viewed as a resource, become an expert in your community. This will help people find your company. Establish dedicated business accounts on Facebook, Instagram, TikTok, and other social media platforms. Regularly, post about new stuff, sales, or business tips and tricks.

Important parts of digital marketing are:

• Social media marketing
• Search engine marketing
• Email marketing
• Content marketing

In addition to your social media efforts, you may want to consider investing in physical advertisements and sales. Small funds can be used to run Google ads and Facebook Ads that target certain demographics. Consider starting an ad campaign with a budget to generate visitors to your e-commerce site. You can also use search engine optimization (SEO) strategies to help consumers find you by writing a blog. Many new e-commerce shops find that doing a little bit of each of these marketing strategies is the key to getting enough views on their store to convert to buyers.

Capital needed to launch a dropshipping venture

1. Website creation and hosting

Using a website building platform such as Shopify or Bigcommerce can cost around 2,000 INR/month. Some website builders such as Wix or Weebly offer free plans but with limitations.

2. Product sourcing

Tools and software to research and find products to sell, such as Oberlo, SaleHoo, or Alibaba can cost between 0 INR to 3,000 INR/month.

3. Marketing

The cost of promoting your business and driving traffic to your website can vary greatly depending on the marketing strategies you choose. Social media advertising can cost anywhere from a few hundred INR to several thousand INR per month. Google Adwords can cost anywhere from a few INR to several hundred INR per click. Influencer marketing can cost anywhere from a few thousand INR to several lakh INR per campaign.

4. Inventory management and order fulfillment

Software to manage your inventory and orders such as Ordoro, or Shipstation can cost between 1,500 INR to 7,000 INR/per month

5. Legal and accounting

Legal and accounting services can vary greatly depending on the complexity of your business and the services you require. A basic service can cost between 35,000 INR to 70,000 INR, while more complex services can cost several lakh INR.

How does dropshipping work as a business model?

1. The retailer partners with one or more suppliers and lists the supplier’s products for sale on their website.
2. A customer visits the retailer’s website and makes a purchase.
3. The retailer receives the order and payment from the customer.
4. The retailer places an order with the supplier for the purchased product.
5. The supplier ships the product directly to the customer.
6. The retailer earns a profit by charging the customer a higher price for the product than what they paid the supplier.
7. The supplier manages the inventory, packaging, and shipping of the products, the retailer focuses on marketing and customer service.
8. The retailer will have to manage the returns, refunds, and any customer complaints.

This business model allows retailers to offer a wide variety of products without having to invest in large amounts of inventory upfront and also allows the supplier to reach a larger market without having to invest in their own retail infrastructure.

Final thoughts about dropshipping

So, now that you know everything there is to know about dropshipping and how to start your own dropshipping business, what is holding you back? If you believe you have a business passion and entrepreneurial drive, launching a dropshipping business may be the simplest way to put it to the test.

If you find this article interesting like it and share it with your friends who might find this article helpful. And don’t forget to subscribe and follow Ecom News for getting more details on ecommerce.

Dropshipping FAQ