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How to start dropshipping: 7 key steps for beginners (2024)

Reading Time: 10 minutes

There’s a common misconception that dropshipping is as simple as setting up a website and watching the profits roll in. While that dream sounds wonderful and you are probably already wondering how to start dropshipping, in reality, it’s not as easy as it sounds. 

The truth is that while dropshipping does allow entrepreneurs to sell products without managing the inventory themselves, it’s a business like any other. This means being successful requires thorough market research, targeted marketing, and reliable relationships with suppliers.

Online shopping is expected to continue to grow in popularity, so there’s lots of room for new businesses to do well if they can meet buyer needs and keep up with trends. If you are considering venturing into a business like this and wondering how to start dropshipping, this guide will help you understand where to begin.

Why start a dropshipping business?

Dropshipping has lots of perks compared to regular stores. One of the main benefits of starting a dropshipping business is that you don’t have to handle products or run a warehouse yourself. This means you can run your business from any place with internet access. 

Also, since you won’t have to worry about storing the inventory, you’ll need significantly less seed money, which means less risk. The lower cost compared to a traditional brick-and-mortar store allows for safer experimenting while trying out different product lines and marketing plans, until you find what really works.

Here’s a look at a few other benefits to consider:

  • You can set up shop in one day
  • As you grow, you can get better deals from suppliers
  • You don’t lose money on goods that don’t sell

How much does it cost to start dropshipping?

One of the best things about dropshipping is the low barrier to entry. You can start with as little as a few hundred dollars. This makes it a great choice if you’re interested in entrepreneurship but don’t have lots of cash on hand. The low start-up cost also minimizes your risk, letting you test your business idea without spending too much.

Here are some typical costs:

  • Setting up your business: $50 to $400, based on where you live and how you set up your company
  • Website costs: For example, Shopify’s Basic plan is $29 a month
  • Domain name: $10 to $50 a year
  • Marketing: This is key for getting buyers, but costs can vary depending on the marketing campaigns you’d like to run, such as content marketing, email marketing, or influencer advertising
  • Product sourcing and shipping: It can start at as little as $20 per month, but most likely will be more, as these costs can skyrocket depending on the products offered and the features you’ll use
  • Transaction fees: Typically, you’ll pay 0.05% – 5% per transaction, depending on the payment processor you choose

Depending on what your final setup will be, you can often make 15% to 45% profit on each sale. 

How to start a dropshipping business in 7 key steps

Starting a dropshipping business can be a lucrative way to make money online. In this guide, we’ll walk you through seven key steps to setting that up. By following this, you’ll increase your chance of starting a successful dropshipping business and streamlining your process to start generating revenue.

1. Select your niche

In dropshipping, a niche refers to a specialized corner of the market that focuses on a particular kind of product or service. So, instead of trying to sell everything to everyone, you target a specific customer group with specific interests and needs.

How do you decide, what’s your niche? You can start by thinking about your own interests, but we advise you to also do extensive market research, competitor analysis, as well as consider the profitability. You can:

  • Use tools like Google Trends and Facebook Audience Insights to research what people like
  • Use apps like JungleScout, Helium 10, or AMZScout to see which products sell well on popular sites
  • Keep an eye on trends to stay current

Ultimately, try to focus on a niche that offers a large selection of items that have a demand in the current market, and start selling it to your customers.

2. Find a reliable supplier

Working with reliable suppliers is key to your success in dropshipping. They handle your stock, process orders, and ship products directly to your buyers. Choosing the right supplier affects not only your profits, but also your buyers’ satisfaction. A good supplier helps maintain consistent product quality and delivery times. Here are some things to consider as you’re looking for reliable suppliers:

  • You can work with one supplier or use a list of many suppliers
  • Apps like DSers can help you connect with suppliers on sites like AliExpress
  • Check a supplier’s history and order samples before you commit
  • Look for suppliers who offer fast shipping options
  • Find reviews or past customers to understand how the supplier works

Once you’ve found a reliable supplier, periodically test them. Place an order from your own store to check if your supplier is sending the same quality you expected.

Setting the right prices is also crucial to ensure your business remains profitable. When determining your prices, consider factors such as supplier costs, shipping fees, and competitor pricing. Balancing these elements will help you set competitive prices that attract customers while ensuring your dropshipping business can sustain and grow. 

3. Set up your store

When setting up your dropshipping store, choosing the right ecommerce platform is crucial. Popular platforms like Shopify and WooCommerce offer different features based on ease of use, scalability, and integration with dropshipping tools.

Shopify is known for its user-friendly interface, making it a great choice for beginners. It integrates with various dropshipping apps, which streamline product sourcing and order fulfillment. It also handles hosting, security, and updates as a fully managed service, that takes the pressure off you.

WooCommerce, a WordPress plugin, is extremely customizable and is ideal for those who want more control over their store’s design and functionality. However, that comes with a price — things like security and hosting will fully be your own responsibility. While it may require a bit more technical knowledge, WooCommerce integrates well with dropshipping tools and is a great option if you’re familiar with WordPress

As you’re evaluating your different options:

  • Choose a platform that works well with payment systems and has good design options
  • Add apps like DSers, Spocket, and Printful to help you automate tasks and connect with suppliers
  • Use AI tools to write good product descriptions and improve photos
  • Look into options like Shopify Collective to work with brands in the US, which allows you to connect with other Shopify stores and sell each other’s products

Once you’ve chosen your platform, setting up your store involves several steps. First, set up payment gateways like PayPal, Stripe, or a credit card processor. Next, choose a website theme that reflects your brand and provides a good user experience. Finally, populate your store with products, set up categories, and configure your shipping options. Use clear, high-quality images and detailed product descriptions to attract customers.

how to start dropshipping: start your business with Shopify
Image via Shopify

4. Create a strong brand identity

Having a clear brand identity helps you stand out and build buyer loyalty. Creating a brand includes picking a name, designing a logo, and creating a look that appeals to your target audience. It’s not just about how things look, though — it’s about creating a steady experience at every touchpoint while engaging with potential buyers online.

Create your dropshipping business name

Start by choosing a memorable and meaningful name that resonates with your audience and reflects your business. Your name should be easy to spell and remember. 

Design a logo

Once you have a name, design a logo that’s simple, versatile, and memorable. If you don’t have experience in graphic design, you can use tools like Adobe logo maker or hire a professional to do that for you. 

Decide on a brand style

Next, decide on a brand style. This will help create brand recognition by always using the same style. Select a color palette and typography. You can even specify how your logo should be used in various design items (labels, packaging, digital ads, etc.). Use these elements consistently across all your marketing materials, from your website to social media profiles.

Some important tips to remember:

  • Keep your brand style the same across your website and social media
  • Develop your own unique tone of voice
  • Create rules (a brand book or a style guide) to keep your brand consistent as you grow
how to start dropshipping: make a logo with Free logo maker by Adobe
Image via Adobe

5. Organize your finances

Managing your money well is important for long-term success. Not only do you need revenue, you need to understand how to handle money appropriately. This includes understanding the financial accounts you’ll need and taxes.

Setting up your business

If you’re looking to start a dropshipping business in the United States, start by creating a business plan and setting up your business legally. Next, obtain an Employer Identification Number (EIN) from the IRS. This unique identifier is necessary for tax purposes and helps establish your business as a separate legal entity. It’s also required for opening a business bank account and hiring employees in the future. For dropshipping businesses in other countries, check your federal and local regulations to ensure you’ve properly set everything up.

Open business accounts

Open a separate bank account for your business to keep your personal and business finances separate. Separating your accounts makes accounting and tax preparation much easier and gives you a clearer picture of your business’s financial health. Check the specific licenses and permits required for your business in your area. Compliance with local, state, and federal regulations is essential to avoid legal issues.

Taxes

Keep in mind that sales tax regulations vary by location, so it’s important to know the rules that apply to your customers’ locations. Tools like Shopify Tax can help manage sales tax collection, ensuring you charge the correct amount and file taxes appropriately. These tools automate the process, reducing the risk of errors and saving you time. It’s helpful to calculate tax due and save it throughout the year to help reduce the challenge of paying it all at once, failing to pay it at all, or missing the payment deadline.

6. Market your dropshipping business

Good marketing is your way to reaching and engaging potential buyers. There is a variety of marketing methods you can use to spread the word about your business. 

First you’ll need to understand where your audience spends time online and target them in those channels. It’s equally important to track your marketing efforts to understand what’s working and what isn’t. This ensures you’re putting your marketing budget where it’s best spent.

Some of the most popular marketing methods include:

  • Pay-per-click (PPC): You can use ads on social media platforms to target specific demographics and interests or try Google Ads so your products appear in search results. This is called PPC advertising and it can drive a lot of highly targeted traffic to your store.
how to start dropshipping: market your dropshipping business with Google Ads
Image via Google Ads
  • Influencers: Consider working with influencers to promote your products. Influencers have dedicated followings and can help you reach a very specific audience. Choose influencers whose audience aligns with your target market and whose values match your brand. Also, make sure they always disclose your collaboration to their audience, to keep things transparent.
  • Email marketing: Use email marketing to stay in touch with buyers and nurture relationships. Build an email list by offering incentives like discounts, free resources, or exclusive content. Send regular newsletters with updates, promotions, and personalized recommendations. Automated email campaigns, such as welcome emails and abandoned cart reminders, can also boost sales and customer engagement, while requiring minimal effort from you.

To track your marketing efforts, use tools like Google Analytics, Facebook Insights, and email marketing analytics as they monitor key metrics such as traffic, conversions, and engagement rates.

7. Keep analyzing and optimizing

For long-term success with your dropshipping business, it’s important to be constantly looking for ways to make improvements. Closely monitor sales and analytics to find opportunities for growth and enhancement. Remember that the fast-paced nature of online selling requires a proactive approach to stay ahead. 

Be open to buyer feedback and adjust your strategies as needed, keeping in mind that what works today might not work tomorrow. Here are a few tips to consider:

  • Keep track of your best-selling products, how much it costs to get new buyers, and how many visitors buy from you
  • Use analytics tools to understand how buyers behave on your site
  • Improve your website’s search engine ranking with tools like Google Search Console
  • Make sure your store can handle more orders as you grow

Continuously analyzing and optimizing your business is essential for long-term success in dropshipping. By tracking key metrics, using analytics tools, improving your SEO, ensuring scalability, providing excellent customer support, and remaining adaptable, you can drive growth and stay competitive in the dynamic world of online selling.

Wrap up

The advantages of dropshipping — low startup costs, the flexibility to operate from anywhere, and the ability to test various product lines with minimal risk — make dropshipping an attractive business model. By following the seven key steps outlined in this guide, you can navigate the complexities of how to get into dropshipping and set your business up for success.

Take the first step towards building your successful dropshipping business with Omnisend, the all-in-one ecommerce marketing automation platform. With Omnisend, you can effortlessly manage your email and SMS campaigns, streamline your marketing efforts, and drive sales growth.

Automate your dropshipping marketing efforts with Omnisend’s powerful automation tools

FAQs

How to start dropshipping for beginners?

Start by choosing a niche, finding good suppliers, setting up an online store, and marketing your products well. Research your target market fully and start with a small group of products. Learn about ecommerce platforms and choose one that fits your needs. Don’t forget to set up your business legally and create a plan for buyer service.

Can you start dropshipping with no money?

While you may be wondering how to start dropshipping for free, the reality is that you do usually need some money to start. That said, you can begin with very little by using free trials and low-cost tools. Look for ecommerce platforms offering free trials, use social media for free marketing, and start with a small inventory. However, be ready to invest some money as you grow to cover costs like domain registration and marketing.

Is dropshipping worth it?

Dropshipping can make money if you choose the right products, use well-thought-out strategies, and market well. It requires low startup costs and has a lot of flexibility, but success takes hard work and commitment. Think about things like market saturation, competition, and your ability to provide value to buyers when you’re deciding if it’s right for you.

How profitable is dropshipping?

You can often make between 15% and 45% profit on each sale, depending on what you sell and how you price your products. How much you make varies widely based on things like niche selection, supplier costs, marketing expenses, and competition. Some dropshippers make big profits, while others struggle to break even. Success often comes from improving operations and building a strong brand over time.

Is dropshipping legal?

Yes, it is legal when done ethically and following relevant laws and rules. This includes properly registering your business, paying taxes, following buyer protection laws, and making sure you have the right to sell the products you’re offering. It’s important to be clear with buyers about shipping times and where products come from. It’s a good idea to consult a legal professional to make sure you’re following all applicable laws in your area.

Bernard Meyer
Article by

Bernard is the Sr. Director of Communications & Creative at Omnisend, with a passion for good research, helping ecommerce businesses with their marketing automation needs, and beating absolutely everyone in Mario Kart 64.