Dropshipping 101 is a step by step guide for solopreneurs and digital nomads wanting a simple (notice I said simple, not easy) route into starting and growing their own ecommerce business.
You’d be forgiven for thinking that dropshipping is an oversaturated, overtly scammy, ruined by marketers business model!
Unfortunately any business model which has almost zero barrier to entry is an opportunists dream, and so it tends to be pounced upon and rung dry by folks out to make a quick buck rather than build a long term reputable business.
The good news is, if you’re in the latter camp, you can still build a very profitable ecommerce business using dropshipping.
At the very least, you can use the dropshipping model to quickly test products and markets before investing in private label products.
You may still be wondering, what exactly IS dropshipping, how does it work, and is it the right choice for you?
Fear not! I’ve got all the answers in this post, where I’ll walk you through an explanation of how dropshipping works in 2022, the benefits and drawbacks of starting a dropshipping business, and how to start one of your very own.
Here’s your full step by step dropshipping 101 guide to start and grow a profitable dropshipping business.
Say you need to buy a new jacket. Who’s involved in that transaction, from the creation of the jacket to the time it arrives on your doorstep?
A few decades ago, it would’ve been relatively simple: clothing retailers purchased items from manufacturers overseas to sell en masse.
You’d head to your local mall or department store to browse the racks and bring home your purchase.
Enter the internet age, and most of that shopping still looked the same, except the order took place online. Stores still purchased items from the supplier and resold them to the customer.
So how does dropshipping fit into the picture?
Dropshipping is a relatively new order fulfillment process where the seller doesn’t store the items before reselling them to the customer.
Instead, the dropshipper acts as a middleman. This helpful diagram of dropshipping vs. classic order fulfillment from Ecommerce Platforms illustrates what I mean:
(Image source: Ecommerce Platforms)
Step-by-step, the dropshipping business model looks something like this:
- The customer orders an item from the dropshipper’s online store.
- Then, the dropshipper sends the money (keeping a commission for themselves, of course) to the third-party supplier.
- After receiving payment, the third party supplier then sends the item directly to the customer.
You might be asking: is it legal to simply act as a middleman without taking a physical part in the supply chain?
While it may seem confusing (or even too good to be true), dropshipping is completely legal. It’s just another order fulfillment method.
Dropshippers facilitate transactions, acting as a matchmaker between consumers and manufacturers.
That way, the manufacturer doesn’t have to worry about the front-end aspects of the business, like running an online store, marketing, or dealing with customer support issues.
And the customer doesn’t have to search out manufacturers themselves.
The short answer is yes, starting a dropshipping business can be an extremely lucrative strategy.
If you look for them, there are many success stories of beginner dropshippers quitting their day jobs to run six-figure ecommerce businesses.
Much like any business venture, running a dropshipping business has the potential to earn you lots of money if you have the drive, persistence, and business savvy to make it work for you.
But that isn’t to say it’s a get-rich-quick scenario. And let’s be honest—if I told you it was, wouldn’t that be a reason to be suspicious?
Instead, it’s best to think of dropshipping as a way to outsource the expensive and inconvenient aspects of selling a product.
But to be successful, you still need to be hands-on and have a good head for online business on your shoulders.
Dropshipping has many challenges and downsides, and it’s not going to make everyone rich.
That’s why there’s such a wide gulf between a successful dropshipping business and an average one.
According to BlueCart, the average commission on each dropshipping sale is between 20% and 30%, which—depending on many factors like niche, merchandise, and market prices—can come out to somewhere between $1,000 and $5,000 in profit per month.
This is a respectable side hustle, but nowhere near the $100,000+ yearly that top-performing dropshipping businesses are earning.
The difference is often in your ability to choose the right niche, make hard decisions about which products you’ll sell, and market your products successfully.
While dropshipping offers a lot of flexibility and low costs, it does come with a few disadvantages that you should be aware of before committing, such as:
Dropshipping comes with very low overheads, but in this case, the advantage can also be a disadvantage.
Because the manufacturer/supplier is taking on most of the expense of creating and shipping the product, they get to keep most of the revenue.
With the dropshipping business model, you’ll need to sell a lot of products to see high profits, which, depending on the demand, may be difficult.
Because the barrier to entry is so low, there are many aspiring dropshippers who set up an online store with rock-bottom prices in an attempt to sell as many units as possible.
These stores will have bare-bones websites and even worse customer service, but consumers looking for the best online deals will still compare their low prices to yours.
So while creating the best customer experience possible will help you set yourself apart from the dropshippers out to make a quick buck, it can still be difficult to scale because of the limitations of pricing in a competitive niche.
Acting as the go-between for the customer and the supplier can come with many benefits, namely that you don’t have to cover the cost of manufacturing and shipping.
But being the middleman also comes with downsides.
Since you don’t have direct control over production, you have no power to fix supplier-end problems (like product quality or shipping speed).
But since you’re the customer-facing person, you’ll be blamed for any issues the customer experiences.
In the case of problems or hold-ups along the supply chain, you’ll be stuck fielding complaints from customers while having very little ability to resolve the situation on the supplier’s end.
It’s hard to build a brand as the middleman.
The product you’re selling will be customized and branded by the manufacturer, which means that if the customer likes the product, they’ll remember the supplier’s brand, not yours.
Without branded and customized products, differentiating yourself can be difficult.
It all hangs on how exceptional you make the customer experience so that they’ll want to return to your store again and again.
For the right person, though, dropshipping can be a great business idea. If the following traits or situations apply to you, starting a dropshipping business could be the perfect fit:
Dropshipping is almost free to get started, which is why it’s a very popular choice for beginner entrepreneurs.
Since you don’t have to worry about purchasing inventory or managing a manufacturing chain, your costs are quite low.
All you’ll need to cover is the cost of running your online store and marketing your products to consumers.
To start a ecommerce dropship business in 2022, you’ll just need enough money for:
- A domain name (est. $15 annually)
- An online store/ecommerce platform (est. $30/month)
- An advertising budget (varies based on your goals, but $500 is a great starting point)
- Incorporation and business license fees (vary based on where you live)
You may also want to invest in testing the products before you buy them.
Set aside a bit of cash to order the product straight from the manufacturer so that you can determine for yourself if it’s up to your quality standards; otherwise, you risk unhappy customers.
Dropshipping is a great option for entrepreneurs with limited space, since you won’t have any storage requirements.
You aren’t managing manufacturing, warehouse logistics, or even physically shipping items.
Every aspect of your business can be done straight from your computer, which makes dropshipping perfect for entrepreneurs who want the flexibility to run their businesses from home (or from anywhere in the world).
And due to the nature of the dropshipping business model, your country of origin is basically irrelevant.
You don’t have to worry about physically shipping any products, which means you can sell internationally, to anywhere, from anywhere.
Because it comes with practically no overhead or expenses on the front end, dropshipping can be a great option for those who want to try selling different products without investing too much in building a manufacturing chain from scratch.
If you’re looking for the right niche that you’ll be passionate about long-term, dropshipping may be an optimal short-term solution.
(Image source: Bringg)
- Choose a niche and source your ideal dropshipping products
- Find a reputable dropshipping supplier
- Build your dropshipping ecommerce website
- Promote your dropshipping products across the web
Can’t wait to get started dropshipping? Sign up here for a 14 day free trial of Shopify.Try Shopify
The beauty of dropshipping is that it’s an online business a beginner can start in just a few steps.
You don’t need to invest in a complicated inventory management system or set up a manufacturing line. Simply:
- Find the right product(s) to sell,
- Find a supplier and decide on a fulfillment process,
- Set up your website and online store, and
- Start promoting your products like crazy!
Let’s walk through each step in more detail, shall we?
First, you need to choose your niche carefully.
Don’t make the mistake of thinking you can pick anything you want to sell and you’ll start raking in the dough; that’s just not true.
The product fulfillment industry is highly competitive, and you’ll almost certainly be entering a niche with other bigger, more experienced ecommerce businesses as your competition.
So the best strategy is to choose a niche that you know well and are passionate about.
Is there a category of products that you yourself buy often?
Or do you have expert knowledge about an industry, or perhaps you’ve done a lot of research about an industry before and know some of the buyer trends and market fluctuations?
Anything that you already know about will help you better compete for customers and deal with dropshipping suppliers when you enter the niche as a seller.
Some of the best categories that do well for beginner dropshippers include:
- Fashion and beauty
- Outdoor gear
- Pet items
But you may want to narrow down even more.
Specific dropshipping products within these niches, for example, monogrammed iPhone cases or superhero-themed dog sweaters, are usually the easiest to sell, since you’ll simply need to raise awareness about the product to the right people and they’ll be clamoring to buy.
And since specific niche products typically have a smaller audience, there will be less competition.
Use tools like Google Trends, Kickstarter, and Wish to find products that are currently trending, and narrow in on the ones that align with your experience or interests.
Don’t choose a product that you have no emotional attachment to; you’ll sell with more passion when it’s a product you care about, and customers can often tell the difference.
Once you’ve decided on a product, it’s time to source it.
There are two approaches you can use to source dropshipping products for your ecommerce store.
This option is usually best for beginners who want a simple backend connection to their Shopify store.
Nowadays, there’s a wide variety of dropshipping suppliers around the world to choose from.
Do your research to find the best dropshipping supplier for you that provides quality products and the best shipping times.
Next, you’ll need to set up your customer-facing dropshipping store.
Some dropshippers choose to run their business through Amazon or eBay, but if you want the freedom to scale and customize your brand, you will want to set up your own ecommerce store.
Plus Shopify also has a 14-day free trial to let you try your hand at creating your own ecommerce website with no credit card required.
You’ll need to enter your shop name, add products (including the title, description, price, and media), and set your shipping settings.
An app like Oberlo will make this whole procedure very easy. You can search for dropshipping products and suppliers via their app and with one click add the products, descriptions and images to your online store.
Shopify’s pricing is very reasonable; after the free trial, pricing tiers range from $29/mo for Basic to $299/mo for Advanced (which includes the price of website hosting).
However, you won’t need more than the basic package to get started and for a long time into your dropshipping business.Try Shopify
After you’ve sourced a product, set up a supplier, and built a website, you’re ready to start promoting your dropshipping business.
Start by making your website easy to find (and an attractive place for visitors to stay once they get there) by:
- Using tools like Google Keyword Planner or Ahrefs to find popular keywords to use in your product descriptions
- Following SEO best practices to maximize organic traffic to your site
- Investing in professional photography for your products
- Writing quality website copy that gives a clear message about your brand values and mission
And if you want to go a step further, start using content marketing tactics to engage and attract potential customers.
One method is to use a popup as a lead generation tool to entice visitors to sign up for your email marketing newsletter in exchange for a discount.
(Image source: Pact)
Then, start leveraging online communities to your benefit.
Build a social media strategy to both attract an audience and increase traffic to your website.
Post regularly—using tools like Later, Hootsuite, or Buffer—with engaging, entertaining content that matches your brand values and voice.
Remember the 80/20 rule: 80% of your content should be informative or entertaining, while directly promotional content should be limited to 20% of your posts.
While the free side of social media can do a lot to increase your traffic and brand recognition, it’s hard to generate enough sales without also leveraging paid advertising.
All the major social networks, including Facebook, Instagram, Twitter, and TikTok, have paid advertising options that you can use to boost your content directly to your target audience’s newsfeeds.
And don’t forget the power of Google ads, which you can use to display your product when consumers search for target keywords.
While dropshipping can be extremely lucrative and a great ecommerce business for new entrepreneurs, there are many ways to trip yourself up.
Be wary of making these common dropshipping mistakes when starting your online store:
To grow a successful dropshipping business, you’ll need to pick the right dropshipping products to sell.
Research your target audience, pick a niche and product that fits your experience and taste, and find out how much competition is out there before getting started.
Building a relationship with a great dropshipping supplier will make or break your dropshipping store.
If the supplier offers low quality products, with long shipping times and high shipping costs, you’re going to be struggling to offer excellent customer service no matter what you do!
Spend time searching for suppliers who have above average customer satisfaction scores and reviews.
Remember you’re a customer too!
Your drop shipping business model relies on being able to provide quality products, at reasonable prices and shipped within acceptable time frames.
Don’t be afraid to kiss a few frogs until you find the ideal dropshipping supplier.
While paid ads are a powerful tool in your arsenal, you shouldn’t start without knowing exactly who your target audience is and where they hang out.
You could waste thousands of dollars on an Instagram ad campaign, but if your target audience is mostly on TikTok, you won’t get the return on investment you’re looking for.
As an ecommerce business, a good place to start is google shopping rather than text based PPC ads.
Google shopping is also a great place to research your niche to see how competitive it is and to see how other ecommerce businesses in similar niches are advertising their products.
When you start a dropshipping business it’s tempting to try undercutting the competition by using rock-bottom prices.
But as a new dropshipper, you don’t have your customers’ trust yet.
They may see your price (set well below the standard price for that item), think it’s too good to be true (or low quality), and go with another seller instead.
To grow a successful online business, built for longevity, start as you mean to go on.
Find higher quality products that can command appropriate pricing and build a strong brand with a vision of becoming a recognisable name.
As the dropshipper, it may not be your direct responsibility to handle returns and exchanges (the supplier will likely facilitate those).
But it’s your reputation on the line, so make sure you have a plan in place in case something goes wrong.
Set up a clear and painless return process ahead of time with the supplier and monitor any returns/exchanges to make sure nothing goes awry.
Add your returns policy clearly to your dropshipping store as this will aid in gaining your customers trust when purchasing.
Remember, dropshipping isn’t the magic key to overnight success; it takes hard work and business savvy.
You’ll need to do your research, be a hands-on business owner, and be willing to go through a lot of trial and error.
But if you’re willing to put in the effort, the dropship business model can absolutely help you on your way to financial success, with the freedom to work from anywhere and build the lifestyle you want!
Dropshipping is an excellent route into the world of ecommerce.
If your goal is to build a strong brand you want to grow and scale over time, then starting with the dropshipping business model is ideal.
Dropshipping gives you the ability to do market research by testing products and audiences without the hassle or upfront investment of purchasing and storing inventory or manufacturing and shipping products.
Once you’ve found a brand and a set of products that sell particularly well, if you want to, you can source those products as private label products and build an even bigger ecommerce business selling across Amazon, Walmart and other ecommerce platforms.
Start with the end in mind.
Build a strong brand. Find quality products and reputable suppliers. Create a robust marketing strategy, offer excellent customer service and build an email list from day one!
You’ll have a successful dropshipping business before you know it.
The simple answer is Yes!
If you’re willing to put in the work, spend time finding quality products, reputable suppliers & build a strong brand, dropshipping can be a very lucrative business.
Due to how the dropshipping business model works, profit margins are tight, so focus on growing a memorable brand and utilise influencer marketing rather than paid ads to generate sales.
The only costs required to start a dropshipping business are a domain name (about $15) and an ecommerce platform – free for 14 days with Shopify, then $29/month).
So the maximum you stand to lose in month one is $45 & $30/month thereafter.
That is if you don’t start shelling out for expensive ads.
Grow your profile on social media, collaborate with influencers & start building an email list from day one to maximise sales without using paid ads.
- Choose your niche and look for ideal products to sell on dropshipping supplier websites
- Source some reputable dropshipping suppliers with quality products
- Build out your e-commerce store
- Tell the world you exist!
Any social media platform you can commit to posting on every single day will help you to grow your business, however if you choose Shopify as your e-commerce platform, then Facebook & Instagram are ideal for selling online.
With ready made shopping experiences from right within each platform, your customer can view & purchase your product without ever having to leave the social media platform.
It’s actually less about the platform and more about the apps that integrate with them.
Oberlo makes starting a dropshipping business super easy by giving you the ability to search for products and suppliers from right within your e-commerce website.
Then with just a couple of clicks you can import the products you want to sell, complete with images & descriptions etc.
Oberlo works with Shopify exclusively.
My personal recommendation is Shopify. I’ve built multiple ecommerce websites using them. They’re extremely user friendly, affordable and make both building and growing an ecommerce business much easier.Try Shopify
Start by making a list of all the suppliers and products you’re keen to promote.
If you’re using Oberlo, look at the seller ratings and how long they’ve been in business. Any suppliers in business less than a year are probably worth avoiding at this stage.
Also look at the seller feedback percentage. Only select suppliers with a seller rating of 97% or more.
Then reach out to the suppliers directly and see how they communicate.
Are they quick to respond? Are they polite and easy to deal with? Is their English good and their emails clear? How do you feel about them after your initial communications?
Order a sample product yourself to test quality, shipping time, shipping costs and packaging.
Did the product arrive in good time with decent packaging? Were you happy with the product quality?
Try returning an item and see how the supplier deals with it? Are they customer focused and easy to please, or have they disappeared?
Just by talking to suppliers and testing products and shipping, you’ll start to get a good idea of who you want to work with.
Dropshipping and print on demand are frequently used interchangeably and both models are an excellent way to start an ecommerce business.
The main difference however, is that with print on demand you promote and sell products displaying your own custom designs and branding.
When a customer makes a purchase, your designs are printed onto products and sent out under your brand.
With dropshipping you have no control over the product design, branding or packaging.
When a customer makes a purchase, the product is sent out as is from the dropshipping supplier.
With print on demand you’re limited to the products on offer from the print on demand company.
Years ago you could only sell print on demand t-shirts, however, the product lines have grown significantly and these days you have plenty of choice.
With dropshipping, there is a much broader variety of products available.
It’s always encouraging to see where others have succeeded before us.
Here are some examples of successful dropshipping stores I hope will inspire you to start your own today!