Learning how to start a dropshipping business has become an earnest pursuit for many entrepreneurs. This pursuit should be even more attractive during the holiday season.
The holiday season is an opportunity for entrepreneurs to take advantage of increased web traffic to online stores. Consumers also have an elevated intent to purchase, so conversions on websites increase dramatically.
With several big shopping occasions such as Black Friday and Cyber Monday, your chance to successfully launch a dropshipping business is finally here!
Starting a dropshipping business during the holidays
According to a report on Holiday Shopping Predictions by Salesforce, overall online sales are expected to grow in 2019 by 13 percent to $136 billion. That report is based on a survey of more than 10,000 consumers and major e-commerce sites.
If you’re looking to start your own online store and want to take advantage of the holiday boom in eCommerce, look no further.
There is no better time to start an ecommerce website and jump on one of the fastest-growing trends in 2019 called dropshipping.
If done right, starting a successful drop ship business can be very lucrative and scalable.
It is no surprise, then, that new entrepreneurs are starting online businesses as a way to make money online in 2019.
What is the dropshipping business model?
The dropshipping model is a fulfillment strategy where an online website can sell products without owning the inventory or shipping orders themselves.
Instead, when a customer purchases the item on your store, you place the order directly with the original wholesaler. The wholesale supplier owns the inventory and will send the order directly to your customer.
The main difference between a drop ship business and a traditional eCommerce operation is that drop shipping doesn’t require you to stock or own any inventory in advance. You also don’t have to deal with shipping or handling logistics.
When a product is sold through your storefront, you simply forward the purchase order to a wholesaler or manufacturer who fulfills it.
Due to the low operating cost and relatively out of the box setup, dropshipping has become a global trend across the ecommerce landscape.
This business model has a few pros and cons that you need to keep in mind before getting started.
How does dropshipping work?
There are three primary components:
- Dropshipping Companies
- Online Business Owners
- Online Shoppers
What is the role of drop ship suppliers?
Suppliers are responsible for the following:
- creating products
- warehousing inventory
- shipping products to your customers
- accepting returns and replacing defective products
- selling items to you at a discount or wholesale price
What is your role as a business owner?
As an ecommerce operator, your first job is to find the right suppliers and items to sell.
Once you do, you list and sell these products on your retail storefront. Depending on your agreement with the wholesaler, you may be able to white label the products and list them under your brand.
Additionally, you’ll also be tasked with delivering customer service, including answering customer questions and collecting feedback.
What is the role of your customer?
Your customer buys the new products directly from your storefront. If questions or issues arise, your customer contacts you. During the entire relatioship, the dropshippig provider you work with is usually invisible to your customer.
What is the difference between starting a dropshipping business and selling your own inventory?
Understanding the difference between how to start an online business and how to manage your own inventory is paramount.
It’s especially important if you plan to start an online store during the holiday season.
While the holiday season presents many opportunities to tap into increased online traffic, it is a relatively short window of time and the competition is fierce. With that in mind, it is critical to learn the key differences between these inventory models.
Let’s start with the zero-inventory model, also known as dropshipping.
Some of the key features of how to start a dropshipping business include:
Vast Inventory Selection
Select from thousands of products to stock in your drop ship store.
Seek out trendy and popular products based on trends and sell-through research to keep your online store stocked and thriving at all times.
No Warehousing Required
No need to store your selected inventory in a physical warehouse or storage facility when operating your own dropshipping business.
Outsourced Order Fulfillment
Making sales is the fun part. Fulfilling orders to your customers is not nearly as energizing.
As a storeowner, you can avoid the fulfillment process and have all of your orders fulfilled and shipped by a wholesale supplier.
Low Start-Up Cost
When you start an online business, you can usually do so with a low upfront investment and minimal overhead and operating costs.
Typically, you can get around investing in purchasing inventory upfront before you understand the demand. When you avoid buying inventory upfront, you also avoid having to warehouse that inventory. Instead, a dropshipping business will warehouse those products until you make a sale.
No Inventory Tracking
While working with a dropshipping wholesaler, you can circumvent the laborious task of tracking inventory through manual systems and processes.
Inventory tracking can be done by the wholesaler you work with.
Returns and Shipments
You can outsource the headache of managing returns and inbound shipments.
Just hire a third-party provider to manage any returns to your online store as well as any inbound inventory shipments.
No Restocking Inventory
One of the biggest advantages of running a successful drop shipping business is the ability to sell great products without the hassle of placing reorders for the inventory that stocks out.
Just enlist a third-party vendor to fulfill the responsibility of reordering products and keeping track of stock levels.
While running an ecommerce website offers myriad benefits, selling your own inventory also has its advantages:
Creativity
When you develop your own products, you will be able to exercise more creativity and control over the creative process.
Generally speaking, it’s much easier to set your business and brand apart when you have more oversight and control over product creation and development.
Specificity and Selectivity
When you create your own products, you can be very specific and selective about quality and design of the products you want to sell.
The freedom to be specific and selective in the product design and creation processes can be a pivotal factor in your success.
When the design and quality are under your purvue, you can better communicate the value of the product to your target audience.
Markup Flexibility
When you run a dropshipping business, you may not have the latitude to dictate the pricing that is best for your business and customer. Working with dropshipping suppliers can limit your ability to set certain profit margins, as well as provide your customers with incentives or discounts.
Furthermore, the revenue split you set with your dropshipping supplier will have many more constraints. Typically, dropshipping business owners receive 20-40% of each sale they make, while the dropshipper gets the remaining percentage.
When you own your inventory, you have much more flexibility to determine the markup as well as the profit margins you earn on each sale. To be on the safe side, you can try our Profit margin calculator to help you determine the right price.
Needless to say, choosing the markup of your products is much easier to do when you own the inventory.
Return on Investment
Entities who sell their own products and manage their own inventory may find they have a higher ROI.
Using a third-party service to manage the inventory, ordering, shipping, and fulfillment of owning an eCommerce store can cut into profits while providing a stress-free dropshipping business solution.
Disadvantages of Selling Your Own Inventory
Owning your own online store and selling handmade or individual items you have created is extremely tempting when launching a business or brand for the first time.
However, it is important to keep in mind that managing your own inventory and selling merchandise without a dropshipping solution can become laborious and overwhelming.
This is especially true if you are not fully prepared to take on the task.
Some of the disadvantages of selling your own inventory include:
Upfront Capital Requirements
The capital needed to launch your very own online business with unique inventory and products is high. You will find this to be especially true if you plan to create custom or bespoke product lines.
Inventory Risk
It is quite risky to launch an online store while purchasing all your inventory in advance. If the inventory you buy upfront does not sell, you will lose out on the money you invested in the products.
Managing Inventory and Stock
When you choose to own and sell all of your promoted merchandise, you are fully responsible at all times for managing the inventory of your online store.
Keeping track of sales, inventory, and products that are in high demand can quickly become an exhausting exercise.
Doing your own Accounting and Finances
When you own your inventory, there is even more emphasis put on you to keep track of cash flow, revenues, losses, product sales, and overall earnings. These line items will become your full responsibility in addition to doing other activities that keep the business afloat.
Some of those other activities include building and cultivating relationships with manufacturers, negotiating wholesale pricing, and hiring additional staff to monitor trends and keywords. Each of these is core to running a successful online business.
Manually Adding New Product Information
With a dropshipping business, you are often provided with a complete overview and description of the products you stock.
When you are the owner and operator of your own online store and stock individual items, you are responsible for inputting proper copy and messaging for each new product you plan to merchandise.
Dropshipping works especially well for solopreneurs with limited time and capital.
If you have both, then you already have an edge, but you don’t require either to launch a successful dropshipping company.
This post sheds light on everything that goes into starting a dropshipping business, from finding trendy suppliers to choosing an eCommerce platform to sell on.
To make the process easier to follow, I’ve broken it down into 5 super-simple steps.
1. Find Dropshipping Suppliers
You need to explore multiple avenues to find the best dropshippers for your needs.
A good place to start is the Modalyst website which connects you with reliable suppliers, including USA dropshippers, stocking a wide range of items from designer handbags to kitchen appliances.
Modalyst drop ship suppliers and wholesale distributors offer millions of profitable products, all of which can easily be found on our platform.
Also, you get to see the potential profit for each dropship item, which can be factored into your product selection.
In addition, Modalyst users enjoy the following benefits for online stores:
In addition to researching Modalyst, you should spend some time on the below steps when looking for drop ship suppliers:
Research and plan your ecommerce goals
You need to spend time doing your research.
You need to understand your own business, establish goals and objectives, as well as evaluate the needs of your customers, and the types of products that you would like to sell.
This can help you narrow down your options when it comes to finding the best suppliers and dropshipping companies.
There are dropshippers for pretty much anything you can think of, no matter how niche it may seem.
Understanding the particular niche or market that your business fits into can make it easier to find a dropshipper that you can rely on.
Finding American dropship suppliers
There is a strong likelihood that your initial research on drop shipping suppliers will yield a long list of Chinese wholesalers.
The conventional formula most online entrepreneurs use looks like this: find cheap products from Chinese dropshippers and sell the products for massive profits.
This formula still works today. However, it’s becoming less effective and profitable as more and more online stores use the same product sourcing strategy. While more Chinese products flood the market, the more competitive pricing becomes, making it more difficult to reap a profit on the sale of an item and differentiate your business from others.
This is not necessarily a bad thing, though. It has helped create interest in a new market: USA dropshipping suppliers.
One way that you can differentiate is by working with suppliers who are based in the United States.
You don’t have to be located in the US for this to be a viable option.
So long as you have a strong customer base in the USA, or you’re looking to break into the American market, then using US dropshippers makes a lot of sense.
Why dropship from the US?
There are thousands of wholesalers and manufacturers in the United States.
The good news is that many of them are starting to offer dropship products and services. If you’re selling.
What to look for in American dropshipping suppliers
While partnering with American vendors is compelling, you still have to do your due diligence.
A dropshipping company in the US isn’t automatically qualified just because they are based in the United States. These dropshipping companies need to be vetted, just like any other supplier you want to work with.
You should follow the same process that you would when vetting any supplier. After all, your supplier is one of your most important business partners. You want to choose the best one.
The best ways to vet potential dropshippers is to do the following:
Review suppliers’ business practices
While you may be the one advertising and selling products to your customers, your supplier can still affect your business and how its viewed by the general public.
You need to figure out as much about a potential supplier as possible before you decide to work with them. Figure out how they do business and see if it works with your company’s needs.
A dropshipping supplier might look good on paper. However, digging a bit deeper into the fine print of their service may show that the company has less-than-ideal ways of handling things like refunds or shipping disputes.
Understand suppliers’ fees and minimum order policies
Drop shipping providers make their money a couple of different ways.
It’s important that you understand how suppliers’ fees work so that you can rest easy knowing that you’re getting a fair deal.
Some dropshipping companies charge a monthly fee.
This usually means that they are a directory that can connect you to hundreds of suppliers at once.
Examples include Doba, Oberlo, and SaleHoo. In addition to the monthly fee, you may have to pay a service fee to each individual supplier. It’s something you should clarify before making a commitment.
Another thing to consider is the minimum order size.
One of the most attractive reasons to work with a dropshipper is to avoid investing in a warehouse.
Unfortunately, minimum orders may prevent you from taking advantage of such a benefit.
If the dropshipper has minimum order requirements or fees, you should make sure that they will still hold onto your product. This is a very popular way of doing business.
You would pay the minimum order fee and the manufacturer will simply fulfill orders as they come in until the minimum is met.
Reach out to drop shippers and get references
Once you identify some solid candidates to be your dropshipping suppliers, you should reach out to them.
Use your first contact to establish a good working relationship. Be friendly and ask all the questions that come to mind. You should also be clear about your business goals and objectives. Starting a relationship with a supplier should be about the mutual benefits of working together.
Also, if you have time, you should ask for some references.
Many dropshipping suppliers are happy to give you contact information for current or former retailers. You can then give these references a call and learn more about how working with the supplier really is.
Place sample orders with suppliers
The most realistic way to understand how a dropshipping company performs is to simulate the buying experience yourself.
By placing an order with the vendor, you’ll be putting yourself in your customer’s shoes.
Make a few of sample orders.
Not just from the suppliers you’re thinking of partnering with, but also from their competitors. This will give you the opportunity to compare and contrast service quality firsthand.
Pay close attention to every detail. Make note of delivery times and scrutinize the packaging. Remember, this is the same experience your customers will have when they order something. So, if there are any big red flags, don’t ignore them.
Consider working with multiple dropshipping wholesalers
Even after you have found one or two suppliers that you want to work with, you should continue to search for additional suppliers.
Diversifying your supply is always a good idea.
Working with multiple dropshippers gives you the opportunity to expand your product categories significantly.
You may also be able to take advantage of additional services, such as private labeling. Not all dropshippers will sell you private label products. Private label is a unique opportunity to sell the suppliers’ products with your own branding and labeling.
Another reason to work with multiple suppliers is to get peace of mind.
While most dropshipping providers in the USA are reliable, dynamics can change in an instant, forcing you to find a new supplier with very little lead time.
What would you do if your only dropshipping company decided to shutter their business?
Your dropshipping business would likely be in a pinch overnight. Having multiple dropshippers ensures that your entire business is not instantly in a crunch and customers always have something to buy.
Online sources of dropship wholesale suppliers
One of the largest barriers new dropshipping business owners face is finding suppliers.
These companies are not easy to discover, especially if you’re a new online store.
Here are a few providers to get you started on your search. These sources connect you with thousands of different suppliers and millions of products.
AliExpress: AliExpress is one of the most popular websites to find individual dropshipping suppliers. It’s an international marketplace that offers access to millions of products. You can find suppliers based on the particular product you’re after. Simply perform a search and you can connect with the supplier from there. The best part of AliExpress is that there is no monthly membership fee. It’s free to sign up and get started.
Inventory Source: The site connects you with 150+ suppliers and even offers an option to add your own private supplier. Its features include optimized inventory sync, full product data integration and worry-free order automation.
Worldwide Brands: This is one of the oldest and most popular supplier directories with over 10 million products. It says it only includes suppliers that adhere to a set of guidelines to ensure quality wholesalers.
Doba: Doba boasts a selection of over 2 million items ranging from books to apparel. The site also lets retailers export products into their stores and ensures that the products are shipped in a timely manner.
If you’re on the lookout for local dropshipping suppliers, go through the Suppliers section in your Yellow pages.
Consider ones who have prior experience in dropshipping and understand the importance of delivering products to your customers on time.
You might also want to inquire about their quality control system i.e. how they deal with sub-standard products and return requests.
This will help prevent headaches down the road.
2. Take a Cue from Amazon Best Sellers
We recommend browsing top-selling items across other marketplaces, especially Amazon best sellers.
Browsing popular items in online marketplaces
You can search online marketplaces to discover which of your selected items have the potential to become top sellers.
Check out sites like Amazon, eBay and Alibaba to gauge the demand of your product mix.
If you find the products you want to sell (or similar ones) in one of the lists, you’re on the right path.
However, you’ll have to spend some time looking around as there’s currently no option that allows you to search for specific items.
Use Google trends to speed things up
If your product selection doesn’t match any of the best selling items, you’ll likely start questioning its viability.
However, a product not making Amazon’s best sellers list doesn’t mean it’s not in demand. You can study the popularity and trendiness of any product by typing its name in Google Trends.
Using this tool, you can easily and quickly see search volume trends over a period of time to know whether or not your selected item is in demand. For instance, let’s say you want to sell drones.
To get started, go to Google Trends and type in “drones” to see what the search volume looks like. At this time of writing, here’s what I see:
As you can see here, there is an upward trajectory for the month of December, which possibly implies that this is a viable product to sell during the holidays.
It’s also worth mentioning that its demand has been somewhat stagnant during the second and third quarter of 2017, which isn’t a good sign. Hence, the search volume trend can also be an indicator that it’s time to modify your product selection.
3. Choose the Best Ecommerce Platforms to Dropship Products Online
There are hundreds of ecommerce platforms and shopping cart solutions to sell products online.
As such, we encourage you to do your research in advance. There is a good deal of overlap in the use of platforms, so you should also think about how you plan to differentiate your brand and online store.
Creating a branded store is one of the best ways to present yourself to prospective customers.
It is a tangible extension of your business that defines the purpose of your existence, what you like and don’t like, what makes you stand out, and if customers are able to resonate with your brand, they’ll buy your products with confidence.
Shopify and Wix are the most recommended eCommerce solutions for dropshipping.
They are inexpensive, easy to understand, and intuitive for the services they provide. On top of that, they’re very scalable platforms.
Note: If you’re using Modalyst to source products, you’d be glad to know that it automatically integrates with Shopify and Wix and has .csv files for you to easily import items to stores hosted on other ecommerce platforms.
The other option is to sell via a marketplace.
The most obvious choice is Amazon but there are plenty of other online platforms out there which get a lot of traffic.
Check out sites like Etsy.com and Bonanza.com and find if there is a market there for your product selection. It’s smart to diversify when it comes to online selling platforms as each one has its own unique audience.
4. Create Beautiful Product Pages
Your product pages are your opportunity to impress prospective buyers.
If you want them to choose you over your competitor, you need to build compelling product pages.
Here’s what goes into an amazing product page:
- Original product image
- Enticing product description
- Easy access to shipping details and return policy
- Transparent pricing
A lot of suppliers will provide you with product images, which should be integrated into your listings in their original state. Consumers will appreciate the fact that they’re getting exactly what they saw in your product listing (edited images often raise expectations and result in disappointment later on).
In addition, several suppliers will give you pre-made product descriptions. Awesome, right? No, not in this case. I don’t recommend using pre-made descriptions because everyone else is using them. How can your products stand out when everyone else has described them in the same way?
That’s where your copywriting prowess comes into play. Carefully construct copy for your products to resonate with your audiences’ personalities/interests/demographics, and you’ll be in the driving seat.
5. Get Rest of the Things in Order & Launch
The last step pertains to adding the final touches to your store and then experiencing that big moment: the launch!
Some of the things you need to set up at this stage are social media accounts and any third-party applications that will add to the experience of shopping from your store.
Most online store owners should focus on important social media platforms, namely:
You can reach the audiences on these platforms by posting about your store in general as well as by promoting your product listings.
As for the applications, only install the ones that’ll really make a difference for your prospective buyers. Install too many and you can face problems like slow-loading product pages. I suggest installing a couple, and once you know how to use them well, you can consider installing new ones.
Some apps I recommend:
Abandonment Protector: This Shopify app retrieves those who abandon your cart and encourages them to come back via email. Similar apps are available for BigCommerce and other ecommerce platforms.
FOMO: This Shopify app creates urgency and social proof by showing how many products other people are buying (makes a great add-on for hot selling items). Orders are displayed in real time via a small popup.
Boost Sales: This app does a great job at lifting up sales by increasing order value per customer. It does that by collecting sales data and creating offers that will make people more likely to buy.
Finally, once you get these things in order, you can launch your dropshipping business.
Conclusion
We’ve reached the end and, by now, you should be well on your way to starting a dropshipping business in just 5 easy steps.
Once you do, continue to update your product listings, learn how to make them more beautiful, continually post on social media and maintain a good relationship with your suppliers. With persistence and hard work, you’ll craft your way to dropshipping success!
Additional Resources
Below are additional resources which can help you build and launch your online store.
These will help you choose a website builder, find eCommerce design inspiration and discover ideas for trending products to sell.
