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6 Steps to Building a Successful Online Drop Shipping Business

10 Steps to Building a Successful Online Drop Shipping Business in 2022

Starting any entrepreneurial venture is never going to be a walk in the park.

There are so many factors that come into play when starting a business so it ends up as a successful one and not a flop.

Today, there are many different types of businesses you can start, particularly on various online platforms.

Among the most popular ones is dropshipping.

In this kind of business, you can go ahead and sell items even with little to no capital at all.

You don’t even need to keep a physical inventory of products as these are all fulfilled by your supplier.

Essentially, dropshipping can give you a good head start when you’re still learning your way around the world of business.

This article will provide you with all the information you need to be part of the dropshipping industry.

A Brief Background On The Dropshipping Business Model

Before anything else, it’s necessary for you to learn what dropshipping is so when you do start, you’re well informed and you know the ins and outs of this type of business.

Dropshipping refers to the business model wherein individuals can directly sell products without keeping a physical inventory. When a customer purchases a product from someone’s store, it’s the third-party supplier who fulfills the order from their own inventory and ships it straight to the buyer’s address. The store owner then waits for the profits to be credited into their account.

All the store owner has to do is to set up their e-commerce store and ensure good communication tools like email, fax services, and cloud services to deal with suppliers as well as competitive shipping and payment portals for their customers.

Tips When Starting A Dropshipping Business

Since you now know what dropshipping is all about, here are several tips that can help you in establishing your very own business using that method:

  1. Select A Specific Niche

Just as you would if you were starting an ordinary e-commerce or brick-and-mortar business, it’s important for you to select a specific niche. Doing so would give your dropshipping business a sense of direction so your buyers can immediately have a grasp of what your business is focused on. You can’t just be all over the place and sell everything you can think of because doing so may make your business confusing. It’ll also be difficult for you to reach a particular target market when you don’t even know what customer profile best matches which business niche.

Most importantly, if you aren’t passionate about your selected business niche, you might find it hard to succeed in dropshipping. While it requires little to no investment, it takes a lot of hard work to scale and grow your business.

Along with taking passion into account, here are other tips to follow when selecting a specific business niche:

  • Choose products that appeal to customers with a lot of disposable income.
  • If you want to focus on highly marketable products, then opt for those that are consistently needed by your target market and bought even if customers have a limited budget.
  • Select a niche with products that won’t come with hefty shipping fees so you won’t be forced to have a high markup due to shipping.

To help you get started, these are some of the most popular niches of and products sold by dropshipping businesses:

  • Health And Beauty  Air purifiers, neck pillows, and massage-related products
  • Women’s Clothing – Workout apparel, seamless underwear, and hats
  • Home And Garden – Pet-related items, house plants, and home organizers
  • Sports And Entertainment –Running shoes, cycling gear, and phone tripods
  • Toys And Hobbies – Montessori toys for kids, painting kits or DIY crafts, and outdoor toys
  1. Be Ready To Commit To Your Business

Some get into dropshipping so they can have a side hustle, while others who’ve already made a name for themselves through their dropshipping business now manage their online store full-time. Nevertheless, what matters is that you need to have adequate commitment to manage and run your business effectively.

Just because you aren’t keeping a physical inventory of the goods you’re selling and you didn’t shell out a hefty amount of money doesn’t mean it’s going to be easy to manage your dropshipping business. You still need to put in a lot of hard work just as you would with any other e-commerce or traditional business.

It takes dedication and a desire to grow your business in the long term for you to start earning the profit you’re after. Remember that even the dropshipping model doesn’t guarantee overnight success.

With that said, here are some areas of commitment needed in dropshipping:

  • Investing in learning new business skills, especially if you’re a first-time entrepreneur
  • Learning more about the ins and outs of operating a business, including the many problems you want to avoid
  • Taking the time to get to know your target market so you can make better decisions in terms of marketing your dropshipping business
  1. Do Research On Your Competition

The more success stories arise from dropshipping, the more entrepreneurs are encouraged to join the industry. This means that although the earning potential is good, the competition is strong as well. You have to compete against so many more other dropshippers in the same niche as yours, and some may have been around for a longer time than you have.

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This is why you need to research your competition. Do this as you would with any other business so you know how to keep up with or even outdo other dropshippers. Researching the competition is a multifaceted process, and your aim is to gather information such as the following:

  • How your dropshipping business can fill the gaps in your competitors’ services
  • The resources your business has that’ll enable you to close competitor gaps
  • The forces shaping the market niche you and your competitors belong to
  • The strong and weak points of your competitors

Competitive research entails going through the following steps:

  • Identify who your competitors are. To study your competitors, of course you have to begin by analyzing who your direct competitors are. This identification will give your analysis and competitor study a sense of direction so you don’t end up studying several businesses and then finding out later on that they aren’t even your direct competitors.
  • Examine each competitor’s website. Going through this process doesn’t mean copying the dropshipping or e-commerce website of your competitor. Rather, it’s more about taking note of what the competition is doing on their site so you have an idea as to what works and doesn’t work well on a dropshipping website for a business like yours.

If you already have an e-commerce website, you can also use the information you got from your competitive research to fill in any gaps or address weak points you may have noticed while studying your competitor’s website.

  • Study your competitor’s pricing. There are many reasons you should study your competitor’s pricing. As you’re still new to dropshipping, the information you’ll gather from studying your competitor’s pricing will give you insights on how to price your own products so they’re attractive to buyers yet profitable enough for you to earn a good income. You’ll also be able to figure out the base price that customers are willing to pay for certain products and services.
  • Study the shipping methods of your competitors. Shipping matters, too, as many buyers today don’t want to have to wait long before their online orders arrive. As you study your competitor’s methods of shipping, you’ll also discover which couriers are well loved by customers since those providers offer not just fast but also cheap and reliable services.
  • Check online reviews. Studying your competitors would also require you to go through the reviews they’ve received. By doing so, you’ll know how satisfied or dissatisfied their customers are. For those with negative feedback, you can use their points of dissatisfaction as a basis for you to improve the same products you may have been thinking of offering to your target market as well. That way, you’ll be able to release better versions of items that your competitors have already started selling.
  1. Find Good Suppliers

This fourth step is perhaps one of the most crucial since it can make or break your dropshipping business. Note that because you’re opting for this kind of business model, you aren’t going to have physical stocks of any of the products you’re going to sell. It’s therefore important to ensure that you’re choosing reputable suppliers since the fulfillment of each of your customer’s orders is in their hands.

Take the time to carefully go through each supplier you may come across. In order to narrow down your options, here are some useful tips to guide you:

  • Contact manufacturers. As the seller or e-commerce owner, it’s your responsibility to reach out to potential manufacturers of the products you intend to sell. It’s through this step that you can get recommendations from manufacturers regarding the best suppliers you can work with.
  • Attend trade shows. If there are trade shows in your area (or perhaps even online ones), then you may want to consider attending them. This is an excellent way for you to have access to numerous manufacturers in one go. While you may have to purchase tickets for them, trade shows are also a great opportunity for you to see and check sample products in person so you can be sure that their quality is legitimate.
  • Be wary of fake dropshipping suppliers. Given that the dropshipping industry is a highly attractive one due to its profitability, it’s not surprising to know that there are also a lot of fake dropshipping suppliers out there. They’ll not only run with your money but also put your business’ reputation on the line.
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It’s therefore important to ensure that you turn to reputable and legitimate suppliers. These are the signs of a fake supplier you have to watch out for:

  • They sell to the general public. Legitimate wholesalers rarely sell to the public since they focus on reaching out to businesses they can turn into clients.
  • They don’t charge a pre-order fee. Most reputable wholesale suppliers charge a minimal pre-order fee. This is to reserve your spot for the order and to give the supplier a sense of protection and peace of mind knowing that fake buyers wouldn’t normally be willing to shell out anything.
  • They don’t have a legitimate address. When you’re browsing the websites of potential wholesale suppliers and you don’t find an address, that’s a red flag. If there’s an address, take the extra step of researching it to determine its legitimacy.
6 Steps to Building a Successful Online Drop Shipping Business
  1. Set Up Your E-Commerce Store

Building your e-commerce store means putting up a website. You can either go through this step on your own or request the services of an expert web developer so that everything about your e-commerce store is in proper order. This is a process you should never rush as the final outcome would play the all-important role of displaying the products you’re selling.

Your e-commerce website can be likened to a brick-and-mortar store had you gone for a physical business instead. It has to be aesthetically pleasing and easy enough to navigate to entice customers to stay on your website and eventually make a purchase.

Most importantly, your e-commerce website should comply with all the standards of search engine optimization (SEO), user experience, web design, and all other factors that’ll help your e-commerce store be more discoverable on search engines.

Conclusion

Since you’ve read the guide above, you should now understand why dropshipping is one of the most popular business models nowadays. It makes everyone’s entrepreneurial dreams and plans come true since even those with very little capital can start and run their own business.

But this isn’t to say that dropshipping doesn’t take a lot of hard work. It’s still a business, after all, and your goal should always be growth, expansion, and a steady flow of income. In setting up your dropshipping business, follow all of the tips above so you can slowly but surely work your way toward success one product at a time.

An ecommerce website that operates a drop shipping model purchases the items it sells from a third-party supplier or manufacturer, who then fulfills the order. This not only cuts operational costs, but it also frees up your time to focus all of your efforts on customer acquisition.

If you are ready to start a business that can compete with retail giants, and do so on a limited budget, then follow the six steps below. While it doesn’t take a lot of startup funds to launch a drop shipping business, it will require an immense amount of hard work.

1. Select a niche.

The niche you select needs to be laser-focused and something you are genuinely interested in. A product range that isn’t focused will be difficult to market. If you aren’t passionate about the niche you select, you will be more apt to becoming discouraged, because it takes a lot of work to successfully scale a drop shipping business. Here are some points to consider when selecting your niche:

  • Seek attractive profits. When you are running a drop shipping business model, your focus is on marketing and customer acquisition, so the amount of work required to sell a $20 item is essentially the same as it would be to sell a $1,500 item. Select a niche with higher-priced products.
  • Low shipping costs are very important. Even though your supplier or manufacturer will handle the shipping, if the cost is too high, it will act as customer repellant. Find something that is inexpensive to ship, as this also gives you the option of offering free shipping to your customers and absorbing that cost as a business expense in order to attract more sales.
  • Make sure your product appeals to impulse buyers with disposable income. When you are focused on driving traffic to your website, you want to experience the highest conversion rate possible because most visitors will never return. The products you are selling should trigger impulse buys and appeal to those with the financial ability to make a purchase on the spot.
  • Make sure people are actively searching for your product. Use Google’s Keyword Planner and Trends to check some common search terms related to your potential niche. If nobody is searching for what you are planning on selling, you are dead in the water before you even begin.
  • Create your own brand. Your drop shipping business will have more value if you can rebrand whatever it is you are selling and pass it off as your own. Look for a product or line you can white label and sell as your own brand with custom packaging and branding.
  • Sell something that isn’t readily available locally. Pick something your customer can’t find down the street. That way, you become more attractive to a potential customer.
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2. Perform competition research.

Remember, you will be competing with other drop shipping operations as well as retail giants such as Walmart and Amazon. This is where a lot of potential drop shippers go wrong, because they look for a product that has little to no competition. That’s a sign there isn’t demand for that particular product.

There are many reasons why a product might not have a lot of competition, including high shipping costs, supplier and manufacturing issues or poor profit margins. Look for products that have competition, as it’s a sign that there is a high demand and the business model is sustainable.

3. Secure a supplier.

Partnering with the wrong supplier can ruin your business, so it’s important that you don’t rush this step. Conduct proper due diligence. Most drop shipping suppliers are located overseas, making communication extremely important, both in terms of response speed and the ability to understand each other. If you are not 100 percent confident in the communication abilities of a potential supplier, move on and continue your search.

Alibaba has become one of the largest online resources to identify and communicate with potential manufacturers and suppliers. Make sure to ask a lot of questions and learn what their production capabilities are in the event that your business grows exponentially. You want to be certain they have the ability to scale with you.

Try to learn from other entrepreneurs who have walked this path in the past. There are plenty of information sources available, from business and tech blogs to this subreddit about drop shipping. It’s a popular topic that can help you avoid costly supplier mistakes.

 

4. Build your ecommerce website.

The fastest way to launch a website that supports a drop shipping business model is to use a simple ecommerce platform such as Shopify. You don’t need a tech background to get up and running, and it has plenty of apps to help increase sales.

Even if you have a sizable budget that would allow you to hire a web design and development company to create a custom solution, it’s a much wiser move to use one of the plug-and-play options, especially in the beginning. Once you are established and the revenue is coming in, then you can explore additional website customization.

5. Create a customer acquisition plan.

Having a great product and a website is great, but without customers looking to buy, you don’t have a business. There are several ways to attract potential customers, but the most effective option is to start a Facebook ad campaign.

This allows you to generate sales and revenue right from the start, which can contribute to quick scaling. Facebook allows you to place your offer directly in front of a highly targeted audience. This gives you the ability to compete with the largest brands and retailers immediately.

You also have to think long term, so search engine optimization and email marketing should also be a focus. Collect emails from the start and set up automated email sequences that offer discounts and special offers. It’s an easy way to leverage your existing customer base and generate revenue without additional advertising and marketing spend.

 

6. Analyze and optimize.

You need to track all of the data and metrics available to grow your business. This includes Google Analytics traffic and Facebook conversion pixel data, if that is your main customer acquisition channel. When you are able to track every single conversion — to know where the customer originated from and what path they took on your website that eventually led to a sale — it enables you to scale what works and eliminate what doesn’t.

You will never have a set-and-forget advertising or marketing solution. You need to constantly test new opportunities and fine-tune current campaigns, which allows you to know when to optimize or shift campaign spend.

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