Whether you’re looking to embark on a new business venture or you’re simply interested in a savvy side hustle, a dropshipping start-up could be a very wise move indeed. It’s a low-risk and low-investment way of starting your own ecommerce business and it’s proven to help small, emerging companies to succeed in an increasingly competitive market. Still confused about what dropshipping actually is? Here’s your ultimate beginner’s guide to dropshipping + some pro tips to help you succeed with your own dropshipping venture…
What is dropshipping?
One of the easiest ways to set up an ecommerce business, dropshipping is a great way to test out your skills as an online or ecommerce entrepreneur.
To put it simply, dropshipping means that you don’t have a warehouse or stockroom with physical products: instead, everything you sell is shipped directly to the customer by a supplier.
Unlike the traditional retail model, where customers buy goods directly from a merchant, a dropshipping retailer acts as a facilitator, and does not hold any inventory. A dropship store owner will not see or handle the goods he or she is selling during the buying process.
The goods are shipped by a third party company (often a manufacturer or wholesaler) and are ordered by the dropship store owner on an order-by-order basis.
The image below gives a simple demonstration of how dropshipping works:
This business model is very popular due to the simple supply chain and minimal overheads, This makes dropshipping a lower risk venture than many other ecommerce models, as you will not run the risk of stockpiling goods which may remain unsold.
For more information on what dropshipping is and how you can use it to start your online business, watch the brilliant video underneath…
The dropshipping process explained
Dropshipping follows a simple order process:
- Your customer buys a product from your store — they visit your online store, place an order, and you approve it
- You contact the supplier with the order and customer details — often this is as straightforward as forwarding the order confirmation email (which can be automated) to the dropshipping supplier
- The supplier sends the order directly to your customer — your supplier packages the goods with your branding and sends them directly to your customer. Your customer has no knowledge of this step
- You inform your customer their goods are being shipped — Your supplier will send you a tracking number. Once you have this, you then need to notify your customer, and do any other post-sales followups.
The supplier is essentially invisible to the customer in this process, especially if you opt for branded packaging. Branded packaging is highly recommended from a customer experience point of view, and pretty standard across the dropshipping industry.
While all dropshipping orders will broadly follow this process, the exact steps will depend on the provider that you select to build your online store. Below you can see how the process works using industry leader, Oberlo…
What are the pros of a dropshipping business?
This easy-to-follow business model has a lot of benefits and these include:
- Very low start-up costs
- Low order fulfilment costs
- You can test out products before committing to adding them to your business
- Can be run from anywhere because the whole business management happens online
- No need for an inventory
- No need to pay for a warehouse
- Less need for staff
- Able to sell a variety of products
- Not very time-consuming, as the picking, packing, and shipping is done by someone else
- Remote working or team friendly
- Can be run by creatives and marketers, rather than tech people.
What are the cons of running a dropshipping business?
Despite being a solid business model, there can be downsides to dropshipping and these are:
- Profit margins are smaller because of the lack of bulk pricing
- Lack of control over the logistics — Some manufacturers and wholesalers can have long delivery times, which is bad for customer experience
- Complex returns process
- Complex taxation
- Sole responsibility for customer issues
- A competitive market, so lots of rival companies
- Many niche areas have already been taken
- Developing a brand identity can be more difficult, as the products you’re selling aren’t unique
- Dropshipping products are not unique so you run the risk of selling generic products
- Lack of control over product development
- Small communication issues can cause enormous problems.
Expert advice on running a dropshipping business
While there are many things that you need to do in order to run a successful dropshipping business, the top three pieces of advice that I can give you are:
- Select the right dropshipping company – you’re trusting the long-term future of your business to the supplier you choose. If they provide a poor service it’s your company which will suffer
- Have your customer service process spot on – as you’re not in control of the shipping process, you need to have planned for every eventuality and have a clear, consistent, and swift response in place (or a method of arriving at one quickly)
- Get your brand identity right – there will be countless companies using the same stock as you. You need to be able to persuade your customers that your products are unique and special so that it is your goods they buy.
What products can I sell through dropshipping?
One of the great things about dropshipping is that you can sell pretty much anything. Take AliExpress. It’s one of the biggest dropshipping resources in the world and gives you the facility to sell:
Dropshipping product ideas
- Mobile phones
- Nail varnish
- Fishing tackle
- Running shoes
- Children’s prams
- Playing cards
- Digital cameras
In fact, AliExpress has more than 100 million products that you can choose to sell.
And using a supplier to sell existing physical products isn’t the only dropshipping method available to you. Print on demand allows you to sell your own custom-designed goods on an order-by-order basis. This means you can sell a variety of products.
Print on demand product ideas
There are many more goods that you can sell using print on demand, with Printify, as an example, offering hundreds of items that you can sell.
You should select your products with your profit margin in mind and there are a number of factors to consider when you do this, such as:
- Smaller items cost less to ship, however, you will need to sell more of them to make a significant profit
- Larger items cost more to ship, however, you will often be able to make a greater profit on these
You should consider how you can add value to the items you sell. For instance, if you start by selling underwear, can you then add other clothing items to your brand? Or do the items you sell have the potential for you to upsell – for example, selling a mobile phone case with a portable charger? Can you create brand value in other ways?
Being able to scale up is one of the best features of dropshipping, so don’t cut your long-term revenue potential by selecting a niche that won’t allow you to scale up.
For more guidance on how to select the products for your dropshipping store, check out the fantastic video underneath…
Picking the right theme for your dropshipping store
However, it’s not just about what you sell. It’s also about how you sell. Selecting the right theme for your dropshipping has a impact on both your brand identity and the ease with which you can sell your products:
- Selecting a generic theme means your business won’t stand out against your peers – and as you are selling generic products you give your customers less reason to buy from your business
- Picking a generic theme without thinking about the UX means that it may be more difficult for your customers to navigate to the section of your store that they are looking for – if they can’t find what they want they won’t buy it.
What platform should I use for my dropshipping store?
The themes available for your dropshipping business depend upon the provider you choose to build your online store with. This makes picking the right provider for you one of the most important parts of setting up your dropshipping business.
Your options fall into two categories:
A self-hosted solution means that you will look after the hosting, along with a number of other factors, yourself. There are a number of pros and cons to using a self-hosted dropshipping solution:
- You can customise to a greater extent
- You own the code, content, and all other aspects of your store
- You will have lower enforced start up costs
- Hidden costs mean that your actual start up costs could be much higher than you anticipated
- It’s time consuming
- If something goes wrong the onus is on you to fix it.
Using a hosted solution means that you pay a provider to use their technology to set up your dropshipping store. In return it provides you with hosting, and a list of other features. Among the different pros and cons of using a hosted solution are:
- You will get a designated customer and community support network
- You pay one monthly fee and that gives you a range of features
- Your website will be more secure
- By renting your website, you are at the mercy of your provider
- There are limitations on the functionality of your website
- It’s difficult to move from one hosted solution to another (or a self-hosted solution).
Popular platforms that are very user friendly include WooCommerce (self-hosted) and hosted options like Shopify, Squarespace, BigCommerce and Wix. Once you’ve got a list of prospective options, be sure to weigh up the pros and cons before jumping in. Alternatively, if you’re tech savvy and want to maximise your profits by cutting hosting fees, you should consider a self-hosted ecommerce site.
Shopify is one of the most popular hosted solutions available. It serves more than 600,000 merchants and is one of the biggest names in ecommerce.
Some of the key points about using Shopify for dropshipping are:
- You don’t need advanced coding skills to use it
- There are over 100 online store designs you can select from
- It comes with 24/7 support
- You will have to pay a monthly fee to use it
WordPress is the largest CMS on the planet. It is used by over 60 million websites and is estimated to power 30% of the internet.
A few of the main things to know about WordPress are:
- You will need some website development and building skills in order to create your website
- It doesn’t have a support network but there is an enormous community of developers
- The software is free to use but you will have to buy a domain name and pay for hosting
- It has a wide-range of plugins and extensions
Shopify vs. WordPress: hosted or self-hosted?
There is no right or wrong answer for which solution you should use, as it depends on the unique requirements of your dropshipping business. In addition to the information above, you will find more advice on the pros and cons on the two options in the excellent video guide below…
How you can start dropshipping with Amazon
Amazon is the biggest name in ecommerce on the planet, has nearly 200 million visitors every month, and supports thousands of dropshipping businesses . But it’s not just the enormous audience that makes Amazon a popular choice for getting into dropshipping:
- You don’t need to worry about either SEO or marketing
- You are able to team up with multiple manufacturers and suppliers
- You can use Amazon ads to boost your brand visibility
As with all dropshipping providers, there are some drawbacks to using Amazon:
- You will be charged 10-15% of every sale you make
- You are very restricted on branding
- You may be subject to additional seller fees
For more information on how you can start dropshipping with Amazon, check out the excellent video underneath and use the world’s biggest ecommerce player to guide your way to dropshipping success…
How do you find dropship suppliers?
Finding reliable wholesalers is one of the key elements to making your company a success. It’s a mammoth task, which done well will pay dividends in the future – if done badly your business will be a short-lived venture.
You can initiate your search in a number of different ways. If you’ve already established which products you want to sell, contacting the manufacturers of these items to ask for a list of their wholesale distributors is a good way to gain trusty contacts. Alternatively, you can use Google to search for key suppliers – just be warned that this can be a lengthy task.
However, if you don’t want to spend your time carrying out manual searches, there are a range of online directories for dropshipping suppliers and manufacturers, as you will see in the guide below:
List of dropshipping wholesale suppliers, manufacturers, & companies
- Alibaba: This is an Asian site that allows you to find manufacturers. While it gives you access to a deep pool of manufacturers, you’ll find many have no website and only communicate in Chinese
- AliExpress: A Chinese online retail service, using AliExpress gives the a selection of more than 100 million products
- Dropship Direct: Using this US company gives you access to a product list of over 100,000 items and nearly 1,000 different suppliers
- SaleHoo: This New Zealand company has a directory of 1.6 million products from over 8000 suppliers and covering 75 categories
- The Wholesaler UK: Not only does this site allow you to sell goods from globally recognised brands (such as Disney), it’s also the largest UK wholesale directory
This is just a sample of the dropshipping wholesale suppliers, manufacturers, and companies that you can select for your business. You can find even more by checking out this superb article.
Dropshipping with Oberlo
One of the most popular entry points into dropshipping is to use Oberlo. Oberlo is a marketplace that enables you to find and import items from AliExpress to an online store built using Shopify.
You pay the wholesale price for the goods before selling them on to your customers at your own price, with the shipping dealt with by the supplier(s) you found on AliExpress.
While you have to pay to set up an online store with Shopify, the basic Oberlo plan is entirely free. This allows you to add 500 products to your store, raise 50 orders a month, and gives you access to a range of features, including:
- Daily product syncing
- Sales reports
- Dispute management
- Automated tracking numbers
- Bulk order placement
You can find more information about Oberlo, including how you can use it to set up your dropshipping business, in the video underneath…
Could dropshipping work for me?
Anyone with proficient computer skills can start their own ecommerce business using the dropshipping model. Thanks to platforms mentioned above, it’s pretty easy to get a shop up and running, so it’s ideal for business novices.
However, it’s important that you don’t jump into launching a shop before you’ve done your market research. This includes looking at competitor ecommerce stores to suss out their stock and using search analytics to see what consumers are looking for. It also helps if you are a good communicator, as it’s likely that you’ll be dealing with numerous suppliers as well as your customers.
Dropshipping isn’t the only way for you to start your own online business and before you decide whether you want to opt for this business model, you should review some of the other methods and decide which one works best for you. See our guide below on some of the other business models:
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Legalities of dropshipping in the UK
Some people may feel that dropshipping doesn’t quite feel legitimate, or even legal — but it’s a common business model and most large-scale stores employ an element of dropshipping alongside selling their own physical stock.
However, while dropshipping is a completely legal form of ecommerce, there are legal considerations that you need to be aware of when setting up your own dropshipping business.
The most important of which is the legal entity you select for your business. (This is the same for any new business owner, irrespective of the model they choose).
Protect your business from liability
Problems can arise in any business, and it is important that you protect yourself and your personal assets from liability in the event of financial compensation being sought, or legal action.
In order to do this you will need to set your dropshipping up as a legal entity. There are a number of options you can choose from in the UK:
- Sole Trader: This makes no separation between your personal assets and your business – all of your income is considered to be one and the same. This means that if a claim is made against you then your own assets (including your home) can legally be used to settle any costs – your spouse’s assets may also be stripped too.
- Private Limited Company (LTD): This makes your company a legal entity in its own right, separating your private and business assets. The liability of shareholders is restricted to their own investment and any unpaid shares which are owned by them.
- Public Limited Company (PLC): Like an LTD, a PLC is a legal entity in its own right and separates the liability of your business from your own assets, with shareholder liability the same as an LTD. A PLC differs from an LTD in that the shares can be traded on the public market
- Guarantee Company (Non Profit): These are not-for-profit companies. The persons in charge of the business are classed as decision makers rather than owners.
You can find even more information about the legal entities of UK companies by reading this excellent article.
How do I succeed at dropshipping?
Having sought-after stock and a user-friendly website is what will secure those initial sales, but consistency is key when it comes to excelling long term as a dropshipping ecommerce store. Order fulfilment is integral because customers expect your business to meet their consumer demands. Clients also expect a fast and reliable service each and every time and if your supplier doesn’t deliver, then you will have to face the wrath of your customers.
You will have to put in hard graft initially to be able to build a strong network of key suppliers – it’s a little bit of trial and error to ensure they provide a service that you and the customer are happy with, but once you’ve secured a fail-safe book of contacts, you’ll be on the road to success.
However, that’s not the only thing that will require your hard work when you’re starting up your dropshipping business. You will also need to consider:
- Order management
- Which payment system to use
- Business licensing
These are just some of the things which mean that while dropshipping is a business model that almost anyone can use, it’s not one that you can make the most of unless you’re willing to put the effort in.
How do I promote my dropshipping business?
As an online retailer, your customers have an online presence, making the web the perfect place for you to promote your business. There are a number of ways you can promote your dropshipping business, as you will see in our guide below:
With 200 million active users and an engagement rate 15% higher than Facebook, Instagram is an social media platform that offers enormous potential for advertising and marketing and there are many ways to harness its power.
Check out the video below for tips on how to promote your business using Instagram marketing…
While Facebook is a free platform, you’ll have to spend money if you want to maximise it as a means of promoting your business to its 2.2 billion monthly users.
Along with the massive user base, one of the major strengths of using Facebook advertising is that you can design campaigns that are extremely targeted. This means that you can spend your money on promoting your business to users who are more likely to convert to customers, giving this form of promotion a high ROI.
Speaking of ROI, email marketing has the highest return of any form of promotional marketing work you can undertake. It has an ROI of 3800% and vastly outperforms social media marketing.
This means that building your email list is one of the best ways that you can do this. There are a number of ways that you can build your email list, including:
- Using a lead magnet
- Employing email automation software
- Content marketing
- Pop ups
Watch the following video to see how you can promote your business with email marketing…
User-generated content (UGC)
As well as showcasing your products, your social channels can be used to build upon the reputation of your company. 30% of US online users strongly agree that customer reviews increase their purchasing confidence.
So it seems only logical that you should use testimonials and reviews to promote your business and encourage users to commit to buying.
Want to find out more about the value of UGC? Then spend a few minutes reviewing this insightful video…
What now? Steps to start a dropshipping business
Follow these steps to start your own online business and guide your way to dropshipping success:
Carry out niche research
- The value of the products you’ll sell
- The income and buying habits of your target market
- The internet usage of your customer base
Decide what type of products you want to sell
- Shipping costs
- Availability (are the products produced everywhere, or locally?)
- Durability (will your goods be damaged when they are shipped)
Research your market and competitors
- Will your website (online store) be able to rank well on Google?
- Are there any competitors? If there aren’t then have you picked the right niche?
- Whether you’re competing locally, regionally, nationally, or globally
Choose the perfect ecommerce platform (hosted or self-hosted)
- How much time do you want to commit?
- How much web development experience do you have?
- Do you want to be able to scale up your business?
Build your online store
- Your theme
- User experience
- Your brand identity
Establish a good base of suppliers
- Reputation of your suppliers
- Location of your suppliers
- If your supplier offers white labelling
Design a strategy to get traffic to your online store
- The forms of marketing you can and will use
- How to maximise the SEO of your online store
- What your targets are and how you will measure them
Have a robust strategy to review the success of your business
- What your long-term goals are
- How you measure success and failure
- Who you are answerable to
[Free] Dropshipping resources
In addition to the advice and guidance you’ve found in this article, I also recommend you check out the following resources:
- Dropshipping for Dummies — ebook here
- The Ultimate Guide to Dropshipping — book here
- How To Get Started With Drop Shipping… — book here
- Dropship Lifestyle — website here
- The Dropship Factory – website here
- The Wholesale Forum — website here
- The Facebook Marketing Blueprint That Put The Passionate Pug on the Path to 6 Figures — podcast here
- eCommerce & Dropshipping Podcast — podcast here
- Is dropshipping dead? What successful dropshippers know — podcast here
- Dropship Club — YouTube channel here
- Wholesale Ted — YouTube channel here
- Oberlo — YouTube channel here
Now you know exactly what dropshipping is and how it can work for you, you’re equipped to launch a successful ecommerce company using the dropship model.