How to Start a Dropshipping Business

Want to start selling online but don’t have enough capital? Or do you want to test an e-commerce idea? Maybe you are an influencer with customers but without products? If so, dropshipping business may be the solution for you. It is a logistics model that requires less financial outlay than a traditional online store.

Dropshipping does not require purchasing or keeping products in stock, as customer orders are processed directly by the wholesaler you work with. However, dropshipping is not an easy way to make money. It is a business that requires time and budget for marketing activities.

---

What is dropshipping

Dropshipping is a retail strategy where online store owners do not directly manage product inventory and are not responsible for preparing and shipping orders.

The seller does not even see the products. They are responsible for attracting as many customers as possible by generating traffic to their website. After receiving an order, the retailer processes it and forwards it to the supplier. They prepare the order and send it to the customer.

You pay for a product only when someone buys it in your online store because you don’t store goods. You don’t need to maintain the physical infrastructure or employ staff. Dropshipping fundamentally changes the dynamics between suppliers and retailers. Instead of buying goods from suppliers and reselling them, sellers pass orders to suppliers who fulfill them on their behalf.

Due to the lack of physical inventory, dropshipping only works for e-commerce retailers, not brick-and-mortar stores.

The dropshipping process consists of the following steps:

1. The customer places an order in your online store;
2. You receive a payment and generate an official receipt using a Zintego Receipt Template etc.
3. You process the order, transfer it to the wholesaler and pay the amount minus the margin;
4. The wholesaler receives the order;
5. The wholesaler prepares and sends the goods;
6. The customer receives the goods.

---

Advantages of dropshipping

This business model allows you to enter the world of e-commerce quite easily. Below are a few advantages explaining why dropshipping is gaining popularity among beginners and experienced entrepreneurs.

Low start-up capital

Probably the biggest advantage of the dropshipping model is the low entry threshold. You can run an online store without investing thousands of dollars in the store’s assortment, warehouse, and employees. By choosing the dropshipping model, you do not have to buy a product until your customer buys it via your website.

What’s more, thanks to dropshipping, you don’t have to worry about:

• paying for the warehouse;
• packing and shipping orders;
• inventory tracking;
• handling returns and incoming shipments;
• warehouse management.

Scaling potential

Infrastructure costs do not skyrocket as business scales. When traditional e-commerce receives more orders, they have more work to do. They must hire new staff, rent a more spacious warehouse and incur other costs. In a dropshipping business, the wholesaler takes care of most of the work related to processing orders.

As you grow, the costs will increase, but slightly. You can invest more time and money in promoting your offer, acquiring customers, and improving the website to generate more transactions. To further enhance your scalability, partnering with a logistic software development company can help you streamline operations and efficiently manage the increasing volume of orders as your business grows.

Straightforward management

Since dropshipping doesn’t require you to make commitments, such as hiring staff to pack goods or renting storage space, you can manage everything online. After finding a dropshipping wholesaler, integrating your online store with your dropshipping wholesaler, and setting everything up, you are responsible for managing your online store and marketing.

Flexibility

You can run a dropshipping business from anywhere as long as you can communicate with suppliers and customers. The flexibility of dropshipping business is also associated with the ease of introducing new products and withdrawing from the offer those that do not sell or generate low income.

Wide selection of products and the possibility of testing

You can list products for sale without investing. Therefore, you can quickly change your offer and list new products at no additional cost. With the dropshipping business model, traditional online stores can test customer interest in new product categories, i.e., print on demand services, accessories or completely new product lines.

---

Disadvantages and risks of dropshipping

As with all business models, the dropshipping business also has some downsides. In general, convenience, flexibility, and time savings come at a price.

Big competition

The ease with which you can start a dropshipping business means you will have numerous competitors with the same products. Without unique products, you must compete in other ways. Provide exceptional customer service or deliver valuable blog content.

When running a dropshipping business, infrastructure and transportation are crucial aspects often outsourced to reliable partners. Yet, managing efficient storage isn’t any less critical. Incorporating essential equipment for e-commerce warehouses can streamline order processing and ensure timely deliveries. Utilizing proper storage racks, picking systems, and advanced management technology is invaluable for maintaining competitiveness in the fast-paced e-commerce environment.

Low-quality products

Before establishing cooperation with a company, it is worth testing its products. The last thing you want is to start working with a supplier who will send your customers low-quality products. So make sure you choose a supplier that offers quality products.

Complicated shipping

If you cooperate with many suppliers, orders in your online store will be carried out by various wholesalers. You will have no control over the supply chain. If a customer orders products from different suppliers, you will incur separate shipping charges for each item. Automating these calculations can be difficult.

Limited customization and branding

A dropshipping business model does not give you control over the product. A dropshipping product is designed and branded by the supplier.

Some manufacturers may put your labels, but even then, the wholesaler you choose has the most control over the product. Any changes or customization usually require a certain minimum order quantity. What’s more, running an online store based on the dropshipping business model is an obstacle to building your brand.

Tough customer service

In traditional e-commerce, if customers complain about product quality, speed of delivery, or return policy, you can propose a solution. If you work based on the dropshipping model, solving the problem often requires contacting the wholesaler to clarify the matter.

Low margin

When you’re vying for customer attention, it can be troublesome to achieve the desired returns, especially if you’re just starting. The profit will depend on the margin and the number of transactions. Wholesale offers depend on the average monthly transaction value. If the traffic on your website is growing, the wholesaler will offer you a better price.

---

How to start dropshipping business step by step

Find your niche

Start by defining your niche and target audience. A dropshipping niche is an integral part of standing out from the competition. Specify your interests. Knowing the products you sell can make the business management process straightforward. In addition, you will build the image of an expert in the industry. Research the market and check the demand for the products you want to sell. Exploring various dropshipping business ideas can also help you identify unique opportunities and refine your approach.

Determine whether you can break through the competition in a few months to a year. Choose less popular products if the industry is dominated by huge companies. Focusing on a niche doesn’t mean you can’t expand in a different direction later.

Start a company

Although starting a business is not necessary, having a company brings measurable benefits. First of all, check the regulations in the country where you live. Some countries allow unregistered businesses in certain situations, and some states approach it rigorously.

Legal and tax issues are not everything. A legal company will make it easier to find suppliers and increase your credibility in the eyes of customers.

Choose suppliers

Since wholesalers play a crucial role in the order fulfillment process, it is important to choose a proven business partner. It is worth ordering and testing several products to check the quality of products and the delivery time. Before signing the contract, you should ask the wholesaler a few questions:

• What is the billing process? Ask if they charge your bill as soon as you place your order or if they send you a summary invoice for the month. And learn all about costs. Request a quote for different sales levels.
• What is the returns and complaints policy?
• How quickly are orders processed, and what are the shipping methods (including whether a personal collection is possible)?
• Are shipments insured?
• Also, ask for references.

You can establish cooperation directly with manufacturers or a dropshipping wholesaler. Choosing wholesalers has the advantage that they usually work with many manufacturers, thanks to which they can provide a wide range of products. Cooperation with the manufacturer, on the other hand, is a potential opportunity for higher margins.

Create a website

Develop a sitemap and design an online store. Remember that you can build your advantage only on effective marketing. Think carefully about your strategy, and design your website and shop based on it. When creating a website, it is worth taking care of UX. The website should allow the user to conveniently browse products and place orders via various devices.

Since your business is actually your website, it must be a masterpiece. Pristine layout, efficient structure, and fast hosting.

The best hosting for your business is a managed VPS server. You’ll get hardware resources for your own use that no one else can use, so you don’t have to worry about your online store slowing down during peak hours.

The dropshipping business does not allow you to control many aspects, which is why control over your website and hosting is so important. Choose a VPS from UltaHost and you’ll get everything a flawless business website needs.

Unmetered bandwidth, NVMe SSDs, root access and a hosting panel and operating system of your choice, unlimited scalability, including powerful VDS plans. Plus helpful support team and impeccable security. Advanced systems will protect your business against any threat, from Malware to DDoS.

Invest in internet marketing

Promoting your business is one of the most important aspects of running a successful online store. To use your marketing budget effectively, you should start by analyzing your competition. Aware of current trends, develop a marketing strategy that will set your company apart and reach potential customers. 

It is worth testing various marketing channels to acquire new customers. Analyze the effects, and then direct most of the budget to where the conversion is highest. However, it should be borne in mind that some channels are profitable in the long term and others in the short term.

---

Conclusion

Dropshipping is a business model that fits perfectly into current trends and facilitates sales. Perfect for beginners looking for an eCommerce idea with a low entry threshold and for bloggers and influencers who have a group of recipients and look for products to sell.

These flexible solutions are good for both people who want to work part-time and those who want to get involved and run a thriving business. Dropshipping is a good solution for traditional store owners who want to test new products.