If you're looking into starting an eCommerce business, there are a lot of options available to you. But what about dropshipping? Is dropshipping dead? Is dropshipping legal? How does it relate to learning how to ship wine?
In fact, dropshipping is one of the fast-growing sectors of the eCommerce industry, and you can easily start one yourself with just a little capital and the knowledge of how to start a dropshipping business.
Keep reading to learn how to start dropshipping, some paperwork you'll need, and the costs associated with starting a dropshipping business.
How To Start Dropshipping
Though dropshipping includes more steps than the traditional types of eCommerce businesses, it's actually fairly easy to start.
Here's how to start a dropshipping business:
1. Commit to the Model
Before you start a dropshipping business, you should research everything you can about the model. Once you've read about what is drop shipping and understood how dropshipping works, you'll also want to know is dropshipping profitable. With all of this information in your hands, you'll know whether dropshipping is the right choice for your business and you can start working on your drop shipping business plan.
2. Pick a Product
You can't run a dropshipping business without any products. There are so many dropshipping business ideas to sift through and a wide range of wholesale items to sell. Start with a general idea of the category you're interested in and conduct some eCommerce keyword research. This will give you insight into what people are searching for and dropshipping niches that you can get into with less competition and higher margins.
Try to stick with products that keep a defined need and that you can source relatively easily. You don't want to pick products that are hard to sell or that are often on backorder. Doing some preliminary demand planning at this stage can help you narrow down your selection to the best dropshipping products.
3. Perform Competitor Research
With your product selection determined, you'll next want to look at the existing competitors in the market. Visit their digital storefront, read customer reviews (especially regarding their customer service for dropshipping), look at their social media, sign up for their eCommerce email marketing, and more. Gather as much data as possible to determine what your competitors are doing right and areas that you can do better in. This will give you a leg up on launch day as you'll be prepared to start taking control of the market immediately.
4. Find a Supplier
A dropshipping business is only as good as the products it sells. That means you need to invest time and energy into finding suppliers that provide quality products at reasonable prices. Your best option is to use a wholesale directory to learn how to find vendors that are reputable and have experience in dropshipping. Not doing so is one of the most common dropshipping beginner mistakes. You can slo try drop surfing and rotate through products more often.
This step is vital in securing a lasting relationship that will help, rather than hinder, your business. Make sure the suppliers can handle production, packing, and shipping products with ease. If customers run into issues with product quality or slow eCommerce shipping, your business is the one that will suffer. You need to know how to find dropshipping suppliers that are reliable.
5. Build Your Website
With products and suppliers secured, it's time to start building your new storefront. One option you can go with is a headless eCommerce platform. This will let you have total control over your dropshipping websites, but will require you to build and launch everything on your own. If you choose this route, you'll also want to look into using a dropshipping website builder.
You could also choose to use an online marketplace or B2B online marketplace. Here, you'll build a storefront on an existing website along with other businesses. Though you have less control over your site, you'll have the chance to get your products in front of a much larger market. BlueCart eCommerce is a great choice for your new storefront. We handle all the hard work of building your catalog, processing payments, and more, so you can get right to selling.
6. Settle on Finances and Payments Software
Your ability to handle transactions and accept payments is key to making sales. Customers like to have flexibility in their payment options and need to feel secure in your ability to handle sensitive financial information. If you run your own site, you'll want to invest in a high-quality eCommerce payment gateway to handle your transactions. This will give you flexibility to accept different types of payments and keep your customers' data safe.
If you use a platform or wholesale marketplace like BlueCart eCommerce, you don't have to worry about this step at all. We have robust integrated payment capabilities that allow you to send invoices and accept payments with ease. We use HTTPS for all services and encrypt all card numbers used by your customers, so they can feel secure shopping with you.
7. Market Your Business
Once your storefront is live, you need to attract customers. A good place to start is by focusing on eCommerce SEO and eCommerce content marketing. These don't require a dedicated budget and are great for producing long-term results. Remember to follow best practices using SEO for eCommerce product pages so each product has a chance of showing up in search results. This is key in how to make money dropshipping.
Email marketing is also a great choice. It is the most effective form of eCommerce marketing and is great for converting both existing and prospective customers. Dropshippers that use BlueCart eCommerce can use our integrated email marketing tools to send promotional emails and more to their customers easily.
Do I Need GST For Dropshipping?
If your dropshipping business is located in India, the answer is yes. Anywhere else and the answer is no. GST, or goods and services tax, is an indirect tax unique to Indian businesses. Luckily, if your dropshipping business sources products from India, but is located elsewhere, this tax is not applicable to you. However, this may not apply if you run a reverse dropshipping business, so do your research.
Do You Need LLC For Dropshipping?
In the simplest terms, no, you don't need an LLC for dropshipping. However, the answer is slightly more complicated than that. An LLC, or limited liability company, is a specific way to structure a business that gives the founders protection from lawsuits and bankruptcy. There are other business structures that work as well.
The better question is, "do you need to register a dropshipping business?" There, the answer is usually yes, depending on your particular state's laws. You may be required to use a certain business structure, get an eCommerce business license, purchase eCommerce business insurance, or get various permits. Don't jump into dropshipping until you know exactly what's required.
Dropshipping Costs
One of the main reasons dropshipping is a great model for entrepreneurs and startups is the low costs. Still, there are a few costs you can expect to deal with when starting your dropshipping business.
Here are the most common dropshipping costs:
Web Platform
All eCommerce businesses must pay a monthly fee for their chosen eCommerce platform. Luckily, most platforms use a tiered revenue model like a subscription box business, so you won't have to spend a lot to start a new business. BlueCart is an even better choice. There's no setup or monthly fees, and we charge the industry-lowest payment processing fees. This lets you invest your money where it counts, selling products.
Supplier Fees
The suppliers you work with will charge you for the products you sell, but also for their dropshipping service. Make sure you know in advance what the monthly fees are and what services are included. It's vital that you have good, long-lasting relationships with your suppliers if you're going to grow your business.
Marketing Costs
Since dropshipping businesses rely so heavily on seeking out new prospects, marketing costs are one of the highest expenses. You may invest in eCommerce PPC and dropshipping ads, influencer marketing using affiliate marketing vs dropshipping, freelance bloggers, or something else. Track all eCommerce KPIs for your marketing efforts and adjust budgets as needed to avoid wasting money on ineffective marketing. Make sure to account for these costs in your markup, that way you can maximize your dropshipping profit margin.
Overhead Expenses
Though you don't have to pay for warehousing or safety stock, you'll still have overhead costs in a dropshipping business. This includes your computer, utilities, any automated dropshipping software, and other operating expenses. These are usually quite low, but try to avoid letting any of these costs grow too much as you scale your business. This will eat into your margin (see markup vs margin) and lessen the benefits of dropshipping. Remember, expenses will go up once you need to start filling dropshipping jobs to keep pace with all the work.
How Much Does it Cost to Start a Dropshipping Store?
On average, it costs about $500 to start dropshipping. Startups can expect to invest between $250 and $1,000 to start a dropshipping store depending on the eCommerce software and eCommerce platform they choose.
Set your budget beforehand and plan for a few months’ worth of low sales. If you're particularly thrifty, you may be able to get a store live with no investment at all. This involves seeking out free trials for all software you plan to use.
Don't Dropship the Ball
Dropshipping can be a very lucrative business with immense scalability. Follow the steps about and invest in the right tools for the best chance to grow. You'll also want to avoid taking any shortcuts like manipulative marketing or selling low-quality goods. This will only cause your business to suffer and push customers away.
For more guidance, try reading dropshipping books and taking dropshipping courses. You could also look into cross docking if you have a little bit of storage space and want more quality control.