Outgrow Blog

How to Start and Run a Profitable Dropshipping Business
05/10/2018 Akshay Saluja
8 min read

 How to Start and Run a Profitable Dropshipping Business

Who hasn’t heard about Irwin Dominguez who within 8 months made $1,000,000 in profit as a dropshipper? Or Kate who makes $32,000+ monthly revenue from her dropshipping business? They are an inspiration for anyone who wants to start a dropshipping business. Perhaps, you too want to follow in their footsteps? If you do then you’re on the right track and place. In this blog, we will go through the nitty-gritty of a profitable dropshipping business right from how to decide which products to sell, finding wholesale suppliers to marketing, promotion and so much more.

How to Start and Run a Profitable Dropshipping Business

For those who aren’t sure what we’re talking about let’s go through the fundamentals. The rest of you can jump to this section.

What is Dropshipping?

Dropshipping is an order fulfillment method wherein you sell products that are stocked at a wholesale supplier’s facilities. When a customer buys a product from your website, the wholesaler ships it directly to them.

Why Run a Dropshipping Business?

1) You can start anywhere: Dropshipping is a brilliant online business opportunity for people who want to earn money sitting at home or as a side hustle. A room, a laptop, and an internet connection – that’s all you need to manage everything online.

2) It requires minimum capital investment: You don’t need a warehouse or invest thousands of dollars to stock inventory. This also means low overhead expenses and minimum financial risk.

3) It saves your time: Since you aren’t doing the box-packing or shipping, you will have a lot of time in hand to do other important things such as improving your inventory or managing issues that you didn’t think dropshipping can result in!

Seems too good to be true? You’re right. Little as you might expect, dropshipping can be a nightmare if you don’t weigh in the cons. More about it in the next section.

Determine your Business Structure

Is it a sole proprietorship, LLC, or Corporation? If you want some direction, read Steve Chou’s blog. You will definitely gain clarity about which way to go.

Next, get your “Employer Identification Number” to open a bank account as well as file your taxes. You can apply online. The process is super easy.

Finally, get your sales tax ID. This is what you provide to the wholesale distributor. Anyone who says they don’t need it is seriously dodging an important step while signing a business deal.

How to Find a Wholesale Distributor/Supplier

The next big thing to address is finding a distributor. Let’s see how you can do that.

1) Google search: The easiest thing to do, right? Wrong. It will be tad-bit testing because not every wholesale distributor has a shiny website. In fact, they lack top-notch marketing or SEO skills. Your task is literally that of an archaeologist because you will have to dig them from under 100s of SERPs. After that, you might feel haunted by their nauseating and outdated designs. But, DO NOT JUDGE THEM for it!

2) Contact manufacturers: Ask them for a list of distributors they work with. The next step is to call them instead of sending emails because who knows if they are internet savvy?

3) Use third-party websites: For example, ImportGenius can help you evaluate potential suppliers and monitor your competitors. You can easily know where your competitors are sourcing their products from. The database is so strong that they also reveal product volumes, industry trends for US importers, and distribution companies.

4) Supplier’s directory: Checkout directories like Doba, Salehoo, and WholesaleCentral or Megagoods. They have a database of suppliers organized by the market, niche, and product. Some of them are subscription-based so don’t say we didn’t tell you!

5) Attend local trade shows: At trade shows, you can interact and get to know them better. You can see the products and make a preliminary evaluation of them. If you have time then do check Wholesale Central. They have a list of all the trade shows in the US. Select your niche/category and you will find an event to attend.

6) Explore Alibaba and other online marketplaces: Check out this video by Shopify where the prime focus is on how you can look for suppliers on Alibaba.

7) Talk to someone who already runs a dropshipping business: Nothing like reaching out to friends and family who are already running a successful business.

Once you finalize the suppliers, open a reseller account with them.

Quality-check the Suppliers

One of the worst nightmares of running a dropshipping business is partnering with untrustworthy suppliers. They can easily ruin your business. So don’t be in a rush to sign a deal. Take your time and consider the following points.

1) Stability: How long has the supplier been in the business? It is wise to go for the experienced distributors because had they not been reliable or doing their job, they would have exited long ago. Though, it’s important to know that the newbies too can surprise you. However, since you’re just starting out it’s better to spread out your safety net.

2) Location: If your supplier is located overseas then make sure there is no communication gap because of language or technology. If you finalize an overseas supplier based out of China then we recommend you watch this video for a few dos and don’ts.

3) Talk to their sales representative: Do this to understand their company culture and work ethics. Are they receptive to your queries? How long do they take to fulfill an order? How do they handle damaged and returned products?

4) Check supplier ratings: Do thorough research. Let’s assume, you are on AliExpress. Head to the supplier rating page. Read all the reviews about them. Focus on the number of orders they’ve fulfilled and their ratings as well. This should give you a rough idea about whether or not you should do business with them.

5) Shipping methods: The distributor should be able to ship products using fast shipping methods with online trackings such as DHL, UPS, or FedEx.

Open your Storefront

With the two major hurdles crossed, we will now focus on getting your eCommerce website ready. You have two options. Either hire someone to build a custom website or choose an eCommerce platform such as Shopify, BigCommerce, Magento. Since you are just starting out, we recommend the second option.

Advantages of using eCommerce platforms

1) You don’t need to have any technical background.

2) The eCommerce platforms are affordable. You don’t have to spend $$$ on website maintenance.

3) They take care of your hosting and server requirements. You just pick up a plan that suits you.

4) You can integrate apps and software that will help you increase sales.

5) Most major platforms have excellent customer service.

Market your Dropshipping Business

We do already know that you are a newbie and may not have a huge marketing budget. But that’s hardly a thing to be worried about. Because in this section, we discuss some fantastic ways in which you can market your business as a beginner.

Ecommerce Recommendation Quizzes

Ecommerce recommendation quizzes as the name suggests, are a type of interactive content that recommend products to quiz-takers. So suppose as part of the dropshipping business you sell makeup sets and items, a recommendation quiz like this can be a great addition to your product page –

outgrow ecommerce recommendation

Once you collect responses on these, you can provide customized deals to your regular shoppers.

In fact, you can also consider adding such quizzes to your email newsletters, encouraging your email list to take the quiz to have recommendations sent straight to their inbox.

Surveys and Forms

Surveys and forms can be used to get customer insights and feedback. Adding these to your newsletters or occasionally lining them to your social media stories can help you gain valuable information on your prospects.

To get you started, we have built this shopper insights survey template.

Giveaway

Other marketing efforts to promote your dropshipping business can include occasional giveaways. Giveaways have the inherent ability to go viral. Even if the price is not significantly huge, because, well, who doesn’t like free gifts! Set up a giveaway and promote it across channels, on social media, newsletters, and other platforms, and see the benefits for yourself!

In this opportune time, host a festive giveaway to attract audience attention!

outgrow giveaway

Polls

How many times have you seen influencers with a huge following, conduct polls on their Instagram, Facebook, or Snapchat stories?

Polls are simple tools that can be super engaging! Conducting polls around your product also helps you gather prospect insights and give you a sense of what kinds of products your prospects would want to see more.

Based on audience responses, you can consider adding new items to your product line or bring in new offers, discounts, etc.

 

Ready to Start your Dropshipping Business?

Of course, you are!

Remember, your fears are real but you can conquer them by prepping yourself. There’s nothing like a trained warrior! Do your own research and make calculated decisions.

See you on the other side?

If you’d like to read more about eCommerce Marketing first, then check out our blog below! 

dropshipping

 

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