How to Start Your Own Dropshipping Business in 5 Simple Steps

Editorial Team

How to Start Your Own Dropshipping Business

Dropshipping is an order-fulfillment method that allows store owners to sell directly to customers without stocking inventory. This system makes it one of the easiest ways to step into the world of entrepreneurship. With that said, building a profitable dropshipping business takes finesse.

5 Steps You Need to Build a Profitable Dropshipping Business

Starting a dropshipping business can be very competitive because you can start one for free. Since you’ll face a lot of competition, you need to sell great products that keep you afloat.

1. Choose a Competitive Dropshipping Business Idea

Performing market research is a vital first step, but don’t settle on a business idea that’s popular. The fitness, beauty product, phone accessory, fashion, and yoga niches are good entry points as long as you target a specific customer base, as you’re more likely to sell to hardcore fans.

For example, if you’re picking the yoga niche, consider selling yoga pants for plus-sized women or men. These markets are rarely catered to and desperately need products for their needs.

You can also use tools like Google Trends to determine if a product is trending upwards. Web browser widgets like Keywords Everywhere can check how competitive your product is. Don’t forget to check out your competition on social media to see how they market their business.

2. Choose a Supplier and Dropshipping Software

Once you know what products you want to sell, you can start looking for suppliers. Your supplier is the company that stores and ships your products, so you’ll need one (or more) that offers high-quality service. Start your research by reading comparison articles and company reviews.

Next, you’ll want to connect your suppliers to dropshipping software. Automatic eCommerce software can upload products, update inventory, send orders, and receive tracking updates.

You can search for the best software using the same methods we used for finding suppliers. For example, we came to understand that Spark Shipping was a convenient Flxpoint alternative thanks to a handy comparison article. Test all suppliers and software before using them.

3. Build your eCommerce Store and Business

Starting a successful online store means creating a user-friendly website. If you don’t know how to code, sign up for eCommerce website builders, like Shopify, Wiz, or Squarespace, to make the process easy. You’ll need a site to attract traffic, sell products, and process payments.

If you’re serious about growing your dropshipping business, you’ll want to set up as a business entity. Most companies start as sole proprietorships, which are taxed higher than corporations.

Companies that want to save money on taxes and look professional simultaneously should switch to an S Corp. To do this, you’ll need to request an employer identification number (EIN), which is like a Social Security Number for your business and fill out the required paperwork.

4. Get Your Business Finances in Order

Of the 4 most common reasons businesses fail, financial hurdles always take the top spot. One common mistake entrepreneurs make is blending their personal and business finances together, which causes confusion and potential liabilities. You also increase the chance of being audited.

First, open a business checking account and get a business credit card. This helps you build business credit. Next, check if your state has a sales tax, so you can collect it from your buyers.

Most cities require a business license, which needs to be renewed on a regular basis. With that said, dropshipping businesses aren’t always considered “businesses” in the strictest sense, as they’re operated from home offices. Before getting a license, check if it’s required in your state.

5. Market/Advertise Your Dropshipping Store

How are you going to sell your products if no one knows you exist? Or, an even better question, how will you prove you’re better than your competition without marketing? To stand out, you need to put effort into your marketing efforts, which is easier to do with a dropshipping business.

Since everything is automated, you can invest more time into content marketing, influencer marketing, and paid ads. Consider utilizing search engine optimization for organic traffic.

The only thing more important than marketing your business is analyzing its results. After finishing your first campaign, review your analytics and find your best-performing channels. Get a read on shopper behavior and adjust your marketing, if needed, to improve conversion rates.

If you’re looking to kickstart your online business and are considering dropshipping as a business model, Gelato can give you some ideas for products to sell and help you get started on the right foot.