How to Start a Dropshipping Business
Do you know how to start a dropshipping business? When discussing the digital market, ecommerces, and starting your own online store, it’s hard not to stumble upon the term dropshipping.
Whether you’re a new entrepreneur looking to enter the world of digital businesses or someone who already owns an ecommerce, starting a dropshipping business could be the next step to leverage your sales.
Tag along as we explore this online business model and find out what you need to start selling online without having a production site.
What is Dropshipping?
Dropshipping is a business model that enables companies to operate and sell products without having to own a warehouse, control inventory, and manage product stocks.
In practice, the company partners up with a dropshipping supplier and opens a digital storefront to sell their products, acting as an intermediary for the sales operations.
Customers will order from your business and receive the product directly from the dropshipping supplier’s warehouse on your behalf. The supplier is in charge of manufacturing, storing, packing, and delivering the products.
- The customer places an order;
- You keep your part of the profits and forward the order to the dropshipping supplier;
- The supplier delivers the order to your customer.
This business model is ideal for entrepreneurs who don’t want to or can’t manufacture and store products and don’t mind sharing profits with a supplier.
It’s also a great way to expand and scale ecommerce businesses without renting or owning a warehouse.
How to Start a Dropship Business in 9 Steps
Now that you’re familiar with how dropshipping businesses work in general and know what is dropshipping, the next step is to understand exactly what you need to do to start.
1. Choose Your Niche and Products
You can choose to focus on specific niches or broader ones. Both options have their ups and downs.
You can build your brand's image to be recognized as a specialist in a market niche and distinguish yourself from generalist competitors. On the other hand, your target audience will be smaller than a department store. But, it allows you to narrow down customer behavior, and create more efficient strategies, at the same time.
If you sell a wide range of products and aim at bigger markets, your number of potential customers will be larger, and so the competition. It may be more difficult to outstand your online store from the others, and gain visibility.
Once you choose your niche, it's time to decide the range of products you will offer.
A product isn't always a physical item, it could also be an ebook, and a subscription, for example. The dropshipping business model enables you to sell physical products without manufacturing or having to store them by yourself.
2. Define Who Your Target Audience Is
Your marketing and sales strategies are more likely to succeed when you understand your potential customers. You can offer what your audience wants, communicate to them using the channels they prefer, show how your products help solve their demands and provide valuable content for them.
Try to answer the following questions to begin with:
- Where is your target audience located?
- What is their age range?
- How often do they buy online?
- Where do they buy on the internet?
- What are their pain points?
- How do your products offer a solution to them?
This data already enables you to create persona profiles, which can be described as fictional characters that contain the main characteristics of your audience. When your marketing team draws the actions to promote your business, they can do that according to the persona profiles, to be more accurate and get the desired results.
3. Research Your Competitors
Another important step regarding how to start a dropshipping business is to research your competitors. It allows you to understand the market you are entering, identify trends, and marketing strategies that are already applied by other dropshipping businesses, and much more.
It's fundamental to understand who you are competing with to know how you can stand out from them, and what you can do differently to attract customers. Identify and highlight the aspects that make your brand unique.
4. Find Suppliers
Once you have defined what products you want to sell, it's time to look for dropshipping partners who will supply the products and be in charge of the whole logistics process including managing and delivering the items you commercialize.
You can opt for having one or more suppliers, it depends on your business strategies and what you will sell. However, it's crucial to do complete research and ensure to select reliable suppliers.
They are responsible for a significant part of your business processes. If you make poor choices it can deeply affect your relationships with customers, and your brand image.
5. Set Up Finances
Planning how you will manage your finances is essential for starting a dropshipping business since you need to build a profitable plan to be successful. First, you need to keep your personal and business finances completely separate.
Start doing that by creating a bank account for your business where you will deposit your revenue. Having a separate account makes it easier to keep track of your ecommerce earnings and expenses. You may also apply for a business credit card.
It's interesting to consult a financial advisor, who will help you to know your tax obligations based on the area you are operating in. This way you will avoid legal problems, and having to pay fines.
Also, you should define your budget, the initial costs, and the ones you will have to maintain your online store. Make market research to determine the projected revenue, and include it in your financial planning too. Using accounting software can be very helpful to monitor cash flow.
6. Develop Your Brand Identity
You need to build a brand identity that is aligned with your market niche and target audience. It's necessary to create a logo and define your brand color palette, font, and tone of speech, which must also be coherent with your brand's mission, values, and goals.
Create guidelines explaining how your brand's visual elements must be applied in different design formats to guarantee the visual identity you have envisioned. This helps to create a consistent brand image that will be easily remembered by your customers.
7. Build a Website
Building an ecommerce website is easier than you think, and it doesn't require design or coding skills if you opt to use a website builder. There are many platforms out there that offer an intuit website editors, where you can choose a pre-built template, and customize the pages as you need.
The website has to be aligned with your brand's visual identity, and be well-organized, so visitors can navigate seamlessly through it and find the products they are looking for. Define a domain name that is easy to remember, avoid words that are hard to spell, and don't put special characters.
Separate the product into categories, and provide a complete product description on the product's page, along with high-quality pictures that show the item as close as possible to reality.
8. Create and Implement Marketing Strategies
Once you have built your online store, you need to promote it to conquer customers, that's where marketing strategies come in. Use the internet at your favor, and be strategical to make your brand stand out.
Define which social media platforms you will use to promote your brand, and create a business profile on each one of them. You can conquer organic visibility by publishing content that is relevant to your target audience, and invest in advertising at the same time.
Use PPC (pay-per-click) campaigns on social media and other websites, and configure them to appear only to the people who have your customer's profile, Enjoy your website features as well to create content marketing strategies, for instance, by adding a blog section, and writing articles considering different stages of the buyer's journey.
Research relevant keywords to your market niche, and develop articles focusing on them, can help you appear on the first search result page at Google, conquer visibility organically, and grow in credibility and authority in your area.
9. Analyze Performance and Keep Improving
As you begin your dropshipping business, it's fundamental to set key performance indicators (KPIs) for each company sector and monitor them continuously. As the name suggests, the KPIs are used to measure your company's performance.
When you keep track of them, you can identify problems before they get worse. Use the KPIs to understand which are out your business's strong and weak points, and define accurate strategies to enhance results.
3 Dropshipping Benefits
You may be wondering what are the benefits of starting a dropshipping business instead of creating your ecommerce, managing inventory, and owning your whole sales process. Here are some of them.
1. Save on Inventory Costs
The most obvious advantage is how much you can save on inventory costs, as well as packing and delivering products and, of course, personnel.
Instead of having to worry about all of these, you can direct all your resources and attention to selling.
Of course, this also means you’ll be sharing profits with the supplier, so it’s a matter of finding a good balance on how much you need to spend to acquire new customers and your profit margin.
2. Find What Products Convert Best
Another great benefit is that dropshipping stores can quickly test different products and find what converts best. This allows them to not invest as much in products that sell less or even stop selling them altogether.
On the other hand, if you were to manage your inventory, there would be no way of getting rid of a product you have already bought, besides trying to sell it.
3. Sell Globally
Last but not least, dropshipping is a business model that does not impose restraints on where you can sell, essentially allowing you to sell globally by finding suppliers in different parts of the world.
Use JivoChat to Boost Dropship Sales
Now that you have learned how to start a dropshipping business, there is a crucial point that can't be forgotten: you need to provide high-quality customer service to conquer loyal customers.
Whether you’re selling on your online store, on a marketplace, or on social media, you must be able to approach customers and assist them in real time, answering their questions and solving problems while they browse your offers.
Consider investing in a live chat solution such as JivoChat to do that. It allows you to monitor visitors in real time and set up smart triggers to engage with minimal effort. The best part is that you can install JivoChat for free and start driving sales right now
Sign up and try JivoChat for yourself!