Here is the guide about How to Start a Dropshipping Business Online.
Do you know you can make a passive income by running a successful online business?
And many of them in my group went from 0 to $500k a month through Dropshipping business. And I know you want to do it right now!
That’s why I’ve created this interesting guide and steps to start dropshipping business online. In this free guide, you’re going to learn all the basics and fundamentals of this business.
Table of Contents
What is Dropshipping Business?
Dropshipping is a supply chain system in which the retailer transfers the customer orders to a manufacturer or wholesaler.
The cargo reaches the customers directly from the source without necessarily going through the retailer. When you start Dropshipping business, you can collect the commission for every order transfer service.
What does a Retailer do?
The retailer gathers the product requirements from customer online. He will have a website with complete product listing based on categorization and sub categorization.
The customer selects the items onto the shopping cart. He makes a payment to the retailer before or after shipment delivery. The retailer, in turn, passes the customer order with delivery details and shipping address to the manufacturer or wholesaler.
What does a Wholesaler do?
The wholesaler processes the order and delivers the shipment to the delivery location. The financial transaction between the retailer and wholesaler can happen for every shipment or on contract.
It is the wholesaler or the manufacturer who has the physical stock of products and items required for the customer.
Why Choose Dropshipping?
A customer may contact the manufacturers or wholesalers to get the shipment to his doorstep. However, there are certain limitations which he has to face. For example,
- Order quantity of products are below the minimum order quantity of manufactures
- The customer has to contact multiple wholesalers for the various products
- Payment to multiple wholesalers can be a complex task
- Difficult to search for suppliers for specific and generic products
- An online retailer can provide you with multiple and simplified solutions for single and various products and wholesalers/manufacturers
- He is the single point of contact for the different categories, subcategories, and individual products
- The customer can choose multiple products, brands, and other criteria based on items from the same retailer. He will take care of passing the orders to an individual or multiple suppliers.
- The retailer updates the product listing from multiple suppliers onto his website. Any new product arrival, changes, and removal of products happen at the retailer end
- The retailer provides customer service from his end with help from the wholesaler or manufacturers
- Easy and comfortable for the customers to make purchases
I want to start Dropshipping? It is Legal to do?
It is perfectly legal to start online Dropshipping business from your city or town. The federal and state governments have absolutely no restrictions or objections in any form.
License
Many of the states require you to have a Dropshipping license before starting the business. However, the regulations may vary across the states.
You can get the FEIN number (Federal tax identification number) from the Internal Revenue Service for your unique identity online. Once you get it, you have to display the numbers on your Dropshipping website.
Reach
FEIN is the federal government authentication of your website to do Dropshipping business. Now, the wholesalers/manufacturers and customers can reach you to sell and buy. You can become the authenticated retailer with no legal or other forms of hassles and limitations.
Advertisement
FEIN gives you the right to advertise and market your Dropshipping services on your website. You can use related keywords to promote your website through organic and paid SEO marketing.
Also, You can use many online business promotion sites like Google My Business. You can also promote the links to your website through social media, blogs, forums, and much other advertising media.
Non-US Citizens
If you are a non-US citizen, it could be mandatory to have an American business partner to start your Dropshipping business. The law may vary in different states.
You can consult commerce and legal expert to know more details about the registration and licensing procedures.
How much I need to invest in doing?
Your investment in the Dropshipping business depends on many direct and indirect expenses (Onetime and frequent), taxes, insurance, customs, and other statutory and non-statutory costs. The first aspect you have to consider is the investment on an e-commerce website.
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E-Commerce Website
Your e-commerce website has to be professional in design and functionality. It is the first point of attraction and retention of potential customers and suppliers.
Having a product listing under a vast range of categories and subcategories is very important. For example, you can think of
- Groceries and household articles
- Fabrics and fashion
- Electrical and electronic appliances
- Machinery and equipment
- Spare parts and machine consumables
- Antique articles and so on
You can have a product listing with general and technical information. It could be related to how to install, how to use, safety measures, benefits, etc.
The potential customers who choose a product should get complete details with user manual if required.
Image galleries for individual products with similar products from other brands will be a huge advantage. The listings can attract several visitors.
After the design, you have to focus on content writing for your e-commerce website. Then you move onto SEO, blogs, social media content and links, and paid advertisement (SEO, Google, directory listing, etc.). All of them require investments.
Product Research
After having your own professional e-Commerce website, then what to sell is the key point. Although if you’re an e-commerce expert, you may harbor many ideas about the trending products to sell, while to be honest, there are different ways for you to do product research to get ideas.
At least you can use Google Trend or Aliexpress dropshipping center to find out the winning products. Or some spy tools would be a good choice, such as FindNiche, it’s a powerful tool to analyze profitable products with the potential for a massive return on investment. It’s impressive for its huge database and real-time updates.
Otherwise, like joining a professional group to catch the trend, or using some free tools, such as AmzChart to check the negative reviews on Amazon should be well considered.
All of these would be helpful for your product research. Then the next step is to find good suppliers.
Supplier Analysis
Now, you have to establish connections with product suppliers. Before that, you have to make a practical analysis of their product types, application, quality, warranty, safety, durability, and other related standards.
Suppliers may have competitors within your state, USA, or abroad. You may have to hire a consultant to perform the task of analyzing the suppliers and compare with each other. Then you can select the right suppliers for your product requirements.
Multiple-Suppliers
You may need multiple suppliers for one or more categories of products you want to sell online. It depends on factors like
- Availability
- Quality
- Consistency and other factors
The supplier should be available whenever you need to book shipments. He should have the sufficient inventory of the products you order. Selection of such suppliers through consultants or online directory search is also an investment.
Shipment Cost
Look for suppliers who can make the shipment free or within the affordable range for your customers. Shipments from/to overseas countries may involve customs and other statutory requirements.
Do you have to check how much of it is he imposing on the customers? You can compare it with the product cost and check whose rates are better for your customers. Then you can choose the suppliers who offer the best prices.
Return Options
How much of your commission does the supplier demand to be refunded, when the customer returns the products? Is her deducting the entire commission or only a part of it? What are the terms and conditions? You have to enquire about them because they are also part of your investments.
Customer Analysis
You have to target the most potential customers within a chosen market zone. You have to invest in creating many related parameters, which could be
- Website and product visibility
- Target audience attraction and retention
- Audience engagement
- Consistent communication (emails, phone, etc.)
- Audience conversion into leads
- Lead follow up
- Lean conversion into sales
- Marketing and advertisements for new products etc
Every point we have mentioned above needs investments. Almost all of them are recurring, except a few of them like domain registration. You may have to change even the website design and content to stay relevant in the changing market conditions.
Competitor Analysis
Even though there are many online free tools, they may not be up to your expectations. Hence, you will need a professional competitor analysis tool or a consultant.
You need to invest regularly for the fee and other processing charges. The investment volume will depend on many factors including
- Number of competitors (for each product and brand)
- The intensity and geographical area of competition
- Strengths and limitations of your competitors
- Your strengths and limitations
Only a professional analyst can perform all the activities accurately and consistently. You have to invest in the services.
Market Expansion Scope
Your Dropshipping services are not for today and tomorrow alone. You have to consider it as a long term business with a scope or vertical growth and expansion.
Vertical growth is the increase in revenues and sales within a limited market zone. It can happen through an increase in the volume of sales and number of customers.
Expansion is the increase in several cities, states, and the counties of reach. Initially, you may have only a few customers outside the range of your present business zone.
An online e-commerce business can expand all over the globe with no restrictions. The only factor is the intensity and scope of advertisement and marketing.
Calculation
You can calculate all the onetime and recurring expenses related to all these factors. Then you can get a clear picture of the investments you need to make.
You can find cheap, moderate, and sophisticated services online related to your specific Dropshipping business. You have to choose the most economical and efficient services to design, develop, and sustain your business.
In the initial stages, you may focus only on the survival and sustenance on the competitive markets. The investments you need to make could be the minimum possible level. Once your online Dropshipping business starts growing, you may have to invest more with time.
You can do all the calculations by yourself if you have the experience. Or you may have to consult a professional to perform the tasks for you. It is yet another investment you have to make.
Results
All these investments you make into the Dropshipping business can bring you regular ROI and increasing profitability with time.
You have to monitor and manage the various processes with your experience or a team of technicians. The salary you have to pay them could be one form of investment.
How to make it Inexpensive?
If you know how to perform all the design, development, SEO, and marketing contacts, you can save all the investments required for each category. The other investments could be within a manageable range.
How Much Can I Earn Through Dropshipping Business?
How much you can earn through the Dropshipping business depends on many factors from the customer attraction, retention, sales conversion, continuation, and volume of sales you get. Remember, it is not a onetime business or a seasonal business.
You have to involved 24X7 in it without distraction or disappointment. Sometimes the business could be high, and other times, it could be below average. You have to strike a balance in your marketing approach to keep the earning consistently growing.
Customer Conversion
The rate of customer conversions per month can decide how stable your income will be. You have to focus not only on the new potential audiences but also on the existing customers.
Providing good quality of customer services and the promotion of new products can benefit a lot.
Your focus should be on making the first time customers keep coming back for more business. So, you have to communicate with them continuously.
They can recommend your products to their friends and dear ones. Hence, the influential circle of your products and brands can grow.
Supplier Retention
You have to keep the relations with the suppliers of right quality products consistent and friendly. You may get attractive discounts and gifts from the suppliers, whose products you sell more.
At the same time, you have to avoid the suppliers who have had a bad reputation in your customer markets. Hence, it is necessary to perform supplier audit frequently.
Product Selection
Selection of products and brands for website listing can make a lot of differences to the sales volume and frequency. Check all the competitor websites and make a list of fast-moving, slow-moving, and non-moving products.
You can also make such an inventory on your website too. The product selection also depends on many factors like
- Gender and age group of customers
- Geographical location and altitude (for foods and appliances, etc.)
- Customer lifestyle and hobbies
- Product and brand preferences
- Type of customers (budget or big-hearted)
There could be many more such factors which you have to analyze within your product marketing and selling zones.
Competitors
A strong competitor for a specific product or category can force you to
- Reduce product price
- Increase product range
- Offer more discounts and gifts, etc
They may have an effect on the price bargain you do with the suppliers. It could reduce the commission percentage you get.
If you can offer a reduction in commission for fast moving products, it may not affect your business much. Discount on slow-moving products can affect your business negatively. Hence, you have to know how to balance the factors to earn more profits.
Inflation
Inflation might affect the commission percentage you get. The customers may move away due to the price hike, and the suppliers may not necessarily agree to supply the products at a lower price.
So, you have to research the most economical products to attract more customers and keep your profits at higher levels. You can’t afford to sell low-quality products, because it could affect future sales.
You have to plan your Dropshipping business by keeping all these factors in consideration. If you can adopt smart business techniques, it is easy to get good profits.
Infrastructure
You have to consider the infrastructural facilities in your business organization and the monthly expenses. If you own a home based business, the costs may not help me much.
If you have a small or medium scale establishment, you have to consider the power bills, internet bills, salaries, and hardware & software overheads.
Calculate
You can calculate these factors while estimating the monthly earnings. Marketing for maximum customer conversion is the only way to increase your monthly profits.
You can start as a freelance Dropshipping agent from your home. Once you start earning handsome profits, you can expand the scope of your business.
Best Dropshipping Platforms
There are many established Dropshipping platforms online, which can give you the best foundations for developing and growing your business.
We have researched the entire website to dig out two of the leading platforms, namely Alidropship and Shopify. They have a reputation among the customers and suppliers for being the most trusted options.
However, the practical experience of many entrepreneurs shows that Alidropship has been the first choice for generating consistent profits.
Steps To Start Dropshipping Business Using AliDropship
Read our AliDropship review
You can start Dropshipping business within a short time after registration. AliDropship platform is flexible enough to design and develop your store independently.
For that, you have to download a plug-in and install it onto your system. You can follow the simple guidelines to start a dropdown business within a few steps.
You can also let the Alidropship people develop a custom website for you. The website offers a wide range of services, which include hosting, promotional tools, ready custom stores, social media marketing, and AliDropship coupon codes to get 30% discount.
The website has a complete set of tools to design the interface, create a backend database, hosting, email marketing, banner ads, and promotional videos. You need to spend a few hours of your time on the website after registering as a client.
Here are a few simple steps you can take to start Dropshipping business using AliDropship.
- Get a laptop/desktop with stable internet connection
- Get a niche research from Alidropship
- Design and develop an e-commerce portal from AliDropship
- Get an in-depth keyword research for manufacturers, suppliers, and importers with products
- Get a high quality SEO copyright content with the integration of all keywords from Alidropship
- Start interacting with the product manufacturers, suppliers, and importers
- Start getting product details (technical, commercial, statutory, shipping, etc)
- Get your portal connected to the social media websites
- Get an SEO starter pack from Alidropship
- Get an in-depth keyword research for potential customers (demographic data, buying patterns, etc)
- Start advertising on social media through Alidropship
- Set up add-ons and plug-ins from Alidropship
- Get your Dropshipping store reviews through Alidropship
- Start connecting with potential customers through Alidropship
- Start making money
How to Start Dropshipping Business Online: Conclusion.
I have researched the web exhaustively to find the best business platforms which you can do at home or anywhere. The top option is to start a Dropshipping business.
The other options may take more investments. Moreover, the risks are low, and profitability factors are high when you start online Dropshipping business.
Amazing article written by the author!