Recently, the dropshipping business has been one of the hot takes in the industry. It is a highly advised strategy, especially for business starters. Imagine you can start selling products to your customer without spending on your inventory. Despite its popularity, not all aspiring business owners succeed in this venture. Of course, you still need to take time to understand how dropshipping works. Don’t you worry. We got you covered. In this article, you’ll learn the basics of dropshipping business and how you can build your own. 

Dropshipping

Dropshipping business is an order fulfillment model in that you can run your online shop without maintaining your product inventory. Instead, you’ll have to post and market your products on your website. Once an order arrives, your supplier or manufacturer will ready and ship the goods from their warehouse directly to your buyer’s house. 

With drop shipping, you worry less about most business aspects, such as storage, packaging, and shipments. Your distributor takes these responsibilities off your plate. Instead, you play the role of a dropshipper or a marketer. 

Business owners are in charge of website creation and brand. You choose how to market the products you wish to sell. You have to focus on prices, including shipping costs. Since the heavy inventory burden is off your shoulders, you can calculate all expenses to gain a good profit margin. 

Many beginners in eCommerce business opt for dropshipping for a reason. For one, it is cost-effective since you don’t need a lot of overhead to sell products. Furthermore, you have less trouble getting your inventory stuck. Unsurprisingly, it is the stepping stone for most new business owners. If you’re interested, you better learn first before you start selling. 

Steps Build your Dropshipping Business

Follow these steps and ensure the success of your eCommerce dropshipping business. 

Establish a Business Concept

Before anything else, you need a business concept of the items you plan to sell and to whom you will sell. You start with the products, website design, and marketing. Without foundation, your dropshipping business is bound to fail. 

You have various options to choose from with dropshipping. You can begin selling with a limited amount of products. But make sure it is a sellable item based on your desired demographic. For example, you thought of a graphic T-shirt for bikers. Your designs, style, and quality must appeal to your market – bikers. 

Research your Competitors

With a dropshipping business concept in mind, you must look at your possible competitors. Understand how they work and find clues about their success. Also, look at their flaws and avoid them. If you have a tight business competition, it’s alright. However, you must limit your research to at least the top five dropshipping companies. 

How can you learn more about your competitors? 

Use search engines

Search your competitors in Google using keywords based on the product you plan to sell. For example, use “graphic T-shirt” and see the top 10 results. Then, see their methods of product promotion. Also, you may focus more on a specific market, like bikers or country. 

Check social media

Browse Facebook ads of your niche and review the top brands. Observe their feed design and method of communicating with the customers. Also, you may follow and check the engagements. Doing this gives you an idea of how you can improve your marketing strategy in social media. 

Sign up for business competitor’s email update

Stay updated on the competition and with your competitors. Subscribe to their email list and receive updates about their promos and deals. This way, you have a buyer’s perspective on their marketing strategy. 

Source Products and Suppliers

Another time-consuming yet critical aspect of starting your dropshipping business is finding your potential products and suppliers. You must look for these factors to ensure that all your effort and finances gain profits. 

Product Popularity

Hot-selling items are the best and safe investment. Then, look into the dropshipping marketplace and find what’s in and not. 

Product Quality

Dropshipping business often fails due to the need for more capability to gauge product quality. You may order a sample product before selling it out. Also, you may rely on the supplier’s rating and sales numbers in the marketplace. 

Profitability

Processing fees and shipping costs are vital factors in dropshipping business. You have to evaluate the wholesale cost to gain potential profits. Set promotions and deals within your limit to attract prospective buyers. 

Location

Your distributor’s location significantly impacts the shipping cost and delivery time. These two are deciding factors for your potential buyers to place an order. 

Return Policy

Many dropshipping businesses vary on the return policy. Most suppliers have no-return refunds, which is challenging to handle. Review the return policy and procedure of every platform or vendor. 

Supplier Record

Reliability is a crucial aspect of dropshipping business. Therefore, assessing your potential supplier on how they can outsource and deliver goods on your behalf is a must. You can see it in reviews or by asking other merchants like you. 

Create an Online Dropshipping Store

Once you have settled your product source, you can build your eCommerce store. You must design it according to your target market and items on sale. Also, it must look enticing and easy to use to convince your customers to place an order. Your dropshipping business website must consist of a content management system, domain name, web hosting, integration with your supplier, and built-in online payment. 

When creating an eCommerce website, apply automation for the product sale. It will process every step in the order placement. If not, you will do all the procedures yourself manually, which might result in human errors. 

Identify the Business Structure

Starting an online dropshipping business is a serious venture. So choose among the most common business structures listed below. 

Sole Proprietorship

It is the simplest form of business, asking for minimal requirements. The earnings of the company will fall into personal tax. However, it lacks personal liability protection. Therefore, it puts your personal assets at great risk. 

Limited Liability Company (LLC)

It provides better protection since it separates the business as a legal entity. However, you have to comply with additional requirements and pay for incorporation and ongoing fees. 

C Corporation 

Most C corporations have the most liability protection when done correctly. That’s why it is more expensive, and you are subject to double taxation. 

Figure out which among these three would suit your dropshipping business best. Most small-time business owners opt for either sole proprietorship or LLC. But then again, it depends on what your venture needs. 

Organize your Finances

Of course, you started a dropshipping business to earn. That’s why you must set your finances straight. First, separate your personal and business funds. Then, open a new bank account, primary checking account, or credit card designated to your business. It helps you stay organized and monitor the cash flow of your money. In addition, it saves you from confusion and wrong assumption about business liabilities. 

Drive Online Marketing

You can’t expect customers to line up their orders after setting up an eCommerce website. You still need to market it. If word-of-mouth boosts physical stores, online shops require it differently. Start by joining social media groups relevant to the business. Create business pages for Facebook, Instagram, Youtube, TikTok, and other social networking sites. Then, post regularly about your products, the latest promotions, tips, and tricks. 

Furthermore, you may invest in ads and sales. Facebook Ads are available even for those on a small budget. Write blogs with search engine optimization (SEO). It can drive traffic into your eCommerce dropshipping business. A little marketing strategy can generate sales if you focus on your target demographic. 

Assess Business Results

Pay attention to analyzing and refining the business. Most successful dropshipping continuously study the trend and competition. Also, take time to read between the numbers. Is your business really doing well? What are the possible pitfalls you must avoid? Are the income revenue aligned with your expectation? If you can find the answers to these questions, you can know the next step to improve and up your game. 

Now you are ready and well-informed on how to start an eCommerce dropshipping business. You shouldn’t miss a step to avoid mishaps. Or better yet, look for a fulfillment company that can handle your storage, fulfillment, and delivery of inventory. Red Stag Fulfillment helps you reach the target market of your product. It is a capable 3PL partner with warehouses strategically located. So you can provide the ordered products to your customers fast and safely without worrying about inventory.