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How to Set Up a Dropshipping Business

Learn how to select your product, secure your supplier, and build your e-commerce site.

Woman working from home on laptop on her dropshipping business.
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If you’ve ever fantasized about starting your own business, you may have become discouraged by the hassle and frustration that can come with operating a retail store, or the inventory costs, ultimately turning you off. While it’s true that operating any business is a lot of hard work, certain areas may not need to be as difficult or expensive as you might think.

Enter: Dropshipping.

The Dropshipping Phenomena

Here’s how dropshipping (essentially, an order fulfillment method) works:

Customers place orders with you, the retailer, who in turn passes the orders to a partner supplier. The partner ships the order directly to the customer. That’s it: You don’t need to purchase or store inventory, deal with packaging or shipping, or manage any of the other overhead that makes running a business such a challenge.

Of course, you’re still a business owner. But you can focus your time and energy on setting up your e-commerce website, choosing the right inventory to promote, finding customers, and ultimately improving sales.

Dropshipping is an extremely popular business model for new entrepreneurs, especially those who lack startup capital but are flush in internet marketing skills used to find customers, sell to them, and ultimately make sales.

If dropshipping seems like something that would work for you, here are a few tips to get you started:

1. Select a Product

The first step to setting up a successful dropshipping business is to select your product(s) to sell. Focusing on a specific niche can help you to streamline your business and target a specific audience, while helping you establish credibility within that niche.

Think of it this way: You’re in the market for a new frying pan. You find a company that specializes in frying pans. They offer a wide range of frying pans in a variety of price ranges in varying qualities.

You also find a company that sells frying pans, as well as other pots and pans. Their range of frying pans is not quite as extensive as Company #1.

Finally, you find a company, Company #3, that sells frying pans, shoes, hairdryers, snack food, and gardening equipment. They offer only a couple of frying pans.

From which of these three companies are you most likely to purchase your frying pan? Not everyone’s answer is the same since there are several things to consider (price, reputation, customer service, and more). But chances are, most people will choose—or, better yet, FIND—option number one or two. The first has focused entirely on the frying pan niche and will likely provide you with the best possible frying pan, due to their expertise in this area.

The second is in the niche of cookware and is also a great option. They probably know a moderate amount about frying pans and other types of cookware. The third, though it may end up having the exact frying pan you want, isn’t focused on a niche. Their knowledge on frying pans is most likely limited due to their broad offerings. (And you might not even know they sell frying pans without a significant amount of research.)

Bottom line? Your odds of customers finding you and instilling enough confidence to buy from you improve when you focus on a particular niche and strive to be the best option within that niche.

It might seem counterintuitive to limit the products you offer, but targeting a niche market can be the best way to achieve long-term success. “Niche” doesn’t mean there isn’t a lot of demand for the product; it just means the demand comes from a specific group of people. These are your ideal clients and you’ll focus your efforts on crafting a message that appeals to them.

When choosing what product or products to sell on your website, you’ll want to look for a niche that:

  • Has a customer base (do enough people want to buy your product?)
  • Doesn’t have an overwhelming amount of competition (how many other companies are selling the same product[s]?)
  • Isn’t completely controlled by big-box retailers (do large stores have a monopoly on the product and will they always be able to undersell you?)
  • Is appealing to you (are you interested in selling the product?)
  • Has a low shipping cost (to maximize profit)?

2. Secure a Supplier

This is when you really get down to business. Choosing the right partners is an important part of your success.

When choosing a supplier, you’ll want to look for one that:

  • Charges reasonable shipping costs
  • Fulfills orders promptly
  • Has good reviews with other dropshipping business owners
  • Communicates with you, responds promptly and professionally, and effectively answers your questions
  • Can accommodate your initial demand and future business growth with their production capacity
  • Charges few, if any, additional fees
  • Offers a reasonable return policy
  • Provides you with order samples so you can determine that the product is up to your standards

You’ll also need to determine if you want to work with an international or domestic supplier.

3. Build Your e-Commerce Site

There are a multitude of companies out there that can help you set up your e-commerce site online without the investment and expense of a warehouse, and when you’re ready, scale to something bigger.
Some popular platforms include Shopify, Wix, WooCommerce, Magento (now Adobe Commerce) and Square, but the list changes rapidly. Do your research and find a platform that works for you based on your needs (cost, hosting/speed/bandwidth, usability, integrations, fees, support, etc.).

4. Launch Your Business

The hard work is behind you, but there’s still a business to run. You’ll be reviewing and tracking customer orders, marketing your business and making sure people interested in your product are finding your website, and dealing with any customer service issues that arise. But because you’ve chosen a dropshipping business, you’ll avoid much of the hassle that comes with having inventory. Being a dropshipper is one of the most efficient and frustration-free methods for running a business.

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2 months ago

There is definately a lot to find out about this subject. I like all the points you made

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CUNA 2023 Diamond Award Winner

Financial Education

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