How to start a dropshipping store

André Ruud
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Updated: 12/18/2023
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7 min read

Learn how to start a dropshipping store and turn your dreams into reality. Take action now and embark on your entrepreneurial journey!

start a dropshipping store
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To start a dropshipping store is a challenging but rewarding entry into entrepreneurship. This business model allows you to open a virtual store and start selling to customers without holding any inventory upfront. With dedication and a realistic approach, dropshipping can become a sustainable income source.

Here’s a comprehensive guide to kick-start a dropshipping store:

Commit to Your Dropshipping Business

Like any business, dropshipping demands commitment and a long-term outlook. Don’t expect quick, effortless riches. Instead, be prepared for a significant investment of time, money, or both. Setting realistic goals and expectations can prevent discouragement and keep you on track.

Select a Viable Dropshipping Idea When You Start a Dropshipping Store

Look for trending products or niche markets with a passionate customer base, such as fitness gear, fashion items, beauty products, electronics, phone accessories, or yoga-related items. Consider focusing on specific niches like dog accessories, iPhone cases, camping equipment, or fitness tools. Remember that the booming e-commerce sector means increased competition, making it crucial to research your competitors thoroughly. I also think it is important to build a business around your passion.

Conduct Competitive Analysis

Understanding your competition is key when you go ahead to start a dropshipping store. Analyze around five competitors, including major players like Walmart, eBay, and Amazon. Use Google searches, competitor analysis tools like Similarweb or Alexa, and social media to gather information. Study your competitors’ marketing strategies, product offerings, pricing, and customer engagement. Organize this information in a spreadsheet for easy reference and to help differentiate your business.

Selecting a Dropshipping Supplier

Reliable suppliers are essential since they provide the products you’ll sell. Utilizing e-commerce platforms like Shopify, you can connect to marketplaces such as DSers, which simplifies finding suppliers and products. DSers offers access to a variety of items from global suppliers, and you can add these to your store with a single click. Particularly, for suppliers in China, opting for ePacket shipping is advisable as it’s faster and cost-effective.

Creating Your E-commerce Store

To start a dropshipping store, you need an e-commerce store. Some options are Shopify and WooCommerce. (Read what theme i use on all my WooCommerce stores i build). They streamline domain registration, sales and marketing tools, product and payment management, and online shop setup. Easy to use and doesn’t need design or development abilities. They also provide several themes to customize your store’s look.

Deciding on a Business Structure

Establishing a legal business structure is important for serious entrepreneurs. Common structures include:

  • Sole Proprietorship: This is the simplest form but offers no personal liability protection. It requires minimal filing, and earnings are reported on personal taxes.
  • Limited Liability Company (LLC): An LLC provides more protection for personal assets and is considered a separate legal entity. It requires additional filings and fees.
  • C Corporation: This offers the most liability protection and is suited for larger businesses. It involves more complex incorporation processes and is subject to double taxation.

Choosing the right structure depends on individual circumstances, and consulting a lawyer is advisable. In the U.S., most small entrepreneurs opt for a sole proprietorship or an LLC.

Requesting an EIN Number

EINs are required for tax filing, bank account creation, and other formal business operations in the U.S. Online EIN applications on the IRS website are simple and free. Legitimising your firm requires this step.

Organizing Your Finances

A crucial aspect while you start a dropshipping store is to separate personal and business finances. Mixing these can lead to accounting complexities, personal liability for business debts, and potential issues during tax audits. To maintain clear financial boundaries, consider opening business-specific accounts:

  • Business Checking Account: Use this for all business transactions, including income and expenses. A dedicated checking account simplifies accounting and financial tracking.
  • Business Credit Card: Reserve this for business expenses and inventory purchases. Choosing a card with suitable rewards can be beneficial, especially if you’re purchasing significant amounts of merchandise.

Handling Sales Tax

Sales tax collection depends on two conditions:

  • Your operating state requires sales tax.
  • The customer resides in your state.

You don’t need to collect sales tax on orders from other states, even if those states impose their own sales taxes. However, laws may change, so stay informed. If your state requires sales tax, register with the state’s department of commerce and understand how often to submit collected taxes.

Local Business Licenses

Many localities require businesses to have licenses, often renewable periodically. For dropshipping businesses, especially those run from home, the requirements might vary. Research your local laws to determine what you need to do to comply.

Incorporating Outside the United States

International entrepreneurs can establish a business in the U.S., gaining access to domestic drop shippers and markets. This process can be complex and might require the merchant to visit the U.S. for paperwork, rely on a U.S.-based business partner, or hire an agency for setup assistance. This step is vital for international merchants aiming to tap into the U.S. market.

Marketing Your Dropshipping Store

With your dropshipping business up and running, focus on marketing strategies to distinguish your store in a competitive market. Given the automated nature of dropshipping, invest your efforts in effective marketing channels:

  • Paid Advertising: Google Ads and Facebook can be used to reach potential customers. Facebook ads can capitalize on impulse purchases, while Google Shopping Ads can target specific, long-tail keywords. Though there’s more competition on price with Google ads, it’s worth experimenting with.
  • Influencer Marketing: This can be a cost-effective strategy, especially for new dropshippers with limited budgets. Influencers, who often have more trust among their followers than traditional ads, can be a great way to reach your audience. Consider affiliate-based payment structures for a mutually beneficial arrangement. (Social Media is important for your business)
  • Content Marketing: To build a sustainable traffic source, incorporate content marketing. Create a blog related to your niche, produce informative videos, and infographics, or start a podcast. These mediums can help educate and engage your target market.
  • Community Engagement: Participate in online communities related to your niche, like Reddit, Facebook Groups, or forums.
  • Mobile Marketing: Engage with customers through their mobile devices. Options include VIP text clubs for exclusive deals or offering live chat support through platforms like Messenger.
  • Email Marketing: Send targeted, personalized content such as promotions, product recommendations, and newsletters to engage and drive sales.

Regularly evaluate the effectiveness of these channels, especially if you’re investing in paid ads.

Analyze and Improve Your Offerings

As your dropshipping store matures, assess its performance:

  • Sales Analysis: Use tools like Shopify analytics to identify top-performing channels, best-selling products, and key customer demographics.
  • Shopper Behavior: Examine buying patterns – are customers purchasing more on desktop or mobile? What are the conversion rates for each?
  • Profit Margins: Determine the most profitable products and track sales and gross profits over time.

Incorporate tools like Google Analytics and Search Console for a deeper understanding of search traffic and to improve SEO efforts. Regularly review any third-party app reports for social media or Messenger marketing to ensure they align with your business strategy. Establish a data-informed analytics system, consistently reviewing your store’s performance against clear KPIs.

Why is marketing campaign monitoring important

By following the mentioned steps, you can not only start a dropshipping store but also run it!

FAQs

Is Dropshipping Ethical?

Dropshipping is just as ethical as any other way of doing business. However, there are some situations where dropshipping could fall into an ethical gray area. For instance, you’ll need to decide if it would be fair to charge much more than the product cost if it could help you make a larger profit.

Is Amazon Dropshipping Worth It?

Choosing Amazon as a dropshipping supplier can be profitable. The average dropshipping margin is between 10% to 30% margins.

Can You Dropship from Alibaba?

Yes, you can dropship from Alibaba. Recently, Alibaba made a partnership with Dropified to make the dropshipping process simpler.

Can I Dropship Branded Products?

If you want to insist on selling branded products in your dropshipping store, you need to obtain a license or certificate from the official reseller or distributor’s company, otherwise, you may bear the corresponding legal responsibility.

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