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How To Start A Dropshipping Business

Nowadays, starting a dropshipping business is one of the easiest ways to make quick money.  The growth of Amazon, eBay, Etsy, Shopify, and other online marketplaces and platforms means that anyone can start an online store for as little as $20. But, with the barrier-to-entry being so low, dropshipping has somewhat exploded in popularity over the last ten years. But, do you want to know How To Start A Drop-shipping Business?

Markets have become highly competitive.

If you’re thinking of starting a dropshipping business – either as a side hustle or a means to leaving your full-time job – you can save yourself time and set yourself up for success by following the simple steps outlined below. But before we get to that part, what exactly is a dropshipping business?

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How To | About Dropshipping

A dropshipping business is where you are able to sell merchandise to your customer without holding any inventory. A customer purchases an item from your store at retail price. You then forward the order to your supplier, which you pay the wholesale price. Once your supplier receives the order, they ship the item directly to the customer under your business name while you earn the profit margin. All you have to do is set up the retail website, find customers, and handle customer support.

In pure and technical terms, dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

How To Start A Dropshipping Business | The Dropshipping Model

In more simple terms, dropshipping works like this:

  1. A customer purchases an item from your store at retail price
  2. The order is forwarded to your supplier (you pay wholesale price)
  3. The supplier ships the item directly to the customer under your business name

Here’s a little illustration:

This means that you – the dropshipper – don’t have to buy and store bulk stock, which saves you having to invest a lot of money upfront. It also eliminates the risk of buying in bulk and not being able to sell all of the products, leaving you out of pocket.

This is why dropshipping is so popular – it requires minimal investment, but reaps similar benefits to traditional retail models.

 

How To Add Up | Dropshipping Statistics | Starting A Dropshipping Business

The hype around dropshipping means some people are skeptical of it as a viable business model and cautious about diving in.

There is limited information about dropshipping specifically, but these statistics should help to provide you with peace of mind (and, hopefully, a sense of excitement).

  • 22-33% of online retailers have adopted dropshipping as their primary business model.
  • Dropshipping accounted for 34% of products sold on Amazon in 2011. That’s $14.2 billion of drop-shipped products from just one online marketplace.
  • The average profit of a manufacturer that dropships is 18.33% higher than a manufacturer that uses traditional retail models.
  • Global eCommerce sales amounted to $2.3 trillion USD. Projections show a growth of up to $4.48 trillion USD by 2021.
  • 84% of online sellers say that establishing positive relationships with dropship suppliers is the number one roadblock to starting an online business.

Google Trends data also shows a massive increase of interest in dropshipping over the past few years.

Enough with the chit-chat and speculative info-checks. We need to ask ourselves one final question:

What You Need To Start A Dropshipping Business

Other than a positive attitude, a good work ethic, and genuine motivation to commit to your new business venture, there are only a few essentials required to start a dropshipping business. They are:

  • A product to sell
  • A supplier of that product
  • A platform to sell on
  • A sales tax ID

Do you have a niche for the market?

A niche is a segment of a market. For example, bluetooth speakers are a popular niche in the home audio market. You could even say that outdoor, waterproof bluetooth speakers are a sub-niche of the bluetooth speaker niche. You get the idea. The more specific your niche is, the better.

Choosing a niche is the first step to starting a dropshipping business. New products and niches are emerging every week, so the opportunities are almost endless. A common misconception about this is that you can be successful and profitable in any niche.

But of course, that is NOT true!

Here, we have assembled for you a few guidelines to help you choose a dropshipping niche that will make you cash online in 2020:

Phase An Idea Into An Opportunity | How To Start A Dropshipping Business

  • Start with your interests and passions: Tap into your hobbies and interests. If you enjoy travel or hiking in the outdoors, you’re going to have unique knowledge of the products and trends in those markets that can help you identify a viable niche.
  • Scratch your own itch: This is old school entrepreneurial advice. The theory is, if you have a problem in your life then it’s highly likely that others will have the same problem. If you can identify a product that solves that problem, you might have uncovered a great dropshipping niche.
  • Research the competition: Is the niche you’re interested in over-saturated? If so, is the competition easy to beat? Better yet, is it worth beating them? You’ll often find that the niche you’re most interested in joining is the one that nearly everyone is already a part of. This doesn’t mean you can’t hop on the bandwagon, just be ready for some competition.
  • Ensure the niche is profitable: The objective of business is to make money, right? Therefore, you need to check the profitability of every dropshipping niche and product idea that you come up with. Ideally, you want a profit margin of at least 40% after shipping costs, seller fees and taxes, but you should be aiming for margins of 100% or more.PRO TIP: You can use this online calculator to determine the profitability of products you are thinking of selling. It deducts Third-Party fees from the retail price and estimates how many items are being sold each month, which is an indicator of demand.

 

I hope this was helpful for you. This article was assembled from a variety of detailed sources into a succinct and understandable format. If you liked it, share among friends and leave a comment in the comment section below!

Written by Ahsan Gardezi

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