Dropshipping is a low-risk method for entrepreneurs to test the waters of running an online business. This flexible model involves selling products without keeping upfront inventory. Instead, procurement and shipping are outsourced to a third party, while the seller focuses on design and marketing.
This guide will dive into the dropshipping basics, how it works, its pros and cons, and other relevant information about this flexible business model.
Dropshipping is a business model where items customers order from your store are shipped and packaged by third-party suppliers. Dropshippers don’t stock inventory. Instead, they act as the intermediary between the supplier and the buyer.
When someone orders an item from your store, you immediately forward the order details to the supplier for fulfillment. Dropshipping is popular because it eliminates the headaches of running conventional e-commerce businesses. Instead, the seller focuses on design and marketing, which are less hectic.
Suppose you want to sell smartphones online. Obtaining your first badge of inventory will usually cost considerable money, and there’s no assurance that people will purchase them from you. You can partner with a smartphone supplier instead of risking money to buy inventory.
You’ll list the supplier’s smartphones on your store at a markup, e.g., 20% more than the supplier’s price. When someone orders a smartphone, you’ll send the details to the supplier, who’ll ship the product to the customer. After paying the supplier for the smartphone and shipping, whatever amount is left is your gross profit.
What is dropshipping? An illustration for beginners
Dropshipping has many variations, but we’ll focus on the standard method of dropshipping for beginners. It works this way:
Repeating the above process can yield significant profits. Many brands have built successful e-commerce businesses using the dropshipping model.
It costs much less to start a dropshipping business than a conventional e-commerce business. Dropshipping eliminates upfront inventory costs, making it cost-effective for new entrepreneurs.
You can start a dropshipping business for less than $100 or even free. With no upfront inventory costs, you have more money to dedicate to marketing and building your online store.
Dropshipping is a highly scalable business model. You can quickly expand your business by adding new products or finding new suppliers. If you observe increasing demand for a specific product, you can find a suitable supplier and add it to your store.
It’s easier to scale a dropshipping business than a conventional e-commerce venture. In dropshipping, most of the scaling work is handled by expert suppliers, letting you focus on other aspects of your business.
Dropshipping enables you to devote more effort to promoting your products. The money and time you’ll save from outsourcing inventory can be invaluable in your marketing efforts. You can spend more money on advertising and giving customers a memorable experience, increasing your long-term chances of success.
When running a dropshipping business, you can achieve more with fewer expenses. Outsourcing inventory eliminates the need to rent a warehouse, hire warehouse managers, and negotiate with shipping couriers. This is a major benefit of dropshipping for beginners who lack expertise in running retail operations.
Dropshipping is very competitive because of its low barriers to entry. Anyone can easily start a dropshipping business, making many niches have a glut of sellers. Building a unique brand in these niches is challenging, and sellers often engage in price wars, reducing profitability.
Product returns are part of running an e-commerce business. Dropshippers often struggle with managing returns because they don’t maintain warehouse space to receive returned goods.
The best way to address this issue is to have a clear and concise return policy that outlines the conditions under which a product qualifies for return. This policy reduces the rate of unnecessary returns, allowing you to focus on the necessary ones.
For the necessary returns, you can tell customers to ship them back to the supplier or your PO box address.
Dropshipping leaves you dependent on third-party suppliers, which carries significant risks. Any little mishap from a supplier can cause shipment delays and annoy customers. Suppliers can make mistakes when shipping products, and you’ll be on the hook despite not being directly responsible.
The best way to mitigate this issue is to choose reliable suppliers with excellent track records. Zendrop is an ideal supplier, offering a broad range of products and industry-leading shipping. We empower entrepreneurs to build successful dropshipping businesses in many niches.
Dropshipping for dummies starts with market research. You should analyze your target market and its prospects. For example, if you want to sell custom T-shirts, research the size of the market in your target locations and its growth prospects.
What’s the current market size, and what will it be within 5 to 10 years? How has the market fared over the past decade? These are typical questions to research about any dropshipping niche.
These tools can help you research effectively:
Google is the most popular search engine worldwide. You can use its Trends tool to monitor global or regional product trends. You can query any niche and observe if search interest has increased or decreased.
As the most popular search engine, search trends on Google mirror real-world consumer interest for any niche. If you observe a niche with increasing popularity on Google Trends, product demand in that niche is likely also climbing.
You can monitor trends on popular online marketplaces like Amazon, eBay, and Etsy. The best-selling products on these marketplaces also sell bountifully on dropshipping stores.
Check the best-seller lists on these marketplaces to get a good clue about the items to sell. Read reviews to see what customers say about these products. Products with high demand and positive reviews will likely be good additions to your dropshipping store.
You can analyze popular dropshipping stores to get a hint of what to sell. Check the top stores in your desired niche. Analyze the stores’ best-selling products and their prices. Learning from competitors is a crucial part of dropshipping for beginners.
Selecting your niche is the next step of dropshipping for beginners. The research and market analysis in the earlier step will guide you in choosing the right niche. Many people choose niches they’re passionate about, as this passion drives them to select the best products, create effective marketing campaigns, and provide excellent customer support.
However, choosing a niche isn’t all about passion. You might be passionate about a niche that has low prospects. In that case, it’s advisable to switch to another fast-growing niche with better chances of building a loyal customer base.
Popular dropshipping niches include clothing, jewelry, fitness equipment, smartphone accessories, home decor, and eco-friendly products. There are endless niches with great prospects, so you can choose anyone and start building your dropshipping business.
Once you have settled on your niche, the next step in dropshipping for dummies is finding reliable suppliers. Suppliers can make or break your business, so you should choose wisely.
Research extensively before choosing a supplier. What do other dropshippers say about them? Do they sell high-quality products and ship them on time? Is their product quality consistent? These are typical questions to answer when vetting suppliers.
Consider these other factors when vetting suppliers:
At this point, you can start adding products from your chosen suppliers. The best suppliers have apps you can integrate into your online store. This integration lets you import products into your store at the click of a button.
Dropshipping involves adding markups to suppliers’ prices. Suppose a supplier sells a T-shirt for $20. You can list it for $30 to make profits. However, ensure your pricing is in line with competitors, or you risk losing customers.
Many suppliers curate their best-selling products, letting dropshippers know which items sell more than others. You can use these best-selling lists as a guide when adding new products. You can also check reviews to see if customers love what they get.
Creating your online store is the next step of dropshipping for dummies. E-commerce platforms like Shopify and WooCommerce have made this process easy. They provide ready-made templates and building blocks for your store. These platforms handle the technical aspects of hosting your store while you focus on more straightforward aspects like branding and marketing.
Shopify is the leading platform for dropshippers because of its numerous features and integrations. It provides many built-in features to help you create a unique online store. If Shopify doesn’t offer a feature natively, chances are you’ll find that feature on its app store.
Shopify lets you automate many aspects of your dropshipping business. For example, you can automatically issue invoices, send abandoned cart reminders, delist out-of-stock products, and add specific percentage markups to imported products. Many other e-commerce platforms have similar features.
If creating a store from scratch feels like too much work, you can use Zendrop’s AI storebuilder to generate a website via text prompts. This storebuilder creates an online store according to your preferences, and you can make the final touches to give visitors a unique experience.
With your store ready, marketing is the next focus in your dropshipping journey. You need to promote products to the relevant audience interested in them. You can run ads on social media platforms and search engines.
Social media platforms like Instagram, Facebook, and X (formerly Twitter) have billions of users with varying interests. You can find the right audience for every product on these platforms.
Social media platforms have self-serve ad tools that make it easy to promote products. You can choose the exact location, age group, and interests to which your ads will be shown.
Suppose you start a store selling history books. You can show Instagram ads to people aged 18 to 24 interested in political and economic history. This age group has the most readers and people interested in political and economic history are likelier to buy your books.
Social media ads are flexible, as you can run them on any budget. You can start with a small budget to test your ads and increase it if you get positive results. Otherwise, you can change the target audience to get better results.
Search engines like Google and Bing let you run targeted ads. You’ll choose the location and keywords for your ads to appear on.
For example, if you sell custom T-shirts, you can run ads that’ll show when people search for “T-shirts,” “Best T-shirts,” and “Cool T-shirts.” Anyone searching for these terms is your target audience and may be interested in your products. They can follow the ad to your website and order some items.
Search engine optimization (SEO) also helps attract unpaid traffic to your dropshipping store. It involves inserting relevant keywords across your store, using precise product descriptions, adding alternative text to all product images, and writing relevant blog posts for your target audience.
Accepting and fulfilling orders is the final step of dropshipping for dummies. The good thing is that this step can be highly automated. When people order products from your store, the details can be automatically passed to the supplier for fulfillment.
With outsourced packaging and shipping, you can focus on offering extensive customer support. Problems can arise at any time, so customers should be able to contact you via email, live chat, or telephone.
Swiftly respond to customers’ inquiries and go the extra mile to solve their issues. Excellent support can make customers recommend your store to their social circles, driving unpaid traffic and increasing sales.
Shopify is the most popular e-commerce store builder for a good reason. It’s an easy-to-use platform for newbies to quickly set up online stores. You can create a store on Shopify without needing to hire a coder. Shopify breaks down the creation process into intuitive steps anyone can follow.
Zendrop is one of the best dropshipping suppliers. It offers access to a catalog of 1 million+ competitively priced products. Unlike some dropshipping apps that connect sellers to randomly sourced suppliers, Zendrop directly controls its supply chain to guarantee product quality.
With custom packaging and print-on-demand services, Zendrop empowers dropshippers to build unique brands and amass a strong customer base. We ship products at industry-leading speeds and offer 24/7 world-class customer support.
Canva is a popular, free graphic design tool. It allows you to create stunning visuals for your online store and social media campaigns. Canva provides a user-friendly interface and free templates for endless types of designs.
Whether you need a social media poster, logo, infographic, T-shirt prints, labels, tags, or other visual assets, Canva provides professional templates to choose from. You can customize these visual assets extensively and build unique designs to attract customers’ attention.
Consider these factors when selecting suppliers for your dropshipping business:
You need suppliers that deliver consistently to your customers. They should offer quality products and ship them at the promised times. Unreliable suppliers can cause shipment delays and harm your store’s reputation, so you should avoid them by all means.
Before choosing a supplier, check their reviews and status on the Better Business Bureau and research dropshipping forums for potential complaints. If you notice overwhelmingly negative reviews, it’s a signal to find another supplier.
You need suppliers that offer competitively priced products. This way, you can add significant markups and make profits. The more affordable a supplier’s products are, the more money you can add to them while still giving customers reasonable prices.
The best suppliers have large, controlled supply chains that guarantee abundant products at decent prices. Zendrop is a notable supplier that offers some of the best product deals.
Research the supplier’s shipping terms before making a final choice. How long does it take to ship items to customers? Shipping times vary according to the customer’s location, but the faster, the better.
Ideal shipping times for dropshippers are 3 to 7 days for domestic deliveries and 7 to 14 days for international shipments. Find suppliers that fit within this range.
Dropshipping is an intensely competitive business, especially in crowded niches like fashion and home decor. Standing out in these niches and building a dependable customer base takes considerable time and effort.
The best way to outshine competitors as a dropshipper is via marketing and customer service. You can create unique social media ad campaigns to attract customers. You can also offer excellent, personalized customer service to differentiate your brand.
The global supply chain is a complicated machine. A minor flaw in one process can affect the whole system. Suppliers often experience shipping delays due to internal and external factors.
Sometimes, the delay is caused by the supplier, and in other cases, it is caused by the shipping company. Such delays can affect your brand’s reputation and revenue, but you can mitigate this by choosing suppliers with redundant distribution networks.
Product returns are an inevitable part of running an e-commerce business. Some customers can be unsatisfied with a product and decide to return it. Managing returns poses a problem for dropshippers who don’t have warehouses to keep the items.
Some suppliers handle returns on dropshippers’ behalf but charge processing fees. These fees can eat into your profit margins.
The best way to mitigate returns headaches is to choose suppliers with high-quality products. This will reduce the chances of customers being unsatisfied with their items. You should also have a concise policy outlining when a product qualifies for a return. This policy will discourage unnecessary customer returns.
Telling a compelling story and having a unique value proposition are the keys to standing out in competitive dropshipping markets. Don’t just use generic product descriptions given by your supplier. Instead, add a personal touch and highlight how the product solves a problem.
For example, a flower vase from a supplier can have a generic description like “Red flower vase, 7.4 inches for Tulip, Minimalism style.” This description is too routine and doesn’t tell a unique story.
You can change the description to “This eco-friendly flower vase beautifies your home and reduces environmental pollution. Its minimalist style makes it perfect for a contemporary home decorated with Tulips.” This description tells a unique story and offers a value proposition that customers can relate to.
Dropshippers can manage shipping costs in several ways. It starts with choosing suppliers that offer competitive shipping rates. This way, you can charge reasonable shipping prices and satisfy your customers.
The best suppliers have global distribution networks that enable them to ship goods quickly. Customers who order an item from your store will receive it from the warehouse closest to them.
You can charge flat or different shipping rates according to the customer’s location. You can also offer free shipping for bulk orders, encouraging customers to fill up their carts and, in turn, your profit margins. The profits from bulk orders will be enough to cover shipping costs and give you significant gains.
Dropshipping can be very lucrative if done right. Profitability depends on several factors, including your niche, supplier, product selection, and customer service. You can build a loyal customer base and make good profits but don’t expect a quick and easy ride. It takes considerable time and effort to build a successful dropshipping business.
One of the best things about running a dropshipping business is its scalability. Endless opportunities exist to expand into new product lines and grow your business. You can start small and increase your profits over time.
We’ve written this guide for people wondering how to learn dropshipping. It explains how dropshipping works, its pros & cons, and how to manage the challenges of running a dropshipping business.
Dropshipping is a popular and fast-growing business model. It enables entrepreneurs to launch e-commerce businesses without risking much capital and is very scalable.
Zendrop is your ideal partner for launching a dropshipping business. We offer high-quality products, excellent customer support, and industry-leading shipping times, empowering dropshippers to build a sturdy customer base. Join Zendrop and kickstart your successful dropshipping journey.
Yes, dropshipping is a good business model for entrepreneurs new to the e-commerce industry. It has low barriers to entry and is very scalable. Learning to dropship can be a lucrative endeavor.
Yes, you can start dropshipping without capital. Many e-commerce platforms offer free trials, allowing you to build an online store without paying immediately.
Then, you can find suppliers to add products to your store without initial payments. You’ll only pay after a customer places an order, and you can scale your dropshipping business from this level.
You can maximize your chances of success by selling products with a unique value proposition, promoting them to relevant audiences, pricing them in line with competitors' prices, and offering excellent customer service.
