A Guide on How to Start a Dropshipping Business in 2024

Napoleon

Jul 13, 2024 — 9 min read

A dropshipping business is ideal whether you're looking for a channel to make extra money or want to be self-employed. Recently, it has become among the most popular online business models.

The main benefit of dropshipping is low start-up capital and shipping costs compared to other business models. You can quickly grow your business to meet your client's needs while saving money on overhead costs, since you don't have to handle the inventory.

In this guide, Foundeck provides you with the golden tips for starting a dropshipping business. Do keep reading to get all the information you need before starting your online business.

What's a Dropshipping Business?

Dropshipping is a business model where you can sell products online without inventory. This means you sell products to your customers without having the goods at hand. Dropshipping is an online business model where you receive customer orders. Instead of shipping your goods, partner with a dropshipping supplier.

The dropshipping partner will fulfill the order on your behalf, but you are responsible for selling the items.

This is how it works:

A client places an order on your site
You process the order and send it to the dropshipping wholesaler
The wholesaler ships the order
Your customer receives their order

Dropshipping and other ecommerce business models differ because you are a retailer and don't keep the inventory or ship the orders. This means you don't have to buy and store products; instead, you forward the order, and the wholesaler fulfills them.

How to Start a Dropshipping Business

If you want to start a dropshipping business, follow these steps:

1. Get Committed

You need to commit yourself when starting a dropshipping business. Although it seems easy to start, and you can make good money, the money won't fill your bank account without effort. You need to invest your time.

Getting your dropshipping company off the ground may take some time, especially when you have insufficient capital. However, if you spend more time, you will learn the ins and outs of the dropshipping business.

This will help you manage different aspects of this business as it grows.

2. Select a dropshipping niche

The competition is relatively high, with many e-commerce businesses using dropshipping business models. Many dropshipping websites sell the same products under different brands, making your brand stand out is crucial.

One way to do this is by selecting a niche. Niche products have a passionate customer base, making selling to a specific group easier as long you raise your product awareness.

Here are tips for choosing your dropshipping niche for a successful ecommerce store.

Start with you: The more you know about your area of expertise and interests, the easier it will be to determine what resonates with your audience.
What's trending? To thrive in dropshipping, consider products in high demand despite the season. Make sure you research trending products and where to locate them.
Research on best-selling products on platforms like Amazon: To confirm your niche has stable or increasing sales, it's advisable to examine its sales history on Amazon, the largest online marketplace

3. Perform market research

After identifying several potential niches, perform market research to evaluate the industry. Doing so will discover opportunities and threats that may affect your business. You will estimate revenues and develop marketing strategies before you start trading.

Look into these elements:

Target audience: when selecting a niche, consider niche demographics such as gender, age range, hobbies, income level, and occupation. This will help you in branding.
Industry value and size of the market: collect information on the size of the niche market, the prospective growth, and trends. This information will determine whether there are enough customers out there who have an interest in the products you are planning to sell.
Customer purchase behavior: You must understand customers’ motives and frequency in order to fix your prices and ideal marketing strategy.
Primary competitors: Research the brand that dominates your niche industry. You need to know their strengths and weaknesses to identify market gaps that your brand can fill.

4. Choose your dropshipping supplier

Your dropshipping partner plays a significant role in your business. Without a reliable dropshipping wholesaler, your business won't have products to ship to clients, and it ends.

At this stage, you have already decided on the profitable products you intend to sell. Getting a supplier who gives you quality service is crucial.

You need to consider these when searching for a dropshipping supplier:

Customer service: Verifying the supplier's customer support channels is recommended. Ensure they respond promptly and can assist with any issues arising from buyers' complaints.
Legality and reputation: Does your supplier have the licences? You should check this to ensure that you don't fall prey to cons; also, you can check for the reviews and see what other clients say about the type of service the wholesaler offers.
Additional charges: Other than this pricing, are there other charges you must be aware of? Check for additional fees, including monthly subscriptions, refunds, packaging, and platform fees. When calculating profit margins, it is recommended to consider all these aspects. Another logical approach is that the costs for direct marketing should range between 20% and 40% or more.
Order fulfillment process: You should understand when the dropshipping partner processes and delivers the product. You should also consider someone who handles returns well.
Minimum order quality: Check whether the wholesaler requires a minimum order. Remember, the more products you buy, the better the price discount.
Product quality: Get a sample order and determine if the product you intend to sell is as good as the seller claims and whether the product's packaging meets the standard. When it comes to price evaluation, compare similar commodities from different suppliers.
CMS integration: Choose a Dropshipping platform that lets your site source products smoothly. One of the most effective platforms for this is AliDropship.

Before you start working with your supplier, draft a dropshipping agreement contract. It will outline business arrangements with your partner, such as damaged items, product wholesale price, and delivery standards.

5. Build your dropshipping brand identity

After choosing a niche, top-notch branding is another thing that will make your ecommerce business stand out. The more distinctive your branding is, the more likely your target audience will remember and buy from you.

If you want to build your dropshipping brand, consider these steps:

What's your brand positioning: determine the key features a customer can get from your brand that are not in its competitors. Emphasize this aspect consistently across your marketing and branding endeavors.
Select a memorable business name: your customers will remember a name they can quickly type or pronounce. So select a business name that aligns with US company name regulations.
Choose an easily readable logo. When creating a logo, use a unique typeface that portrays your brand identity. Pick a familiar name and readable font for site content, email newsletters, social media visuals, etc.
Choose a visually appealing color palette for your brand's visual identity. Choose colors that complement each other. They will represent your business and appeal to your prospects.
Design an attention-grabbing logo: let your customers guess what you're selling by looking at it.

6. Build your dropshipping online store

The next step is building your ecommerce store, where you will send traffic, sell items, and process payments.

A dropshipping website provides complete control over your branding and business. It allows customization of the theme and selection of payment gateways. Unlike an e-commerce marketplace, you won't incur any platform fees, enabling you to achieve higher profit margins.

To create a business site, you need a domain name. Most entrepreneurs prefer .com; however, if it's unavailable, you can use .shop.store; they are more affordable and ideal for ecommerce businesses.

When building an online store, consider these elements:

Payment gateways enable multiple popular payment solutions among your clients and prospects. Be upfront about any additional tax and shipping expenses that customers should consider.
User experience: your customers should easily navigate your online store and find your product.
Product description: include a clear and persuasive product description for each item to convince your customers to purchase.
Mobile optimization: ensure your online store can be accessed through a desktop or a mobile phone.
Contact form: ensure customers can readily contact you to inquire about your business and products.

7. Decide your preferred business structure

To stay compliant, set up a legitimate dropshipping business. You can register your business from these common business structures.

Sole proprietorship: this is an easy business structure without personal liability protection. If your ecommerce store is sued, your personal assets are at risk. Reporting your business earnings through your personal tax requires minimal filing obligations. You need no other federal or state filing requirements.
Limited liability company: this structure protects your assets since your business is separate. Although the liability protection isn't absolute, it provides more security than a sole proprietorship. You might have to adhere to extra filing obligations and incur both incorporation and ongoing fees.
C corporation: This corporation offers more liability protection, although it is more expensive to form. However, it is liable to double taxation since the earnings don't pass to shareholders directly.

You also need web pages to make your ecommerce website look more appealing; they include

Terms and conditions: Set clear expectations and safeguard your business by creating a legal document detailing your company's and your customers' rights and responsibilities.
Refund policy: This web page will increase your customers' trust in you because it shows that your business is a secure platform to buy products.
Privacy policy: This page proves to your customer that you value their information. It outlines how it collects and discloses its information.
Return or exchange policy: many customers cannot buy online products since they can't see them. However, with a return and exchange policy, customers feel free to return or exchange the item if they don't like it.

8. Get your dropshipping finances in order

Don't mix your business and finances because it confuses, can result in business liabilities' assumption, and makes accounting difficult.

What to set up may differ according to your region, so consult a financial consultant to ensure everything is in place.

But no matter your location, you must have the following:

A dropshipping business bank account: use this account to receive client payments and pay your dropshipping supplier.
Resale certificate: Some areas require this certificate to sell products from another location. Check with your local government to determine if registration and payment for this certificate are necessary.
Maintenance fee: To enhance your business growth, you need to include the platform and marketing costs in your pricing and budgeting.

9. Optimize and advertise your dropshipping business

After building a website, you need to promote your products and attract more customers. Use digital marketing to market your dropshipping business via different channels.

To increase sales, use these methods to drive traffic to your ecommerce store:

Search engine optimization (SEO): SEO techniques will increase your website’s chance of being more visible on the SERPs.
Email marketing: Create a subscription form and place it on the site’s home page with an attractive link saying sign up for great offers today. This will encourage the customers to sign up for the emails and get a discount. You will be the one to send automated emails, notifying the customers about specials and new products.
Social media marketing: Your current contacts on various social platforms will view the products you share and potentially become potential buyers. Take advantage of promoting your products on visual sites such as Pinterest and Instagram.
Affiliate marketing: this involves the content creator advertising the products for a higher commission.
Referral marketing: Your customers can spread the word about your product, thus promoting it, or create a referral link that they can share. Every time someone buys a product through the link, they receive a 10-20% commission.
Performance marketing: You can also use online advertising to market goods for a fee. Forums, like Facebook Ads and Google Ads, are applicable examples of ads that have target audience options that aid in engaging potential buyers.

Why Should You Start a Dropshipping Business?

Dropshipping can be advantageous if you want to start your own business for the first time.

Let's explore its benefits:

Minimum capital and supply chain management: With dropshipping, you don't need to pay upfront inventory costs or handle business logistics. You can start your business without being a manufacturer, owning a store, or selling your products.
Flexible location: since you don't oversee production or shipment, you can run your business from anywhere.
Low-risk business venture: You can add as many products as possible without considering production or inventory costs. If a product isn't performing well, the supplier can easily replace it with another item to sell.

Form Your LLC with Foundeck Today

If you have any questions on how to form your company in the US, don’t hesitate to contact us here, and we’ll do everything we can to help.

Winding Up

For a first-time entrepreneur or a seasoned business owner, a dropshipping business has more advantages than other business models. First, it's a low-risk business, and you can start cheaply.

You don't need an inventory; instead, get a reputable supplier who matches your business niche. Build your online store and import your products. With SEO practices and product images, you're ready to begin selling. Do you have questions on how to start a dropshipping business? Kindly contact one of our experts here for help today.