How to Start a Dropshipping Business from Home
Whether you’re a new entrepreneur or an ecommerce vet, a dropshipping business is a great low-risk, low-cost way to start selling online. With the rise in third-party apps and marketing automation tools, it’s no longer a struggle to run your business online. Hopefully this dropshipping guide inspires you to create a pathway to success and financial freedom, so you can live the life you’ve always dreamed of, like so many other ecommerce entrepreneurs.
How the dropshipping business model works?
Dropshipping is an order fulfillment method that lets store owners sell directly to consumers without stocking any inventory. When a customer purchases a product from a dropshipping store, a third-party supplier ships it directly to them. The customer pays the retail price you set, you pay the suppliers’ wholesale price, and the rest is profit. You never have to handle products or invest in inventory.
In order to sell the best dropshipping products, you just need to register an account with a supplier.
Two common ways to find a supplier for your dropshipping store are:
Through a supplier database, like Dropship Direct, Alibaba, or AliExpress.
Using an integrated supplier directory in your store’s backend..
In the dropshipping business model, you are responsible for creating a website and your own brand, as well as choosing and marketing the products you want to sell. Your business is also responsible for shipping costs and establishing prices that result in a good profit margin.
Commit to starting a dropshipping business
As with any other business, dropshipping takes significant commitment and a long-term perspective. If you’re hoping for a six-figure income from six weeks of part-time work, you’re going to be sadly disappointed. By approaching your business with realistic expectations about the investment required and your potential for profit, you’ll be much less likely to get discouraged and quit.
When starting a dropshipping business, you’ll need to invest heavily using one of the following two currencies: time or money.
Investing time in your dropshipping business
Bootstrapping and investing sweat equity to build your business is our recommended approach, especially for first-time dropshipping entrepreneurs. We favor this approach over investing a large sum of money for numerous reasons:
You’ll learn how the business operates inside and out, which will be crucial for managing others as your business grows and scales.
You’ll intimately know your customers and market, allowing you to make better decisions.
You’ll be less likely to spend large sums on vanity projects that aren’t critical to success.
You’ll develop several new skills that will make you a better entrepreneur.
Realistically, most people aren’t able to quit their job to spend six months ramping up their new online store. It may be a bit more challenging, but it’s definitely possible to get started with dropshipping even if you’re still working a 9-to-5 position, assuming you set appropriate expectations regarding customer service and fulfillment times for your customers. When you start to grow, you can transition into working full time on your business as much as cash flow and profitability allow.
If you have the option to work on your business full time, that’s the best choice to improve your profit potential and chance of dropshipping success. Focusing all your efforts on marketing is especially helpful in the early days, when building momentum is crucial.
That may seem like a lot of effort for a relatively small payoff, but keep these two things in mind:
Once your dropshipping business is up and running, maintaining it will likely take significantly less time than a 40-hour-per-week job. Much of your investment pays off in terms of the efficiency and scalability offered by the dropshipping model.
When you build a business, you’re creating more than just an income stream—you’re also building an asset you can sell in the future. Make sure you consider the equity value you’re accruing as well as the cash flow generated when looking at your true return.
Investing money in your dropshipping business
It’s possible to create and grow a dropshipping business by investing a bunch of money, but we advise against it. We’ve tried both approaches to growing a business (bootstrapping it ourselves versus outsourcing the process) and have had the most success when we’ve been in the trenches doing most of the work.
In the early stages, it’s crucial to have someone who is deeply invested in the success of the business building it from the ground up. Without understanding how your business works at every level, you’ll be at the mercy of expensive programmers, developers, and marketers who will quickly eat up any profits you’re generating. You don’t need to do absolutely everything yourself, but we strongly recommend being the primary driving force at the outset of your venture.
Choose a dropshipping business idea
The second step in learning how to start a dropshipping business is performing the necessary market research. Just as if you were opening up a retail store and looking into the different locations, competitors, and trends, you want to investigate a niche you’re interested in and make decisions based on how profitable it can be. But the truth is, coming up with product ideas to sell is tricky.
By focusing on more niche and trending products, you can help get the attention of shoppers and gain traction without competing with larger, established businesses.
Niche products often have a more passionate customer base, which can make selling to specific crowds easier by raising awareness for your products. Fitness, fashion, beauty products, electronics, phone accessories, and yoga-related items may be a good entry point to start dropshipping with no money.
Some examples of a niche dropshipping store could be:
iPhone cases for iPhone owners
Camping gear for campers
Dog bow ties for dog lovers
Exercise equipment for fitness folks
You can also use the following tools to test out your dropshipping business ideas:
Google Trends. Google Trends can help you determine if a product is trending upward or downward, as well as the seasons they tend to trend in. Note that Google Trends doesn’t show search volume. So if you use it, be sure to cross reference your data with a keyword tool like Keywords Everywhere to determine the product’s popularity in search.
Keywords Everywhere. This keyword research tool shows you the monthly search volume for your product and how competitive it is. You can use this information to gauge the popularity of your dropshipping business idea and inspire new product ideas for the future.
Although the growth in ecommerce is a great benefit for those looking to start a dropshipping business, it also creates a lot of competition. That means you’ll want to do competitor research when putting together your dropshipping business plan to find success in selling your products.
Do competitor research
Now that you know what you’re going to sell in your store, you want to look at who your competitors are and understand the way they work. Your competitors may hold great clues to success and can help you build a stronger marketing plan for your dropshipping business.
If your market has a lot of competitors (which is a good thing in dropshipping), limit your research to about five other dropshipping companies, including one or two big players like Walmart or Amazon. It’ll help you keep focused and plan your next steps.
Some ways to go about your competitor research are:
Run a Google search. Search engines are an obvious starting point. Use Google to build a list of your top five competitors. Start with key search terms in a simple search, like “ear plugs.” The top 10 results will show you who your top competitors are and how they are promoting their products. If you want to focus on a specific country, you can use a third-party tool like Ahrefs or SEMRush to find keyword data in those areas.
Use competitor spy tools like SimilarWeb and Alexa. Online tools like these are great for finding (and keeping track of) your competitors’ online activity. They give you a list of competitor website information, such as their social media profiles, top traffic sources, number of visitors, and who their competitors are.
Browse social media. Search for Facebook ads in your niche and check out the top brands in the market. Look at how the business communicates with its customers, how its feed is designed, how much engagement it gets—you can even follow its feed to never miss a beat. Use this information to find ways for your business to stand out and improve your social media marketing strategy.
Subscribe to competitors’ email lists. Want competitors’ updates straight to your inbox? Sign up for their email list and get a look inside their marketing strategy. You can also learn more about the promotions and deals they use to entice customers to buy.
Learn everything you can about your top competitors: their website, prices, marketing methods, product descriptions, reputation, etc. Keep your research organized in a spreadsheet so you can easily refer to it when making decisions for your store.
Choose a dropshipping supplier
Choosing a dropshipping supplier is a critical step toward creating a successful dropshipping business. Without suppliers, a dropshipping business wouldn’t have any products to ship to customers and, therefore, cease to exist.
At this point, you vetted what products you want to sell and know they can be profitable—now you want to make sure you find a dropshipping supplier that gives you the high-quality service you need to grow. Ecommerce platforms like Appily App Builder offer a plug-and-play style option.
Build your ecommerce store
The next thing you need to start a dropshipping business is an ecommerce platform like Appily App Builder. This will be the home where you send traffic, sell products, and process payments.
Appily App Builder makes it easy to build and launch your ecommerce website. It’s a complete commerce platform that allows you to sell in multiple places, including online, sell in multiple currencies, and easily manage products and accept payments.
You don’t need to be a designer or developer to use Appily App Builder either. You don’t need to be a designer or developer to use Appily App Builder either.
Need help building your online store?
Get your finances in order
One common mistake entrepreneurs make when starting a business is blending their personal and business finances. This causes confusion, makes accounting more difficult, can lead to personal assumption of business liabilities, and is a big red flag for the IRS if you’re ever audited.
You’ll want to keep your business and personal finances separate as much as possible. The best way to do that is by opening up new accounts in your business’ name. You’ll want to open the following:
Credit card
You should have a business credit card that is used for business expenses and dropshipping inventory purchases only. Because you’ll be buying a lot of merchandise from suppliers, you can rack up some serious rewards with the right rewards travel cards. We’ve found that Capital One has the best travel rewards program and that Fidelity Visa/American Express offers the best cash-back program.
Collect sales tax
You’ll need to collect sales tax only if both the following are true:
The state you operate from collects sales tax
An order is placed by someone living in your state
For all orders placed by residents of other states, even if those states charge their own sales tax, you won’t need to collect any tax. There’s a good chance we’ll see changes to these laws in the coming years, but for now the tax laws for small online merchants are very advantageous.
If your state does charge sales tax, be prepared to collect it on the limited number of orders from customers in your home state. You’ll want to contact your state’s Department of Commerce to register as a retailer and find out how frequently you need to submit the tax you collect.
Business checking account
You should run all of your business finances through one primary checking account. All business revenue should be deposited into it and all expenses should be withdrawn from it. This will make accounting much easier and cleaner.
Local business licenses
Most cities and towns require businesses to get a business license that needs to be renewed on a regular basis. However, this requirement may differ for dropshipping businesses, many of which likely will be operated from home offices. You’ll want to look into your local laws and regulations to see what, if anything, is required.
Incorporating outside the United States
It can be complex, but it’s possible for international merchants to incorporate a business in the United States, giving them access to US based dropshippers and customers. The merchant will need to come to the US to complete the necessary paperwork, have a trusted business partner in the US who can act on his behalf, or hire an agency to set everything up.
Market your dropshipping store
To stand out in your market, you may want to put extra effort into your marketing and advertising efforts when building your dropshipping business plan.
With so many things about dropshipping being automated, you can spend time focusing on marketing and promoting your business in the following ways:
Influencer marketing. As a new dropshipper, you may have a limited budget to market your business. Influencer marketing is an affordable way to reach your target audience because people tend to trust influencers more than traditional advertising. If you go this route, negotiate an affiliate fee with the influencer versus a flat rate. It’s a win-win situation, because they’ll make money off of each sale and the cost will be less for you.
Content marketing. If you want to build a long-term stream of traffic for your store, add content marketing into your dropshipping business plan. Start a blog around your dropshipping niche and create content that entertains and educates your target audience. You could also start a YouTube channel, create infographics, or start a podcast to help get the word out about your brand.
Communities. Get involved with groups of people who are passionate about your niche. You can start conversations with potential customers on Reddit, Facebook Groups, or online forums. Remember not to be too sales-y when engaging with a community. Aim to help and build relationships with potential customers so they trust your brand and want to buy from it.
Paid ads (Facebook and Google). The average cost for a Facebook ad is around .97 cents per click, which isn’t too bad if you’re newer to advertising on the social media platform. Facebook ads are scalable, products can perform well on them, and they tap into people’s desire to impulse buy. You can run Shopping Ads in Google and target long-tail keywords where shoppers are more likely to buy. There’s typically more price competition with Google ads, but it may be worth your time to test it out.
Mobile marketing. Mobile marketing is a broad term that refers to a business connecting with customers on their mobile phones. For example, you can start a VIP text club and encourage website visitors to sign up for exclusive deals and promotions. Or provide customer support in a live chat conversation with shoppers through Messenger. With a mobile marketing platform like ManyChat, you can create automated lead generation, customer retention, and cart abandonment campaigns to drive sales and revenue for your dropshipping business.
As with any successful online business, keep an eye on what channels are working and which aren’t—especially if you’re investing money in them like paid ads. As you continue to grow and improve your business, you can always adjust your marketing strategy to lower costs and maximize revenue.
Analyze and improve your dropshipping business module
After you’ve been marketing and managing your dropshipping business for some time, you can start looking at the results of your hard work. Appily App Builder analytics can help you answer some important questions about your online store, such as:
Shopper behavior: Are people buying more on desktop or mobile? What’s the conversion rate for each device?
Sales: What are my best performing channels? Where should I put more ad dollars? What are my best selling products? Who are my best customers?
Profit margins: What products and variant SKUs are the most profitable? What are my sales and gross profits looking like month over month?
You can also use tools like Google Analytics and Search Console to measure search traffic over time and improve your search engine optimization (SEO) efforts. Plus, if you’re using a third-party app for your social media or Messenger marketing, you check the reports monthly to make sure your overall strategy is working for your business.
When creating a dropshipping ecommerce store, you want to create a data-informed analytics system. Remain consistent with what you analyze over time and measure your store’s performance against clear KPIs. This will help you make smarter decisions for your store and take your small business to the next level over time.
Next Steps:
Learning how to start a dropshipping business, as with any type of venture, isn’t easy. Nevertheless, it’s a great first step into the world of entrepreneurship. You can sell to customers without holding any inventory. You don’t need to pay for products upfront. And if you’re serious about your new venture, you can build a sustainable source of income in the long run.
Ready to create your first business with Appily App Builder?
