Dropshipping Business Models
There are a few different types of dropshipping business models to consider:
Online Retail Store
- Create your own standalone ecommerce site, often using a platform like Shopify
- List and sell products from various suppliers and wholesalers
- Brand the store around a particular product niche or theme
Marketplace Selling
- Sell products on existing online marketplaces like eBay, Etsy, Amazon
- Listings appear alongside other sellers on the platform
- Leverage existing site traffic but less branding control
Private Label
- Source suppliers for products you can brand as your own
- Add custom packaging, labels to white-labeled items
- Higher margins but more effort required
Hybrid Approach
- Combination of the above models
- For example, own site + Amazon + private label
- Provides more flexibility and diversification
The online retail store model involves the most work upfront but provides the most long-term payoff if you intend to build a standalone brand. Marketplace selling has lower barriers to entry but less differentiation. Many successful dropshippers start with marketplaces while working towards their own site.
Finding Reliable Suppliers
The key to success with dropshipping lies in finding high-quality suppliers that integrate easily with your ecommerce platform. Some places to look include:
- AliExpress – Leading wholesale marketplace based in China
- Alibaba – Largest wholesale hub globally for finding manufacturers
- Salehoo – Directory of dropship-friendly suppliers from US and China
- Inventory Source – Specialized platform for US-based wholesale suppliers only
- Manufacturer Direct – Make direct contact with producers to source inventory
When evaluating potential suppliers, look for:
- Integration with your ecommerce platform
- Reliable order fulfillment and fast shipping
- Wholesale pricing with room for markup
- Positive reviews and reputation
Sample products thoroughly before listing them in your store to ensure quality. Slow shipping times can increase the chance of cart abandonment, so US-based suppliers are ideal if available for your product niche.
Choosing Profitable Dropshipping Products
Focusing on the right type of products to sell will determine your potential to drive sales and revenue. Some items tend to work better for dropshipping than others based on factors like:
- High margins – Look for 50-100% markup between wholesale and retail
- Low shipping costs – Important for maintaining margins
- Generic products – Items that don’t require special branding
- Small and light – Cheap to ship which keeps costs down
- Trending niches – Leverage spikes in demand for hot products
A few examples of traditionally profitable dropshipping products include phone accessories, fitness equipment, home goods, beauty products, and fashion jewelry. Expanding into multiple niche stores over time helps minimize risk and diversify income streams.
Popular platforms for running a dropshipping business include:
- Shopify – User-friendly with wide app ecosystem
- WooCommerce – Flexible WordPress plugin for online stores
- BigCommerce – Scalable SaaS ecommerce solution
- 3dcart – Specialized features for dropshipping
- Volusion – Longstanding platform with built-in CRM
Evaluate options based on costs, ease of use, built-in features, and integrations with suppliers and marketing tools. Most platforms offer a free trial to test them out.
Key integrations to enable include:
- Payment gateways – Stripe, PayPal, Authorize.net
- Shipping calculators – For real-time rates during checkout
- Supplier inventory – Automated order routing and fulfillment
- Accounting – Sales tax calculations, reporting, etc.
Building out your online storefront with an optimized theme, professional branding and high-quality product listings will help drive conversions.
Streamlining Dropshipping Operations
Running day-to-day operations for a dropshipping business involves a number of moving parts:
- Inventory tracking – Syncing with suppliers to monitor stock levels
- Order management – Processing placements, generating packings slips
- Customer service – Handling questions, issues, returns
- Accounting – Managing income, expenses, sales tax
- Shipping labels – Optional printing for branded packaging
- Analytics – Monitoring key ecommerce metrics to optimize
Automating repetitive tasks using platforms like Zapier or Workato helps reduce the workload as your sales volume grows. Watch for potential pain points like double shipping costs if using non-integrated suppliers.
Marketing Your Dropshipping Store
Driving consistent traffic and sales to your new dropshipping store requires an effective online marketing strategy. Tactics to consider include:
Paid Ads
- Facebook and Google ads allow precise targeting
- Drive targeted traffic straight to your product pages
- Requires testing and optimization for ROI
Influencer Marketing
- Pay related social media influencers for promotions
- Works well for visual products like fashion/beauty
- Leverage influencer audiences for sales
Content Marketing
- Build a blog covering your product niche
- Focus on informational long-tail keywords
- Converts organic traffic into customers
SEO
- Claim local business listings on Google, Yelp, etc
- Build links, citations and authority for your domain
- Rank highly in search engines for buyers searching your products
Email Marketing
- Collect customer emails and nurture subscribers
- Send promotions, cart abandonment reminders
- Keep brand top of mind after purchase
Dropshipping Finances and Legal Requirements
Running your dropshipping business legally requires a few key financial considerations:
- Business license – Register your business name and structure
- Sales tax – Collect and remit state sales tax if economic nexus laws apply
- Trademarks – Protect your brand name and logos where applicable
- Accounting software – Track income, expenses, profit margins
- Payment processing – Accept credit cards securely from customers
- Disclaimers – Terms of service, DMCA, privacy policy for your website
Bookkeeping and working with an accountant will help you maximize tax deductions and manage your bottom line profitably.
Overcoming Dropshipping Challenges
Some potential challenges with operating a dropshipping business include:
- Narrow profit margins – Wholesale pricing may cut into margins
- Shipping delays – Long wait times from some suppliers
- Lack of quality control – Can’t inspect goods before fulfillment
- Inventory stockouts – Dropshipper dependence on supplier inventory
Solutions to overcome these obstacles may involve:
- Negotiating lower wholesale costs once you achieve sales volumes
- Carefully vetting suppliers for maximum reliability
- Ordering product samples yourself to inspect quality
- Building inventory buffers with key products where feasible
Proactive communication with suppliers and customers helps minimize hiccups.
Some current trends shaping the future of the dropshipping industry include:
- Emphasis on US-based suppliers whenever possible
- Using niche-specific online stores over general marketplaces
- Leveraging social media influencers for marketing products
- Dropshipping private label and handmade goods
Useful apps and plugins for managing your operations include:
Shopify
- Oberlo – Supplier integration and automation
- Spocket – US-based dropship supplier marketplace
- Dropified – Automated order processing
- Ecomhunt – Product research and trends
- Aliscraper – Competitor price tracking
WooCommerce
- Dropified – All-in-one order routing + management
- AliDropship – Direct AliExpress integration
- Zonos – Inventory updates across sales channels
- Ecomhunt – Product and market research
- DropshipMe – Supplier management and fulfillment
Getting Started with Your Own Dropshipping Business
The world of ecommerce moves quickly, so the time is ripe to capitalize on starting your own online retail business using the dropshipping model. With low startup costs and no need to carry inventory, it’s easier than ever to tap into the trillion dollar online shopping industry. Just focus on finding a profitable niche, vetting reliable suppliers, and marketing to your target audience.
The guidelines covered in this beginner’s guide should equip you with the knowledge needed to decide if dropshipping is the right online business model for you. Feel free to reach out with any other questions as you conduct research and build your dropshipping plans. With careful testing and persistence, your ecommerce company could be the next big success story!
