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How to Start a Dropshipping Business in 2021 (Ultimate Guide)

If you want to be financially safe, never rely on a single source of income. 2021’s lifestyle is expensive, and a 9-5 job is not enough to meet life’s expenses. Sooner or later, you will have to think of some other ways to make money. If you are looking for a source of stable side income, you are not alone, as 44 million American fellows also have the same approach to have a side hustle. One way to make a living online is to start a dropshipping business. Don’t know how? Read our dropshipping guide to learn if it’s for you, the pros & cons, and the starting steps.


Generate Passive Side Income with Dropshipping (Ultimate Guide)

There are several sources of passive income apart from your normal job, but how are you supposed to follow those ways while doing your job. So, if you want to generate passive income as a side hustle, starting an online business like eCommerce or dropshipping business is a profitable niche in 2021.

If done right, you can make way more money with dropshipping than your job. If you want to know how to start dropshipping, you need to have a learning attitude. In this dropshipping guide, you will learn how to start a dropshipping business in 2021.

We are going to discuss everything that you need to know about starting your own dropshipping business.


Is Dropshipping Worth your Investment?

Should you start a dropshipping business in 2021 when there is fierce competition in the online field? The answer is yes, but ROI depends upon your hard work and your strategic approach to grow your business. In general, dropshipping is a profitable business, and you must know how to start dropshipping.

You are not only going to invest money, but it will also require your time, so make sure that you are dedicated enough to start a successful dropshipping business in 2021.


What is Dropshipping (Quick Guide)

Dropshipping business has been around us in different forms, and the last few years of the internet revolution have made it an even better option for online income. First of all, dropshipping is not any trick to get rich with a shortcut. Like any other real-life business model, you will have to put your full potential to make dropshipping successful.

The business model of dropshipping is really simple as the dropshipping store owner does not own products or does not maintain inventory. He just markets of the 3rd seller on his store. Whenever someone places an order on the dropshipping store, the details are forwarded to the fulfillment center where the product is shipped to the customer.

The store owner does not have to deal with the management of the product or the delivery process. What is the difference between the normal store and eCommerce dropshipping store? Here is the overview of the working of both stores:

Regular Store: The store owner is responsible for maintaining the inventory, and the shipment is carried out by the store owner.

Dropshipping Store: The store owner is not responsible for the shipment and the packaging. He just needs to receive orders and land new customers.

You don’t need big capital to get started with dropshipping as you are just acting as a bridge between the end customer and the retailer. You can start a dropshipping store with minimal or even no investment.

In simple words, you are doing everything digitally as you don’t need to worry about storing products, manufacturing products, packaging, and shipment processes. You can make handsome profits with dropshipping stores.


Is Dropshipping Business Model Growing?

The last ten years have been the best years for a dropshipping business if we look at the past few years. The stats show that upcoming years are going to see even more high demand of the dropshipping market.

Here are some amazing facts about dropshipping:

For the years 2016 and 2017, almost 23% of the total online sales were made through dropshipping stores. Major Dropshipping stores made the total sale of $85.1 billion in the year 2017, and the numbers have almost doubled in the next years.

Amazon is the biggest online shopping platform, and it made 35% of the total sales through dropshipping. These percentages were for the year 2011 and for 2021, let’s wait for the final stats

Dropshipping is a profitable business model for both online store owners and manufacturers. Product manufacturers who follow the dropshipping model are found to make 18% more profit than the conventional manufacturers.


Dropshipping Business Model

The business model of dropshipping stores is simple, yet it needs market knowledge, trust, and fair partnership between involved parties. Here are simple steps that are generally followed during the dropshipping business from placing the order to the shipment of the product to the end-user:

Market your product virtually on your site without having any physical office or ownership of the products

  • Attract new visitors and convert them into paying customers
  • The customer places an order on the dropshipping store.
  • The information is forwarded to the concerned manufacturer.
  • The manufacturer or fulfillment center takes care of the order details like address confirmation and ship the product to the customer with the branding of the dropshipping store.

The real application and completion of the process can be different, but theoretically, all dropshipping stores follow these steps in order to offer their services in the market.


What are the Pros of Dropshipping?

No doubt, dropshipping stores are great as you can start making money online by investing minimal or no money. There is no capital required to start your dropshipping store, and anyone with the dedication to learn something can start earning from the online resources like freelancing, dropshipping, or regular eCommerce stores.

Here are some practical benefits of dropshipping as compared to normal eCommerce blog:

Minimal Cost of the Startup

As you are not going to run any physical store, you don’t need to worry about investing millions. A complete dropshipping eCommerce site can be developed easily by using any amazing template. If you are willing to get started with dropshipping, you just need to have a domain name and hosting.

You don’t need to worry about losing your investment or the financial fluctuations as you don’t own any physical products. Your task is just to refer clients to the manufacturer through your dropshipping site. In simple words, like blogging, the dropshipping site is almost free if you have the domain and hosting plans.

Minimal Order Fulfillment Cost

As shipment and inventory tasks are not your responsibility, you don’t need to worry about the rising costs of shipping and other management expense. All your responsibilities are just about sorting the digital information and running the website to launch more and more content.

Whenever some random buyer places the order on your site, the order details will be automatically forwarded to the retailer, where all other tasks will be carried out like packaging, labeling, and marketing.

Low Risk Involved

As you are maintaining no inventory, there is no risk involved. Even if you fail to generate profit out of your store, you can back out at any time without worrying about your investment. If you need more flexible options, you can always look for other available options. Hundreds of retailers and manufacturers offer different packages. 

Switching Niches is Easier

If you start in a sports niche, but it does not work out to be profitable for your store, you can always switch to any other niche. You just need to add and remove the product, and here you go with another niche on your site. You are not bound to sell the same products forever.


Cons of Dropshipping

Till now, everything looks great about dropshipping, but there is another side of the picture too. Like any other business of the practical world, dropshipping also has some limitations and disadvantages, including:

Over-reliance on the manufacturers

As you don’t have physical access to the products and items, you are 100% relying on your partner. In case if he decides to pull back or partnership does not go through, you will have to look for any other option.

No Control over the Delivery

As you have no access to the store or shop, you cannot manage the deliveries and the shipment of the products. Most of the fulfillment centers offer fast delivery options. Still, if your customer does not get the product in time, it is going to impact your dropshipping store, not the manufacturer. 

Poor Control over Process

In dropshipping, all the processes like packaging, shipment, and management are being carried through some other company. If something goes wrong with the final product delivery, the customers are going to ask you for compensation, so it is all up to you to satisfy your customers.

Limited Branding Opportunities

Although many fulfillment services allow the dropshipping stores to use their personalized packaging, yet it is not true for all the manufacturers. You need to ensure that the company allows the brand packaging as it will help the customers to recognize your store as a brand.

Low-Profit Margin

If you are looking forward to high-profit margins, dropshipping is not the right business for you. Although dealing and managing the dropshipping store is easy, the profit margins are also lower. Many entrepreneurs prefer to sell their own items in order to earn more profit. The commission rates may vary for different industries.


Who is Dropshipping for?

If you have a limited budget but want to make money online, starting a dropshipping store is a good option for you. It will allow you to enter the market with the least investment. Setting up a traditional eCommerce store requires huge capital, investment, and management. Most of the dropshipping store owners are using this option for side income.

Starting a business with no investment seems impossible in a real-world business, but dropshipping made it possible. In simple words, dropshipping is a great business idea for:

  • New entrepreneurs
  • People looking for a side hustle
  • Marketers who want to start a business with no investment
  • People who have business experience for the eCommerce industry

How to Find the Best Dropshipping Products to Sell?

The success and failure of dropshipping are highly dependent upon the selection of the right products and niche. There are always some products that sell like crazy in eCommerce, so the main game is to find the trending products that lie within the scope of your chosen niche.

An example of a dropshipping store is a dedicated shop for selling different kinds of Bluetooth devices.

The trending niches and products keep varying time by time, so you have to do your homework before choosing any product blindly. Here are some most trending dropshipping niches for 2021:

  • Tech niche ideas
  • Lifestyle niche ideas
  • Fashion niche ideas
  • Sports niche ideas
  • Gaming niche ideas

These are just a few main niches, but there is always more so it is up to you how keenly you observe the industry and the market to come up with the right ideas for the products and the niches. If you want to choose the right niche and products for your dropshipping store, here are some major factors that you need to focus on:

Pricing of the products

As the end goal of starting any business is to generate profit, and the balanced pricing is a must for the success or failure of the store. You need to maintain a reasonable balance between retail and wholesale pricing so that you can generate enough profit margins from your products. 

Size

The product size is another factor that must be considered while choosing the products for your store. The bigger size of the products will require the manufacturer to bear:

  • Higher packaging charges
  • Higher shipping charges
  • Higher handling charges

The best strategy is to start with smaller products. The profit margins will be low, but you won’t have to worry about additional costs that are associated with larger products.

Renewability

If you want to have more returning clients, then start your dropshipping business with smaller yet renewable products. In general, selling a large refrigerator will generate more profit and revenue for your store, but the use is not going to need another refrigerator for the next several years. On the other hand, selling toothpaste may seem like a minor return, but you will be getting the order from the same client after every few weeks. If you want to play with the profit margins, always keep these points in mind.


How to Find the Best Dropshipping Supplier

If you are at this step, make sure that you pay attention to the details that we are going to share in this part. If you mess up while choosing the best dropshipping supplier, your whole dropshipping business is at risk. Your dropshipping store will rely on suppliers for most of the tasks, including:

  • Stocking up the products
  • Product delivery
  • Shipping and handling of the products

Your job is to send the customer’s details like address, product details, and other information to the supplier, and the supplier will take care of everything else. While choosing the right dropshipping supplier for your business, make sure to check for:

The supplier must be Tech-Savvy

For a smooth dropshipping business, your dropshipping supplier must be tech-savvy. Tech-savvy means that the dropshipping supplier should be equipped with the technologies to keep up the entire dropshipping cycle.

Punctuality of the Supplier

The dropshipping industry is very competitive, and the best way to scale your business is to offer the fastest delivery options. The delivery time is totally up to your dropshipping supplier, so make sure that the product gets delivered in 48 hours at max in major cities.

If the dropshipping supplier keeps dragging the delivery, the customer won’t think again before switching to another store.

Dropshipping Supplier should be experienced

If you need smooth dealing with your customers and the supplier, always choose an experienced and professional supplier. The team of the dropshipping supplier matters a lot when it comes to the reputation of your business. The poor performance of any team from the dropshipping supplier side can impact the user experience. A professional supplier will be able to ensure the top-notch experience for packaging, shipment, and product quality.

Quality is the Backbone

No matter what, you should never compromise on the quality of the services and the products. You might get some lucrative offers from the sellers who deal with low-quality items but never fall for that trap. It will hurt your business in the long term.

Here are some perks of choosing a professional and experienced dropshipping supplier:

  • The low goods return rate
  • Low cancellation rates
  • Higher customer satisfaction
  • Higher customer lifetime value

How to Start your Dropshipping Business?

We are done with the theoretical work, choosing the most profitable products to choose the experienced dropshipping supplier, and it’s time for some action. This is not going to be a cup of tea at the start, but you will find peace with time and make sure that you keep learning from your failures. Here are some steps that you need to focus on for dropshipping business startup:

Marketing your Dropshipping Store

Like any other business, your marketing efforts and strategies decide the future of your store. There is a tough competition going on in the dropshipping industry, and it is not easy for new businesses to stand out. Apart from the quality of the products, marketing your dropshipping store is another important thing that you need to focus on.

The marketing part is extremely extensive, and if you want to do it the right way, you will have to invest money in:

  • Customer engagement
  • Brand building
  • Image building

When it comes to marketing your dropshipping store on different channels, all the social media and other marketing channels are your potential sources of getting new clients. Here are famous marketing channels for dropshipping store:

  • Email marketing
  • Social media marketing
  • Paid advertisement and media campaigns

Maintaining Inventory

Although we have said that you are not responsible for managing inventory, yet keeping track of the supplier’s inventory is a good practice. As you are selling supplier’s products, you must be aware of the available products and other stats. There are several online inventory management and warehousing tools available that you can use for your dropshipping business.

Provide Active Customer Support

Customers always prefer dealing with responsive businesses that have active customer support. Most of the businesses will take the lead in the customer support sphere. Some of the common platforms to offer customer support are:

  • Social media channels
  • Email
  • Telephone
  • Live chats

If you can manage to offer 24/7 customer support, that is a great plus point for your business.

Product Refund and Exchange Policy

This is one of the tricky parts of the dropshipping business that might hurt your business. Your customer satisfaction is the most important thing that can impact business growth. In order to establish good relationships with the customers, you need to respond to their complaints in a positive way and try to compensate them where possible.

Having a clear refund and exchange policy is vital for any dropshipping business. The return or exchange policy must be clear. At some point, these terms may seem hard to accept, but you need to do it the right way for customer satisfaction.


How to Grow Dropshipping Business?

As you are all set to make sales, the next step is to scale and grow your business. The most important ingredient for business growth is your dedication towards achieving your long term goals. If you keep doing impressive work, soon you will be making your dream income from your dropshipping business. Here are some expert tips for growing and scaling your dropshipping business:

  • Use multiple platforms like eBay, Amazon, and Alibaba.
  • Optimize your dropshipping store
  • Focus on brand building
  • Leverage email marketing
  • Use the right channel for the marketing of the product and the store.
  • Use video ads to promote your store.

The suggestions and the tips about starting the dropshipping business are infinite. But till this step, we have covered all important tips on how to start dropshipping business and how to scale your business. Keep testing different strategies and products for your store to see what works best for your business.


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Written by Nikola Knezhevich

Ex-lawyer & ex-legal advisor. Former startup CMO. Currently an entrepreneur & digital marketing enthusiast. I have been doing digital marketing since 2014, primarily lead generation, client acquisition & business strategy. Joined "Ad Specto" to share all my digital knowledge and wisdom with you.
Co-Founder @AdSpecto, Founder @AdUp, Founder @LawAcademy

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