How to start a dropshipping business in 10 steps:
- Choose a dropshipping niche
- Perform market research to find product ideas
- Find dropshipping suppliers
- Decide on a dropshipping sales channel
- Create an online store
- Register your business
- Get your business finances in order
- Launch and market your dropshipping store
- Analyze performance
- Test new products
Starting a dropshipping business enables you to generate online income by selling products that you don’t actually own and leveraging the supplier to fulfill orders to your customers. Dropshipping’s low barrier to entry and relatively simple operating requirements attract many aspiring online entrepreneurs to the business model. In fact, approximately 27% of all online retailers use dropshipping, according to AovUp. Whether you want to start selling AliExpress products on your own Shopify store or try the latest trend of using TikTok dropshipping to make your product go viral, this article lays out the right steps you should follow to start a successful dropshipping business in 2024.
1. Choose a dropshipping niche
Due to low entry barriers, dropshipping is a highly competitive industry, which is why it’s essential to choose a dropshipping niche to focus on so that you can take a more targeted approach in your marketing efforts. In fact, dropshipping constitutes nearly 23% of all online sales, according to Ecommerce data platform Yaguara.
What are the best dropshipping niches?
The best dropshipping niches are:
- Baby products
- Fitness & Workout
- Pets
- Home decor
- Fast fashion
What are dropshipping niches to avoid?
Dropshipping niches to avoid are:
- Counterfeit products
- Lifestyle products
- Watches
- Vitamins & supplements
- Electronics & computer products
2. Perform market research to find product ideas
Dropshipping marketing research is the process of looking for viable product ideas for your dropshipping business. Typically, this process leverages product research tools. Dropshipping expert Nawras Ganim recommends the following process for dropshipping product research.
- Employ a data-driven dropshipping tool
- Browse social media for dropshipping ads to find actively marketed products
- Check estimated sales revenue using a dropshipping sales estimation tool
- Perform competitor analysis by studying sellers of the products to see where improvements can be made regarding product offer and advertising strategy
This is just one of many dropshipping marketing research strategies, but most require a dropshipping product research tool to do effectively. If your budget is tight, you can try using a free research tool like Google Trends.
Best dropshipping product research tools
3. Find dropshipping suppliers
Once you have a product idea in mind, you need to find a reliable dropshipping supplier who can provide that product and handle order fulfillment for you. You can find dropshipping suppliers on dropshipping supplier marketplaces like AliExpress, Alibaba, Worldwide Brands, and Salehoo. Make sure to look at reviews and ratings if available. It’s essential to find a reliable dropshipping supplier who consistently has your dropshipping product available and has a history of fulfilling customer orders on time. It’s a good idea to compare multiple suppliers to find the best option for your business, as partnering with a bad dropshipping supplier can destroy your business.
Although China has traditionally been the go-to option to find dropshipping suppliers, US dropshipping suppliers are becoming more popular as they offer faster speed of delivery and competitive pricing.
US dropshipping suppliers
Some excellent US dropshipping supplier options are:
4. Decide on a dropshipping sales channel
There are many dropshipping sales channels where you can sell your dropshipping product, including:
- TikTok
- Shopify
- Amazon
- Facebook Marketplace
- eBay
- Walmart
TikTok dropshipping
TikTok dropshipping has traditionally meant creating a dropshipping store with an Ecommerce platform like Shopify or WooCommerce and using TikTok to market dropshipping products. However, since the release of TikTok Shop in the US in September 2023, dropshipping is also possible directly through the TikTok app and there is no longer a need to create a store on a third-party platform. TikTok even allows drop shipping supplier applications like CJ Dropshipping to be listed directly on the TikTok Shop marketplace for easy integration. Therefore, TikTok dropshipping can mean either of the two dropshipping methods.
Shopify dropshipping
Shopify dropshipping is creating a custom online store using the Shopify Ecommerce platform. As of data from 2023, Shopify accounts for over 16% of the total Ecommerce share globally with over $444 billion in economic activity, according to Yaguara. Shopify is a popular choice for dropshipping because it offers an easy-to-use website builder that is both SEO friendly and optimized for conversions.
Amazon dropshipping
Amazon dropshipping is listing products on the Amazon Marketplace and fulfilling product orders with a third-party supplier. Dropshipping is fairly common on Amazon, with 19% of Amazon sellers using the business model, according to the 2024 State of the Amazon Seller report by Jungle Scout. Although Amazon dropshipping is highly competitive, dropshippers still flock to the platform due to Amazon’s industry leading 310 million active customers around the globe.
Facebook Marketplace dropshipping
Facebook Marketplace dropshipping is listing dropshipping products on the Facebook Marketplace and leveraging Facebook advertising channels like Facebook Ads and Facebook pages to promote products. Facebook Marketplace sees over a billion shoppers each month, according to Capital One Shopping. As such, Facebook Marketplace offers dropshippers a potentially massive audience for promoting their products.
eBay dropshipping
eBay dropshipping is using the eBay Ecommerce marketplace to sell and promote dropshipping products. eBay allows dropshipping when the order is fulfilled directly by a wholesale supplier, but it does not allow buying products from another retail or marketplace and shipping it to an eBay customer. Although eBay customers have been on the decline, there are still upwards of 3.67 million shoppers using eBay every month, according to Oberlo. eBay offers a low-risk option to get started with dropshipping.
Walmart dropshipping
Walmart dropshipping is using a third-party supplier to fulfill orders for your products listed on the Walmart Marketplace. Walmart dropshipping is growing in popularity as the Walmart Marketplace grows in popularity. As of the latest data, the Walmart Marketplace serves upwards of 230 million customers per week, according to Demand Sage. Although the Walmart Marketplace can offer a massive customer base and less competition than Amazon, it’s more difficult to qualify for the Walmart Marketplace. For example, Walmart Marketplace sellers need to have an actual legal business entity with an EIN tax number and a history of successful Ecommerce performance to get approved.
5. Create an online store
After deciding where you want to sell your products, create your dropshipping store. This can entail creating a full website with custom features if using an Ecommerce platform like Shopify, or just setting up product listings if using Ecommerce marketplaces like Amazon, eBay, or Facebook Marketplace. Regardless of what sales channel you choose, provide all the necessary product details, including high-quality product copywriting and images, to optimize your dropshipping store for SEO and potential customer viewing.
6. Register your business
Depending on where you’re operating your dropshipping business, you may need to register your business for legal purposes. Beyond filing for a federal tax ID, most businesses in the United States are not required to register with the federal government to operate legally, according to the Small Business Administration. Businesses that only file for their tax ID automatically receive the sole proprietor designation. However, many dropshippers elect to set up a legal business entity that offers greater protections for the business owner, like an LLC or C Corp.
An LLC is a legal business structure that protects a business owner’s personal assets from company debts and can be owned by one or more individuals. It’s relatively easy to set up and usually requires minimal reporting requirements. On the other hand, a corporation is a legal business structure that is owned by shareholders. It has more reporting requirements than an LLC and a more complicated ownership structure. However, it’s the preferred structure if planning to raise money from investors at some point in the future. Both LLCs and corporations can elect for the S Corporation tax designation. An S Corp is considered a pass-through entity because it can pass business income, losses, deductions, and credits directly to shareholders, without paying any federal corporate tax.
7. Get your business finances in order
Getting your business finances in order entails applying for business accounts and preparing a method to track and separate tax money. For example, a business checking account allows you to separate your business finances from your personal finances for easier tax reporting and you can deposit all earnings and withdraw all expenses from this account. A business credit card can be used to accumulate points while safely paying for business expenses, like buying merchandise from suppliers. As a dropshipper, you may also need to collect sales tax, so you’ll want a method for tracking your tax liability. An accounting software like QuickBooks, Xero, or Wave can help to keep track of your business finances.
8. Launch and market your dropshipping store
Launch and market your dropshipping store to start attracting potential customers to your product offerings. There are many marketing strategy options you can use to promote your dropshipping store, depending on which sales channels you’re leveraging for your business.
What are strategies to advertise a dropshipping store?
Is creating a dropshipping video ad a good idea?
Creating a dropshipping video ad is a good idea because it can increase sales. In fact, a study by video marketing company VidMob found that video ads drive a 48% higher sales rate than traditional image ads. Furthermore, video ads receive 612% more likes and comments than image ads as well, according to Content.io.
Can a dropshipping video ad service be a good solution?
Yes, a dropshipping video ad service can be a good solution because they are experts at crafting compelling video ads. Using a video ad service like EcomVids can allow you to outsource your marketing efforts to experts instead of wasting time on it yourself, resulting in a more efficient use of your resources.
9. Analyze performance
Dropshipping success often comes down to making the right adjustments to your products and marketing campaigns, so regularly analyzing performance is essential. Some of the most important metrics to analyze include:
- Traffic sources
- Profitability
- Product sales
- Conversion rate
- Shopping cart abandonment rate
The tools you can use to analyze your performance depend on which sales channels you’re using for your dropshipping store. For example, a Shopify store owner can see their conversion rate metrics in their Shopify admin panel under the Orders page.
10. Test new products
Regularly testing new dropshipping products allows you to expand your profit potential and scale your business. In fact, the ability to easily test new products without much risk is one of the biggest benefits of the dropshipping business model. Look out for new or hot products in your niche to experiment with in your dropshipping store. According to Dropship China Pro, you should aim to sell between 50 and 60 products in your dropshipping store at a given time. As such, you can replace poor performers with new products to potentially boost your sales.
How much does it cost to start a dropshipping business?
It costs between $100 and $1,000+ to start a dropshipping business, according to Forbes. Although you don’t need to purchase products like with other Ecommerce business models, starting a dropshipping business does require capital for product research tools, advertising, and potentially a website store subscription (Shopify).
$500 is enough to start dropshipping. However, you may run out of funds before you start generating a profit. Dropshipping tends to require a lot of trial and error. Therefore, if you get lucky with a successful product in the beginning, you may not need to invest more than $500. If you don’t find the right product opportunity, you may need to come up with more capital to continue your dropshipping business.
What are dropshipping pros and cons?
Pros
Hassle-free store creation
Low startup costs
Reputable suppliers
Wide array of available dropshipping products
Good scalability potential
Cons
Extreme market competition
Low profit margins
Difficulty creating a unique brand
Lack of control over supply chain
Tendency for shipping and customer service issues
These are the main dropshipping pros and cons.
Is dropshipping still profitable?
Yes, dropshipping is still profitable. Dropshipping is not 100% profitable, like some online “gurus” may lead you to believe, but you can make a decent profit margin with the business model. Dropshippers typically make between a 15% to 20% profit margin, according to Ecommerce platform BlueCart.
Is TikTok dropshipping profitable?
Yes, TikTok dropshipping is profitable. In fact, Kate Amanda was able to earn a whopping $70K in her first month of TikTok dropshipping, according to AliDropship. However, she already had an audience when she got started with TikTok dropshipping. Even so, TikTok has proven itself as a profitable platform for dropshipping for those who find a solid marketing strategy.
How much do dropshippers make?
Dropshippers make around $20/hour on average, according to data from Zip Recruiter of professional dropshipping salaries. You can make $1,000 a month with dropshipping. However, how much dropshippers make depends on the specific of how well an individual runs their business.
Average dropshipping income explained
The average dropshipping income explained simply is between $1,000 and $3,000/month.
Is dropshipping passive income?
Dropshipping is not passive income. Dropshipping typically requires a lot of manual work, such as researching new product ideas, coordinating customer shipping details with a supplier, and recording dropshipping sales for business accounting. However, like most online businesses, you can make this business model more passive by employing automation tools and employees to help support your business so you don’t need to perform all of the work yourself. For example, Zendrop is a dropshipping automation tool that can automatically add trending dropshipping products to your store, meaning you don’t necessarily need to spend as much of your time performing product research for new dropshipping products. Therefore, if your dropshipping business earns enough profit so that you can pay to outsource all of the work, it's possible to earn dropshipping passive income.
Can dropshipping make you rich?
Yes, dropshipping can make you rich. The richest dropshipper is Sebastian Ghiorghiu, with an estimated net worth of $8 million, according to Dropshipping.com. However, these results aren’t typical. It is not easy to get rich from dropshipping. That’s because most dropshippers earn a below average salary.
Is dropshipping easy?
No, dropshipping is not easy. Although certain aspects of dropshipping are easy, such as the ability to list and sell products online that you don’t own, many aspects of dropshipping are difficult. For example, because dropshippers earn slim profit margins of just 15% to 20%, they need to make many more sales than other Ecommerce professionals doing private label or wholesale just to make the same amount of profit.
What is the dropshipping success rate?
The dropshipping success rate is just 10% to 20%, according to Shopify.
Reasons dropshipping is hard
Some reasons dropshipping is hard are:
- You have zero control over product and order fulfillment
- Many profitable niches are saturated already
- Getting sales requires you to spend on digital marketing
What are the main dropshipping mistakes to avoid?
Some of the main dropshipping mistakes to avoid are:
- Choosing a bad niche
- Performing insufficient product research
- Poor customer service
- Not paying attention to your finances
- Setting unreasonable expectations
- Skipping product quality testing
Is it too late to start dropshipping?
No, it is not too late to start dropshipping. Dropshipping is expected to continue strong growth through this decade, with Grand View Research estimating a compound annual growth rate of 23.5% through 2030 globally. Therefore, there is still plenty of opportunity in dropshipping for those who are willing to put the work into learning the business model.
Is dropshipping saturated?
No, dropshipping is not saturated. Dropshipping is just an inventory management strategy within the greater Ecommerce industry. Although Ecommerce has certainly grown competitive over the years and many general niches are relatively saturated, there are still new niches and products coming into the market that spur new growth opportunities.
Is dropshipping a bad idea?
No, dropshipping is not a bad idea. Dropshipping can be a good idea for those who don’t have much capital but want to start building an Ecommerce business. Dropshipping is even a useful strategy used by established Ecommerce businesses to test new product ideas before committing to buying products in bulk. Even so, there are some reasons why dropshipping is a bad idea, especially if your financial circumstances enable you the ability to choose a different online business model. For example, dropshipping has lower profit margins and higher shipping cost than the Ecommerce business model of private label.
What are the risks of dropshipping?
Some risks of dropshipping are:
- Bad dropshipping suppliers providing poor quality products to customers
- Slow shipping times causing frustration among customers
- Seller account getting banned by Ecommerce marketplace and losing sales channel
Are dropshipping courses worth it?
Yes, dropshipping courses are worth it for those who want step-by-step support in starting a dropshipping business. However, the main issue with many students of online courses is that they don’t take real action to start the business after completing the course. Therefore, if you’re going to invest in an online course, make sure you follow through and actually start a dropshipping business.
What are the best dropshipping courses?
Some of the best dropshipping courses are:
What are the best Shopify dropshipping courses?
Some of the best Shopify dropshipping courses are:
- BeyondSixFigures by Justin Woll
- Creato by Jeremy Ray Holst
What are the best Facebook Marketplace dropshipping courses?
Some of the best Facebook Marketplace dropshipping courses are:
- Facebook Marketplace Titans by Paul Lipsky
- Facebook Marketplace Dropshipping 2.0 by eCom Tom
My dropshipping case study
My dropshipping case study involved earning over $48K in revenue in just a month using Facebook ads to promote shark onesies. However, my profit was only about $3,000 after considering advertising expenses and product costs.
My dropshipping review
My dropshipping review is that it’s certainly possible to make money with dropshipping, but it requires a lot of work to make a relatively small amount of profit in my opinion. I can certainly see the appeal of starting a dropshipping business, but I prefer online business models with more passive income potential and higher profit margins.
Conclusion: Is dropshipping the best online business model for beginners?
Dropshipping is not the best online business model for beginners. Although dropshipping is a relatively affordable online business model to get started with, factors like high competition and lack of control over product and fulfillment lead to the low success rate of dropshipping. An alternative business model I recommend for those just getting into online business is local lead generation.
Local lead generation is an online business model that entails creating websites that target customers for local businesses. Instead of competing with everyone on the internet like a dropshipping store, a local lead generation website only competes against a handful of businesses in one location. Furthermore, the profit margins of a local lead generation website are up to 90%, much higher than dropshipping. You can learn more about starting a local lead gen business with this lead gen training program.
