How to start a dropshipping business? A Complete guide.
Dropshipping business refers to a retail strategy where a seller sells products that the seller does not keep in stock. The seller, on receiving orders from the customers, sends information such as product number, delivery address, and order date to a third-party supplier. Who then ships the goods directly to the buyer. Nowadays, dropshipping is benefiting both the business owner as well as the manufacturer or real seller. Let’s learn how to start this business step by step.
Choose a product niche you want to sale
The most important step in starting any business is to choose the right niche for the products. A niche is a specialized segment of the market for a particular kind of product or service. The online market is full of hundreds of dropshipping businesses and competing on price becomes too difficult for you if you don’t start from some specific products. So first find a niche that suits you best and you have knowledge about that product too. Plus choose those products that are hard to find in the market.
Identify the suppliers
After finalizing the niche for your business, start searching for suppliers that are willing to provide drop-ship. Search online for “wholesaler”, “distributor,” “bulk,” “reseller,” and “supplier”. You can also look through your Yellow Pages, Alibaba, or other such pages under Suppliers or Wholesalers to see if there are any in your area. So you can reach out to them and ask if they handle drop shipping.
Choose the best-selling products.
On finding the right suppliers for your business, it’s time to choose the items that you want to sell. Ideally, you will want to sell products that are in high demand. You can find out the demand for the product by using Google’s Keyword Tool or looking at the completed listings on eBay to check items that sell 60% or more. These items are usually best-selling products.
Decide payment methods.
You can pay upfront, or pay on the terms of the manufacturer. An upfront payment policy requires that customers pay a deposit before you start or finish a project while with pay on terms, you pay all of your orders at a later date, such as at the end of the month. As you are just starting your business, suppliers might only agree to work with you if you pay upfront. Afterward, they may switch to pay on terms.
Create an account and complete your documentation with the supplier.
After you finalize the suppliers and select the product you want to sell, it’s time to set up an online account and complete other documentation asked by your seller. At this point, you should also form your business.
Select a drop shipping business structure.
Like any other business, you need permission from your government to create the legal structure for your dropshipping business. Keep in mind that each structure has its own advantages and disadvantages. So choose the one that suits your work and budget. You can also discuss this with your lawyer.
- A sole proprietorship is a type of business run by one person, easy to set up and no file paperwork is required by the state. However, you are personally responsible for all of your business debts.
- A limited liability company (LLC) is a separate legal entity where the state is involved and shields its owners from personal liability for business debts.
- A corporation is also another form of business structure that not only shields its owners (shareholders) but also pay their own taxes. However, if you form an S corporation, then the business’s profits and losses pass through to the shareholders.
Apply for a federal tax ID.
You need to pay taxes to the federal government, so you need a tax identification number. If you run a sole proprietorship, then you can use your Social Security Number instead.
Select your selling platform for dropshipping business
You have two options. You can create your own eCommerce site, or you can sell on an existing online marketplace, such as eBay, Amazon.com, or Daraz.com. If possible you can create your own eCommerce store or purchase a domain name and create your own website to sell products online.
Set up your website to accept credit card payments.
Marketplaces like eBay and Amazon will process payments for you. However, if you create your own eCommerce site, then you will need a merchant account and a payment gateway account so that your clients can pay with credit cards. Several companies offer both as a bundle like PayPal, which is the easiest way to process payments.
Obtain a toll-free number for your dropshipping business
You’ll look more legitimate as a drop shipping business if you have a toll-free number customers can call to lodge complaints or ask questions. Check online. Some providers even allow you to link the number to your cell phone.
List your products for sale.
After all, is set up, it’s time to list your products for sale on your online page.
- The most important thing in this business is the price of the products. Select an optimum price that must not be too high or too low to compete with other sellers.
- Also, keep in mind the cost of the shipment and other charges before setting the price.
- Don’t forget to clearly mention your customers about your shipping and return policies in your listing.
Purchase from the supplier when you get a sale.
As a drop shipper, you wait for a customer to order from you. Then you turn around and order from your supplier. Make sure not to delay, since your delay will only cause a delay for your customer. Notify your customer when their product ships. Send a follow-up email telling them when the product has shipped. Also, provide your contact information so that they can contact you if a problem arises.
The main goal of marketing is to attract customers and keep them. However, the specific marketing goal for your business can vary, depending on your existing product’s position in the marketplace. Try out several marketing techniques and find out what works best. You can create a mailing list customers can sign up for to receive special email offers. You can also run Google or Facebook ads or run a blog or guest blog to enhance your visibility on Google.
Dropshipping is an order fulfillment strategy that does not call for a company to maintain inventory. In contrast to common opinion, the dropshipping business concept is not a way to become wealthy quickly. Even though it sounds like simple money, it may be a difficult job when all the disadvantages, challenges, and day-to-day management are taken into account. Drop shipping can still aid in the development of a prosperous company if you go about it in the right manner, just perhaps not as soon as you’d want.
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