Today, I will show you everything you need to know about the dropshipping business model. I have been in this industry for many years, and I believe it makes sense that you learn from my experience.
In this article, you will learn:
- The dropshipping business model
- How to succeed in dropshipping
- How to look for suppliers
- If dropshipping is the right business for you
- Dropshipping is when you sell a product without buying inventory
- There are 5 main steps in building a dropshipping business.
- Dropshipping is very cheap to get started with
Ready? Let us dive into it!
BEST Way To Start Dropshipping For Beginners
Tune in with Nawras, an 8-figure dropshipper and the founder of dropship.io, as he reveals the BEST way to start dropshipping for beginners. Don't miss this chance to learn from a top industry expert!
What is dropshipping?
Dropshipping is a business process where you sell products without buying inventory. Although dropshipping has been around for decades, the internet only made it easier, and it is the internet that has given it a massive boom in recent years.
In a nutshell, dropshipping means you sell someone else’s goods. Once a customer purchases from your online store, you notify the seller, and the seller ships the item to your customer.
How does dropshipping work?
Dropshipping works in so many ways, but we will focus on the traditional dropshipping method, which is to build an online store.
Here is how it works:
- You build an online store and market it
- A customer pays you for an order
- You tell your supplier about the order (and you pay them, too)
- The supplier ships the item to the customer
As you can see, there are several key players here. Below are some key terms to remember.
- Dropshipper – You are the dropshipper; the dropshipper is the seller who has no inventory.
- Supplier – the supplier is the manufacturing company, or retail company, who agreed to supply you with products that they will ship to your customer.
Then, there are other parties that you can involve, such as the web host, the dropship supplier tool, etc. All these must work together to create a functional dropshipping store and process.
Although dropshipping only has four major steps, each step has its nuances, which I will cover in the next section.
Steps to Dropship
Step 1: Choose a niche/product
A niche is a specialization or a grouping of products. The first step to successful dropshipping is to choose one niche, as it is also the very thing that will dictate who your market is.
An example of a niche is women’s shoes. As such, you will sell nothing but women’s shoes. However, you can also niche down, which means you can concentrate on selling only high-heeled shoes. Another example of a niche is toys, but you can niche down to educational toys only.
There is no right or wrong niche selection, as the success of your business depends on how you handle the complexity of your industry.
Here are some of my pointers in choosing a niche:
- Choose a niche that you understand and are passionate about
- Pick a niche where you are sure there is a market; it means you are sure people are willing to spend money on it
- If you are a beginner, choose a niche that is not too competitive
Choosing a big niche can be overwhelming, though, and you may find yourself so stressed. Think about it: if you choose to target women’s clothing, you must choose thousands of products for it. As such, you are stressing yourself so thinly. It is better to target blouses for now, and then simply add more categories to your store later.
On the other hand, you can sell just one product and still succeed financially. A one-product website is easier to manage than a multi-product store. One good example of this is Specter Labs, a store I found in our dropship product database tool.
Specter Labs sells only one thing: mouse pads. This store made over $129,000 in revenue in 12 months. You can see more of these stores in one of our articles about the best print-on-demand dropshipping stores.
Step 2: Look for a supplier
Do not build your store before testing a supplier. One of the worst mistakes you can make is to sell a product that you never tested.
There are factors you must consider when choosing a supplier. Some examples are:
- Product Quality
- Refund policy
The best way to find a reliable supplier is by using dropship supplier tools. By far, the best ones are:
These are dropship directories that offer integration with Shopify. Some can integrate with WooCommerce. Like all dropship tools, each one has an advantage over the other.
There is not enough time today to review each supplier on my list. What I suggest is that you click on the links and visit their websites to see what they have to offer.
Remember: place an order with the supplier to test the product and shipping times. This process will tell you a lot about the supplier, and you can pick the best supplier to work with.
Step 3: Create your online store
The next step is to build your online store, which includes uploading the products you selected in the previous steps.
Your two best options are:
- Build a store with Shopify
- Build a store with WooCommerce
Here are some things you need to consider when building a store:
- Website design
- Legal compliance such as GDPR and cookie usage
- Payment processors
- Marketing applications
- Dropship supplier integration
There are other options, like Wix, BigCommerce, Shift4Shop, Squarespace, etc. However, Shopify and WooCommerce are the biggest players in the e-commerce industry.
The advantage of Shopify is that it is easy to use. It is so easy that you can build a store in as short as 30 minutes.
WooCommerce, on the other hand, is cheaper but more difficult to use. You need a website hosting service provider to build any website with the WooCommerce platform. In addition, you must have a working knowledge of website security, design, etc.
I suggest that you start with Shopify. The Shopify founders created the platform for only one purpose: selling online. With Shopify, you can build with zero technical knowledge. They also offer a multitude of payment processors, which means you can accept money no matter where you are.
Step 4: Market the product
Marketing is one of the toughest aspects of dropshipping. Now that you have a dropshipping store, how will people find it? Most importantly, how will you convince the people to buy? There are several ways by which you can market your products, and I will discuss this in more detail later.
Step 5: Accept and fulfill orders
The last step is to fulfill the orders. It means that once a customer places an order on your website, you must contact your supplier and pay them. Only then will they ship the item to your customer.
All dropship directory tools that I mentioned in Step 2 make this process easy. All you need to do is click some order buttons, and the supplier will do the rest.
Some dropship supplier tools, like Dropified, go a step further. They automate the whole thing. It means that the system will place the order on your behalf even if you are asleep. There is no need to log in to your store admin and place the order yourself.
Tools To Find Dropshipping Suppliers
There are many ways by which you can find dropshipping suppliers. First, you can use the list I supplied earlier. Second, you can look for suppliers in AliExpress.
AliExpress is the biggest online retail store in the world. The sellers here are manufacturers from China, and most dropshippers start with this platform.
AliExpress is like Amazon. The big difference is the price. Since it is the manufacturers that list their products on AliExpress, you can expect the products to be super-affordable.
Here is an example:
I only typed “drone,” and we have drones with prices that range from $21 to $100+. The next step from here is to investigate your competition and order the product to test it.
The other method is to use dropship spy tools, and below are some examples:
- Shop Hunter
- Commerce Inspector
All these tools show you the sales data of millions of products and who supplies them. While you can use dropship supplier tools such as Spocket and AppScenic, many of them do not show sales data. As such, you cannot determine if the product is a winner or not.
Before we move on, please read our blog on how to find dropshipping suppliers. That article covers the following topics:
- How To Find Dropshipping Suppliers
- What Makes A Great Dropshipping Supplier?
- Benefits Of Dropshipping From Multiple Suppliers
- How To Contact Dropshipping Suppliers
- How To Spot Fake Or Scam Dropshipping Suppliers
How To Choose The Right Suppliers
One of the biggest problems you will face as a dropshipper is supplier reliability. There are many suppliers who, at first, seem dependable. Later on, you begin to realize that these suppliers do not have your business interest in mind.
Below is our guidance on what to look for from a supplier:
- Product Quality – make sure to choose a supplier who maintains a standard. Low or high, the products must meet expectations and must be uniform.
- Shipping Standards – you want to work with a supplier who ships fast and cheaply.
- Warehouse Location – if possible, pick a supplier who has a warehouse in your target market. This setup reduces handling and shipping time, along with shipping costs.
- Technology and Efficiency – the best suppliers must have a system you can integrate with yours. As such, it is best to look for these suppliers in dropship supplier tools like Spocket and AppScenic.
- Return Policies – do not work with a supplier who does not accept returns. An excellent supplier accepts mistakes and takes accountability for them.
We have discussed this in detail in our other blog post, What to Consider When You Choose Your Dropshipping Supplier.
The Cost Of Dropshipping
There is no single answer to the cost of dropshipping, as the tool you select plays a critical factor in your monthly expenses. In this section, I will discuss the cost of building a bare-bones dropshipping store with Shopify.
Here are the two basic things you need:
- Shopify Platform – $25 per month
- Dropship Supplier Platform – $39.99 per month
With this setup, you can build a dropshipping store for $64.99 monthly. Shopify has three plans, and the Basic Plan should be enough to start a dropshipping store.
Spocket is an affordable dropship supplier tool. With the Starter Plan, you can import up to 25 products to your store. However, you need to shell out more if you want to upload more products.
These two things allow you to build a fully functional store. However, you do not have all the bells and whistles to make your store competitive enough. It also does not cover the cost of blogging, advertising, creating a logo, etc.
The beauty of dropshipping is that there are many free apps you can use. You can also use social media to market your product without spending a lot of money.
In addition to your monthly cost, you will also spend on some start-up purchases. For example, you need to buy product samples. You can also use spy tools for a few months, which will help you find winning products for dropshipping.
And before I forget, you also need to set aside money for your domain name. There is no fixed range for this, but prepare at least $20 for it.
How Profitable Is Dropshipping?
One question I see all the time is this: how profitable is dropshipping? Is it even profitable? The answer is yes, dropshipping is profitable if you do it right.
Your profitability depends on your margin and expenses. Some dropshippers think, “I will sell this product for a profit of $1 so customers can easily afford it.”
That, of course, is a bad business approach. At a gross profit of $1, you must sell 1,000 units to even make $1,000 a month. You cannot survive with $1,000, right? In addition, it is not that easy to sell 1,000 units a month.
At best, you must look for products that will allow you to have a 100% profit margin. Why? Because you have to take into account your operating expenses.
Here are some examples of your operational costs as a dropshipper:
- Store Maintenance
- Domain Name
- Advertising / Marketing
- Dropship Tools
The store maintenance is your hosting fee. With Shopify, you pay it monthly. With WooCommerce, you pay the hosting provider annually. The domain name is also an annual financial obligation. You can pay for most dropship tools monthly or yearly.
Anything you do to market your products has a cost. It may be the cost of time, the ad copy, ad impressions, ad clicks, etc.
Should you choose to go the route of blogging, you will spend money paying writers to create content for you. If you write the articles yourself, you must “pay” yourself, too.
Dropshipping is highly profitable only if you make a store or product that is unique. One good example is a store called Things of the Stars. This print-on-demand dropshipper sells canvas wall art, which they get from Printify, Printful, and Gelato.
How To Analyze Competitors In Dropshipping
As a dropshipper, you are operating in a tough environment. One of the best things you can do is to keep abreast of what your competitors are doing.
To make it happen, you will need a tool like ours. We have a competitor research tool that will show you hard data and several important information not publicly available.
Here is a sample from our competitor analysis tool:
As you can see, there are several elements here that you can learn from:
- Store revenue
- Items sold
- Number of items they have in their store
- What social media apps they use
- Ads they launched on Facebook (via the Facebook Ad Library button)
- Apps they use in their Shopify store
Here is more:
We can also show you the top-selling products of a store based on either revenue or sales volume.
Why do these things matter? If you can view your competitor’s apps, you will know who their suppliers are. If you can view your competitor's ads, you will know how they market their products.
Dropship.IO is the ultimate spy tool that you will ever need. In addition, we not only provide you data about a dropshipping competitor, but we can also show you sales data for ALL products on the Shopify platform!
Marketing Your Products
As promised earlier, I will show you the best ways to market your dropshipping products. These methods are:
- Affiliate Marketing
- Social Media
You can advertise on Google, Meta (Facebook and Instagram), Pinterest, TikTok, and so much more. The downside is it is costly, and it takes some serious marketing knowledge to make it work.
You can blog on your website and work on your search engine optimization. I suggest that you blog about topics that help your readers, which eventually makes you an authority figure in that niche.
For example, if you are selling high-heeled shoes, you can blog about managing foot pain. If you sell drones, you can blog about the best batteries for drones or the best cameras for drones.
The purpose of blogging is to get free traffic and establish authority. In your blog, use some hints that you are selling the very items that can solve their problems.
3. Affiliate Marketing
Affiliate marketing is a process where people sell your products or make referrals. If they make a sale, you pay them a commission.
To do this, you need an affiliate marketing program—you need a software program and a commission program. For the latter, it is up to you how much commission you want to give.
For the software, here are some of the most downloaded ones in Shopify:
These are software programs you can integrate with your Shopify store. From here, you can build the entire process such as registration, link creation for each affiliate, tracking, and payment of commissions.
4. Social Media
The last method I recommend is marketing via social media. There is a store I know that uses TikTok to get followers and buyers. The store’s name is Dumb Club.
As of the time of this writing, Dumb Club does not advertise on Facebook, and it does not have a blog. They also do not have an affiliate marketing program.
What they have is a social media presence. They have active accounts on:
They are particularly active on TikTok. They interview random people and ask the participants questions. For example, they would tell the participant to name two countries that start with the letter Z. If the participant succeeds, he gets a free hoodie.
This marketing process earned Dumb Club 1.2 million followers on TikTok with 39.8 million likes. I checked our competitor tracker just today, and our records indicate that the company made $7,000 in the last seven days!
Pros Of Dropshipping
1. Anyone Can Start A Dropshipping Store
You do not need to be an expert to start a dropshipping store. The concept is easy to grasp, and building a website should not be a concern.
For one, it does not take a computer programmer or engineer to put a website together. Shopify has everything that you need. All it takes is to choose a theme, and then add your images and products to make a sale.
In addition, it does not take a lot of money to build a dropshipping store. You can build one today for only $30.
2. You Do Not Need To Buy Inventory
The best thing about dropshipping is you do not have to buy inventory. Your suppliers do. It is so unlike Amazon FBA where you need to buy hundreds, if not thousands, of goods to be able to start a retail business.
Traditional retail uses the same approach where you buy goods now, and then sell them later. What if you do not make a sale? If that happens, you will stare at hundreds of items sitting in your warehouse. It is not likely that you will get your money back.
If nobody bought your inventory, consider that as a loss. With dropshipping, this loss will never happen. You can even change products and niches as often as you want without spending.
3. Low Business Risk
The business risk for dropshipping is small. If you get the Basic Plan of Shopify and pay for a year, it translates to only $19 per month.
Spocket costs $24 per month if you choose the annual plan. Combined, you will spend $516 for one year. If you do not succeed, you lose $516.
However, this risk is not too big, considering that you have the potential to earn hundreds of thousands of dollars in a year.
Take a look at this example:
The charts above represent the sales performance of Specter Lab, a print-on-demand company that sells nothing but personalized mouse pads.
They sell only one product, and yet they can make $129,000 in revenue. You can do the same with only $516 per year!
Should you go the monthly payment route, it is not that expensive, either. It takes only $65 per month to run a functional dropshipping store.
Think about it: you spend $3.26 for a tall latte in Starbucks per day for 20 days. That is equivalent to $65 per month. Your coffee does not make money for you, but a dropshipping store will do.
4. You Can Manage The Business Remotely
One of the perks of dropshipping is that you can run your store no matter where you are—all it takes is an internet connection.
For example, let us say that you live in the United States. One day, you decided to have a vacation in the Bahamas. For as long as there is internet in your hotel, you can process dropshipping orders.
You do not even need to make phone calls, or print shipping labels—it takes only a few clicks of the mouse to process an order.
Better yet, use a platform like AppScenic that automates orders. The system will place the orders for you, and you do not need to do anything at all.
5. You Can Dropship Worldwide
The best pro of dropshipping is that you have access to a global clientele. Since it is your website, you have control over what countries can access your store.
What does this mean for you? It means you do not have to limit your market to one country only. You can advertise to the US market even if you are in Asia. Vice versa, you can advertise to Asian customers even if you are in the United States.
Cons Of Dropshipping
There are two major cons of dropshipping, and these are competition and level of control.
The Competition Is Tough
Printful said in one of its articles that 30% of all online stores use dropshipping as their method of fulfillment. While that does not tell us the exact number of dropshipping stores, it tells us that the competition is tough.
Dropshipping is tough because the barrier to entry is low. At a starting cost of $65, anyone can build a dropshipping store. It is why dropshipping stores are cookie-cutter stores—they look the same, and many dropshippers sell the same stuff.
With high competition comes low profits. You must sell your goods at a lower price just to make a sale. I am telling you right now: this is not good.
So, how do you set yourself apart from the rest?
Create something unique. Target a specific niche. Create designs that people can only find on your website.
Surely, there is a risk of people copying your designs. After all, spy tools like ours can track your store, and our users can see what you sell.
The key here is not only design uniqueness, but also your capacity to build an audience. That is something that people can never take away from you.
You Have Little To No Control
You do not have control over product quality when you dropship. Products come as they are. The only way you can control this is through private-label dropshipping.
In addition, you have no control over:
- Speed of handling
- Shipping cost
- Shipping couriers and speed
Essentially, I am saying that you are at the mercy of the supplier. You have no recourse if you make a deal with a supplier, and they don’t deliver according to your standards.
You can, to a certain degree, work out a solution if you buy from AliExpress. As a dropshipper, AliExpress looks at you as a customer, which means they will cover your purchases with their buyer protection program.
The best thing you can do is to choose your supplier wisely. Take your time in picking the best supplier for your products. It does not matter if it takes you months. Be patient and choose the best.
Common Dropshipping problems
1. Competition and Pricing
One of the biggest problems you will face is competition. Let us take a look at this dropshipping product.
I saw this on AliExpress, and I ran a reverse image check. Here is what I found:
A vast majority of images on the right are those that come from dropshippers. If you review them one by one, you will see a wide variation in pricing.
Because of this, you have to adjust your prices accordingly. It means you have to sell your dropshipping products at a competitive rate. A low price is equal to a low profit.
To avoid this problem, I will echo what I already said earlier: be unique. The less competition you have, the better.
2. Shipping Cost and Speed
Shipping cost and speed will become a problem, especially if you ship from China. First of all, you cannot tell a supplier what courier to use. Second, e-packets no longer exist.
Let us be honest: for a product that you bought or $3, do you really think that the suppliers will go out of their way to pack and ship your time the following day?
No, they won’t.
They will wait until they have enough orders to compensate for their labor, gasoline, and time, and then they will ship all the orders at the same time.
There are ways to get around this problem. The first one is to choose a dropship supplier with high shipping speed. AppScenic is a good example.
The other way is to set proper expectations. Tell the customer that it will take 60 days to ship if that is the reality.
3. Product Quality
We discussed product quality earlier, and I cannot stress this enough: test your products before selling them.
“Is this not too expensive?” you ask.
No, it is not. You can control the products you upload to your dropshipping store. So, you can spend on product testing according to your budget. In my opinion, it is better to spend money on testing than dealing with customer complaints later.
Many suppliers in the market sell cheap goods. Surprisingly, customers will put up with this. After all, you get what you pay for.
What matters is that your supplier does not ship broken items. So, even if the product is not of the highest quality, what’s important is that the products do what they are supposed to do.
4. Refunds and Returns
You will have this problem if:
- You make false claims in your ads
- You do not choose a reliable supplier
Customers will not hesitate to ask you for a refund if your item does not meet their expectations. If you think you can get away with it by ignoring them, think again.
Consumers can file a chargeback through their credit card issuers or banks. If this happens a lot, I can tell you that your payment processors may put your account on hold.
PayPal is notorious for doing this. To protect their users, they will put your account on hold if:
- You process a lot of refunds.
- Several customers filed a chargeback.
PayPal does not want to work with unscrupulous merchants. In this case, it is not entirely your fault, as the supplier has something to do with it.
SOLUTION: Pick a reliable supplier and set clear and proper customer expectations about shipping.
How to Grow Your Dropshipping Business
I will not spend too much time on this topic, as it demands an article of its own. However, I will provide you with some quick pointers.
- Choose a winning product – do not sell products because you like them; sell products that have a demand.
- Build a professional store – take the time to review stores that have high revenue. Observe what they do and learn from them.
- Market your products the right way – learn how to write advertising copy that works. Advertise consistently and show your products to the right people.
Is Dropshipping Right For Me?
Is dropshipping the right business for you? Do you think you should try something else? Here are three things you need to think about to help you decide.
1. You are willing to work hard
Dropshipping requires a lot of hard work. The sad reality is that while anyone can start a dropshipping store, you need to put in the time and effort to succeed.
Here are some things you need to do:
- Manage product uploads
- Investigate if a product is a winner
- Process customer orders, complaints, requests, etc.
- Fix website issues
- Make your website secure
- Do the math for business such as accounting, taxes, profitability, analysis, etc.
In addition to all these, you must create ads, write blogs, create graphic art for your storefront, and so much more. So, while dropshipping does not require a lot of money, it does require a lot of work.
2. Your financial risk appetite is low
Dropshipping is an excellent business if you do not want to risk a lot of money. To be honest, $500 for one year of basic expenses is not a lot.
Because of this, you do not need to worry about losing your life savings at all. You do not need to borrow from your 401K, insurance—there is no need to look for investors.
3. You are willing to learn
Lastly, dropshipping is for you if you are willing to learn. Dropshipping is a business where you must from your efforts, not someone else’s. The truth is that there are many aspects to dropshipping that you may currently not have experience with.
Here are some examples:
- Website design – you need to learn user experience (UX) and user interface (UI) principles to be able to build a professional website.
- Ad Copy and Art – not all ads work. You need to learn how to create advertising art and copy that attract attention and convince the viewers to take action.
- Advertising – advertising platforms have different challenges. What you would do on Facebook to launch ads differs from the steps you need to take in Google Ads.
There are other things that you must learn along the way, such as website security, integration of marketing apps, etc.
As time goes by, you will also see new technologies—programs that you need to learn how to use to keep up with the changing landscape of the industry.
Dropshipping For Dummies: FAQs
How can a beginner start dropshipping?
You can start by taking our free dropshipping course. The Dropship.IO Dropshipping University has videos that will show you the fundamentals of dropshipping.
Is dropshipping good for beginners?
Yes, dropshipping is one of the best businesses for beginners. It does not take a lot of money to start a dropshipping store, and it is easy to build.
Is dropshipping competitive?
Yes, it is highly competitive because the barrier to entry is low. Anyone from any country can build a dropshipping store.
Is dropshipping legal?
Yes, dropshipping is legal. What you need to worry about is your business registration and how you will pay your taxes. Different countries have different laws, so apply what is necessary depending on where you live.
Do I need dropshipping insurance?
You only need one if your business is big. Insurance is just another cost that you do not want to have right now.
The next step is to decide on a niche, create a list of products in this niche, and investigate if you have a winner. You can only do this if you use a tool such as ours.
We offer a 7-day free trial that you can take advantage of. Use our product database to see if your ideas have a market. From here, it should be easy to build and launch your very own dropshipping store!