How to Start Dropshipping: 7 Steps to a Profitable Plan

From researching which products to sell to registering your business, we share all the steps you need to follow to make your dropshipping venture a success.

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Whether you’re taking the first steps as an entrepreneur, or you’re looking to start a side hustle, dropshipping is a good venture to pursue if you know what you’re doing. It has low startup costs, few overheads, and you don’t have to hold or purchase inventory, making it an ideal bootstrapping venture.

As easy as it is to sell the idea of dropshipping, it does come with a few challenges. What sort of items do you want to sell? How do you develop your brand’s identity? What platform is best for dropshipping?

To help ease any doubts, we’ve put together a guide to walk you through the path to dropshipping success. In just seven steps, we’ll give you the insights you need to set up your next business venture.

What is a Dropshipping Business?

The beauty of dropshipping is that you run an online store without ever holding any inventory. This means that once you make a sale, your supplier will ship your product from their warehouse to your customer’s door. Your focus remains on selecting your product range and marketing it, rather than worrying about storage, packaging, or shipping.

There are three key players in dropshipping: the manufacturer, the retailer (you), and the customer.

If we follow the money, it starts with a customer placing an order on your website and paying you, the retailer. You then pay the manufacturer, which means you want to sell your product at a higher price to the customer to make a profit. The manufacturer then sends the product to the customer. Because of this dynamic, you don’t have to run the risk of storing inventory that can’t or won’t sell.

How to Start a Dropshipping Business in 7 Steps

Dropshipping doesn’t have to be complicated. The seven steps needed to create your dropshipping business are:

  1. Research and create a business plan
  2. Choose what you want to sell
  3. Carry out competitor research
  4. Choose a dropshipping supplier
  5. Build an online store
  6. Register your business
  7. Market your dropshipping store
  1. Research and create a business plan

Although dropshipping is an alluring venture, you need a clear plan to turn a profit. Understanding what’s doing well in the market and how much investment might be needed to stay afloat is key. From our dropshipping knowledge, we found that the best places to research the viability of your possible products is via Google Trends, the Amazon Best Seller list, and TikTok or Instagram hashtags. These sites are highly responsive to trends that are influencing consumer behaviour, and can give you an idea of product demand.

For instance, if you look at Google Trends for the keyword ‘clothing’, you’ll see demand has remained steady between 75 and 100 over the past month. This result shows there’s reliable and steady demand, making it a great bet for a dropshipping business. Generally, you want to avoid items that have seen a sharp drop in searches recently, as it means their popularity has died off. Think for instance fidget spinners – they were trendy a couple of years ago, and search volume on Google has significantly dropped since.

The numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term.

2. Choose what to sell

Once you know which products have a high demand and are performing well, you now have to choose what to sell and how to sell it. Will you develop a generic and safe clothing brand, or a niche one? How wide is your product offering going to be? Regardless of what industry you want to be in, your choice should be data driven and should be reflective of product trends.

As you design your product offering, you can also use DSers to measure the potential of your products. DSers is a multi-store management platform that lets you integrate your operation with Shopify, WooCommerce, and Wix, making it easy to coordinate your dropshipping venture. You can analyse order volume to see what has the highest demand.

3. Carry out competitor research

Dropshipping is a competitive space, so it’s important to know your competition. For inspiration, you’ll want to learn what they’re selling and how they’re selling it, as well as spot if there’s something you could do better. While researching, try to stick to about five competitors, ensuring that eBay or Amazon are included on the list. This will help give you a sense of what products genuinely perform well in your sphere.

To gather all your intelligence, here are a few of methods you can use:

  • Google Search → pick a keyword that your target audience would likely use to find your product on Google. Take a close look at the Search Engine Results Page (SERPs) to see which provider is consistently coming out on top. Look at what products they sell, how they write their product descriptions, and note anything else you think they’re doing well like their range of products or marketing strategy.
  • Use competitor spy tools → tools like Alexa are great for keeping track of competitors’ online activity. They can give you insights into their social media profiles, top traffic sources, number of visitors, and more.
  • Go on social media → examine how your competitors make their digital mark on social media platforms. Some might even use their pages to sell, such as Instagram for dropshipping. What sort of approach do they have to their marketing? What content are they publishing? This will bolster your social media content strategy and help your brand stand out.

4. Choose a dropshipping supplier

Your dropshipping business is only as good as your supplier. You’ll want to find a company that provides high-quality, profitable, and reliable products to keep your customers happy. Shopify’s ecommerce platform for dropshipping is a great middleman that connects you with potential suppliers through the DSers app, which uses AliExpress to help you find and add products to your store.

Alternatively, if you’re going to use a different ecommerce platform to set up your store, you can go directly to AliExpress and start finding potential suppliers. You can start by identifying five or six good ones and narrow them down based on the following criteria:

  • Product quality → it might look great on the product picture, but in real life it might not scream high quality. Therefore, have a look at reviews or do a sample order to verify the quality yourself.
  • Profitability → as a dropshipper, you make an income by charging your consumer a slightly higher rate than the price you to pay the supplier for the product. Suppliers that give you wider profit margins will therefore be better, as long as the product quality isn’t being sacrificed because of a lower price.
  • Reliability → you want products to reach your customer on time, with reasonable shipping expenses and times. Many suppliers might be overseas (particularly with AliExpress, with lots of products shipping from China) so you might want to do a sample order to check whether the products arrive in good condition after their long journey.
  • Return policy → if possible, find a supplier that has a return policy. The majority don’t, so it’s definitely a competitive advantage in the supplier market.
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5. Build an online store

You’ll need to build an ecommerce store to sell your products. It’s essentially your digital storefront, so you’ll want to make sure it looks good. Your ecommerce site will run the purchase of transactions and also help you gather customer data for analytics..

Based on our research, the top-rated option is Shopify. Starting at £19 per month, the platform is user-friendly and easy to navigate, making it easy for newbies and seasoned business veterans to build their digital storefront. You’ll also get unlimited inventory allowance, revenue reports, and an impressive library of dropshipping apps.

Sprinting closely behind, our research points towards Wix as another outstanding ecommerce platform to build your dropshipping store. It’s great for high-level dropshipping product customisation and offers automic inventory synchronisation.

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Dropshipping beginners who want a simple and easy user experience, with expansive sales features

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Users that want an ecommerce platform offering high-level dropshipping product customisation and automatic inventory synchronisation

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Advanced users who already have experience using an ecommerce platform to run a dropshipping business

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Using multiple channels to promote the products in your dropshipping store

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Dropshipping business owners with experience in website building, who want to get going with minimal outgoing and support costs

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£19 per month

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6. Register your business

You’ll need to set up your dropshipping company and register it. To do this, you’ll need to register with HMRC online. You can set up as a sole trader, limited company, or partnership. Here’s a quick breakdown of the different options:

  • Sole proprietorship (trader) → this is the simplest business structure, but it offers no personal liability protection. If your business is sued, your personal assets might be at risk. However, it is the easiest to handle. You just report your business’s earnings on your personal taxes.
  • Limited liability company (LLC) → this model offers increased protection of your personal assets by establishing your business as a separate legal entity. You may need to comply with filing requirements and pay incorporation and ongoing fees.
  • C Corporation → this offers the most liability protection. It is more expensive to incorporate because it is subject to double taxation, as income doesn’t pass directly to shareholders.

You might want to consult a lawyer before you choose how to incorporate your business. However, SMEs tend to resort to either of the first two options. It all comes down to your budget and how risk averse you are.

7. Market your dropshipping store

It’s time to get selling! You have a wealth of channels to pursue given how creative you can get with social media. Your aim is to make sure you get a good Return On Investment (ROI) on your marketing budget, so here are a couple of robust marketing channels to pursue:

  • Paid advertising → keep your budget low at the beginning to experiment, testing out what content gets the most conversions. Create several ads to figure out which products sell best. You can also run Google Shopping Ads and target long-tail keywords, which tend to have high conversions due to high user search intent.
  • Influencer marketing → if you have a limited budget, this is a great way to reach an audience quickly. People tend to trust influencers and their recommendations. You can then negotiate an affiliate fee as well as any other fees for their service. Try this out on TikTok and Instagram.
  • Content marketing → to foster long-term traffic to your store, you can market your content as part of your dropshipping plan. You can start a blog to foster thought leadership and carve your authority within your industry.
Did you know?

The average success rate of a dropshipping business is between 10% and 20%. The difference between those that succeed and those that fall by the wayside is a solid business plan and being data-led. Following these seven steps can help extend the longevity of your dropshipping venture.

Can you Start a Dropshipping Business for Free?

Technically, yes. There are ecommerce platforms that are highly budget friendly like eBay and Amazon, so you won’t have to pay a subscription like you would with Shopify. For instance, with eBay and Amazon, you pay a fee when you sell an item. While both these platforms are great for selling items, they’re not necessarily the most scalable solutions, especially if you want to set up a serious business.

If you’re worried about throwing money at a platform that doesn’t work for your dropshipping vision, we’d recommend doing a free trial first. Shopify offers a 3-day free trial and lets you sign up without adding your card details. This gives you access to all its features, commitment free.

Subscribing to a robust ecommerce platform for your dropshipping business is key because it builds your digital storefront. You need it to look good so customers can trust you. If you want to build a reputable brand and receive good reviews, we’d say the investment is definitely worth it.

Next Step: Start Selling

Dropshipping is a flexible way to delve into the world of ecommerce, but it does take work to ensure it’s done properly. Whether you sell shoes or stickers, or use Shopify or Wix to build your site, if you follow these seven steps diligently you’ll be positioned to do well. And remember – always revisit the data and adapt your dropshipping strategy accordingly.

Frequently Asked Questions
  • How can a beginner start dropshipping?
    There are seven steps to follow if you want to succeed as an amateur dropshipper. You’ll need to: research and create a business plan, choose what to sell, carry out competitor research, choose a dropshipping supplier, build an online store, register your business, and market your dropshipping store.
  • How profitable is dropshipping?
    Dropshippers usually keep their profit margin at 10-20%, but your profitability will hinge on the volumes you sell and how efficient your marketing is.
  • Is dropshipping legal in the UK?
    Yes! It’s entirely legal. It’s treated no differently than any other ecommerce store.
Written by:
Fernanda is a Mexican-born Startups Writer. Specialising in the Marketing & Finding Customers pillar, she’s always on the lookout for how startups can leverage tools, software, and insights to help solidify their brand, retain clients, and find new areas for growth. Having grown up in Mexico City and Abu Dhabi, Fernanda is passionate about how businesses can adapt to new challenges in different economic environments to grow and find creative ways to engage with new and existing customers. With a background in journalism, politics, and international relations, Fernanda has written for a multitude of online magazines about topics ranging from Latin American politics to how businesses can retain staff during a recession. She is currently strengthening her journalistic muscle by studying for a part-time multimedia journalism degree from the National Council of Training for Journalists (NCTJ).

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