How to Start a Dropshipping Business in 2021; Ultimate Guide
What’s a profitable dropshipping business worth?
If you’re the owner of Inspire Uplift, then about $4,000,000 in sales per year!
Have you ever wondered how to start a dropshipping business, but just never got around to it? Well, now’s your chance to dive-in and learn.
But, you might be thinking “entrepreneurship is scary, expensive, and time consuming. Who has the financial security to leave their full-time job and jump into something unknown? Something that may or may not be profitable?”
If this sounds familiar, then dropshipping could be the perfect side-hustle for you.
Disclosure: Some of the links on this page are affiliate links, which means we may receive a modest commission if purchases are made through those links. This adds no cost to our readers and helps us keep our site up and running. My reputation is of the utmost importance to me, which is why I only provide completely honest, unbiased recommendations.
What is Drop Shipping?
Dropshipping (sometimes spelled ‘drop shipping’) is a unique business model that revolves around online e-commerce.
With minimal investment (we’ll get to this later), the business owner creates an online store and sell products without ever buying inventory.
With drop shipping, the online storefront sells products on their site, and the products are delivered directly from suppliers and manufacturers.
As the store owner, you only “buy” what you sell; typically after it’s sold. The benefit of this is that you can start a drop shipping store even if you don’t have a lot of money.
All you need is a website. That’s it!
How does dropshipping work
The process is simple. And quite lucrative if done well. At a basic level it looks like this:
- You build a website on an established platform (more on how easy this actually is later) and populate it with products you want to sell.
- You then drive customers to your website via online marketing and advertising. Most people use Facebook, Google, Instagram – wherever your target customers may be.
- Then, customers buy the product.
- At the time of purchase, you make however much money you priced the product for.
- The manufacturer then ships the product to the customer.
- Finally, manufacturer then bills you for the cost of goods. You make the difference between the price on your website and the the manufacturers cost of goods.
- Rise and repeat.
Ready to get started?
I was too, and in 2012 I started my own dropshipping business called SizeSlim. SizeSlim was a dropshipping supplement company that I ran for 3 years.
Through that experience, I gained an incredible amount of knowledge on dropshipping. Using that knowledge I wrote this particular blog so you can get your store up and running as quickly as possible and start making money.
I’ll reference SizeSlim to highlight key examples along the way. Enjoy!
How to Start Dropshipping
Now that we’ve laid the foundation, let’s get into the nuts and bolts of how to dropship. We’ll dive into the specifics of how to start an online store, how to choose drop shipping suppliers, and setting yourself up for success.
Here are 5 steps to start a dropshipping business.
1. Discover your niche
Choosing products is for many the most challenging part of dropshipping. But, we’re going to make it easy.
The key to finding the right niche is a combination of the product demand, and the competition in the market.
Finding the right product
To accomplish this, there a few easy things you can do. My favorite thing to do is to analyze keywords.
Analyzing keywords is the best way to determine demand. And, it’s easy to see why.
If a lot of people are searching for something, it’s logical that a lot of people are also buying that particular thing.
Here’s how to do keyword research:
The first think I did when I started SizeSlim is I went to Google Trends. Google trends is essentially a dashboard conveying the latest data on Google searches.
To start, head over to Google Trends and search in the box near the top where it says Explore Topics.
After you submit your search topic, a graph will pop up showing relative interest over time – ranked 0 to 100. This is important. You want to find a product that has a consistent relative interest score of at least 50 for 3 consecutive months. Or, trending strongly upward.
If the product is not at least a 50, or is bouncing from 0 to 100, you’re likely to get end up with very few sales.
Note: This is actually one really nice thing about drop shipping, though. Remember, the initial investment to drop ship is literally zero for products. So, you could always choose to list several products.
Or, if you’re first one fails, just add different products to your site.
That’s exactly what I did with SizeSlim.
When I first started researching for something to dropship, I started by trying to sell a relatively unpopular product called Garcinia Cambogia. Again, no cost to me whatsoever.
But, I continued to analyze Google Trends and eventually realized that people weren’t searching for Garcinia Cambogia. They were searching for fat burners.
Guess what the next product I listed on the website was. You got it. A high powered, fat burner.
And, it worked! In the first month I sold over $20,000 of product at no upfront cost to me.
Once I learned what people were searching, I also used Google Trends to understand where these people were searching from. If you scroll down on the search page, Google Trends shows you a map of the US. From here it’ll show you which states are leading the charge for a particular search.
With regards to fat burners, the Californians were all about it. They had a score of 100.
The reason this is important is because it allows you to better target your audience when you start marketing. Why target users in the entire US when only those in California are after fat burners?
Another awesome tool that I used quite a bit is SEMrush. With SEMrush you can analyze keywords to see exactly how much search volume is happening per month and the difficulty of ranking with each. The KD (keyword difficulty) is super important to understand.
I recommend only finding products whose keyword difficulty is below 50%. If it’s more than that, the competition will be too steep for you to make real money.
Other things to consider
Once you’ve finished analyzing your potential products with Google Trends and SEMrush, the next best thing to do is to give your product a reality check. Check out your favorite places to shop online and pay special attention to how items are categorized in the menus.
Could any one or a combination of those categories make for a good niche for your store? Be careful not to be too specific – you want an array of attractive products – or so general that you can’t really define your brand.
If you’re interested in fashion, what’s currently trending? You probably know. Sticking close to your core interests is always a good idea – as long as it’s in demand.
According to The Trend Spotter, oversized Victorian sleeves are making their bicentennial reemergence. But, we both know you can’t build a store with just oversized Victorian sleeved clothing.
Even more importantly, Google Trends data shows the fashion statement coming and going a few times throughout 2020, sometimes having no interest whatsoever.
This is a great example of a trend – a category – not an overall business idea.
However, a broader characterization of the type of people typically seen wearing Victorian sleeves could be a great option for your brand at large.
A quick Google yields some informative results, specifically around street style, hipster, or old English (well that makes sense…) styles.
Once you find your interest, check out some broader categories and consider them for your niche. Remember, you want each of your target customers to find something they’re interested in – Victorian sleeves, tweed vests, and ruffled blouses, for example.
But, you don’t want to reduce your target audience to something as minimal as a particular sleeve type.
One last thought on finding your niche
Trends, such as our Victorian sleeves, come and go. Not ideal. You don’t want a business that comes and goes every few years, but there’s nothing wrong with shifting things in and out of various categories to remain relevant.
Today’s Victorian sleeves are yesterday’s bellbottoms and tomorrow’s platform shoes. Shift your categories, not your identity.
Once you’ve identified your niche and product, it’s time to move on to building your website.
2. Build your website
Your website is your storefront.
You won’t have a building, a store in a strip mall, or even space in a cafeteria/shopping plaza combo. This matters more than you might think.
Many retailers track significant metrics around foot traffic. And, you’d be amazed at the revenue distribution for random passersby that happened upon a store.
But, this isn’t the case for a website – aka online storefront. Instead, you’ll need an attractive, easy-to-navigate, and dare I say, seductive website.
We’ve all been on the internet for decades now, and we’re familiar with what a website should and shouldn’t look to make the user feel comfortable. And, this is where a lot of folks in e-commerce go wrong.
Creating something beautiful, intuitive, and useable takes time and effort. Fortunately, there are solutions out there to help.
Shopify dropshipping is the primary solution for low-cost, no-coding-required websites. You don’t even need to know what HTML is (let alone how to use it) to create an entire store of your own with their platform. And, better yet, it’s entirely free to get started!
You can take all the time you want to perfect it and not pay a cent until you’re ready to launch. You can start a free trial right on the home page within minutes.
Once you’ve entered some basic information, you’ll be presented with a home page. There are hundreds of tutorials out there for how to create your Shopify site, but we’ll go over the rundown here.
Select “Customize Theme” on your Home page, and you’ll see an option to “Explore free themes” from the Shopify library.
Take a look around, find one that’s attractive to you and meets the needs of your business and niche. Each has its own unique features and advantages, so take your time picking the right one.
Add it to your Theme Library and select “Customize” to make it your own.
Play around with the Customization settings as much as you’d like. There’s a lot you can do and it’s incredibly intuitive for a website builder. I won’t bog you down with details here, but let us know in the comments if you have any specific questions and we’ll try to help you out!
Remember, there are a ton of detailed, step-by-step website creation tutorials out there designed specifically for Shopify that could come in handy.
Other dropshipping companies
There are a bunch of other options, each with their own benefits, in addition to Shopify’s platform. If you want to check some others out, here are our favorites to start 2021:
3. Find drop shipping suppliers and products
Regardless of what you decide to sell, you’ll need to find a supplier, or manufacturer to make and ship the goods once you’ve sold them. Find the right supplier is the key.
That said, are you ready for another massive benefit to using Shopify’s e-commerce platform?
They have dropshipping partners built right in! You’ll see an “Apps” button on your Dashboard. Hit that and Visit the “Shopify App Store”.
This is where you can find product suppliers who have teamed up with Shopify to make your drop shipping store setup as easy as possible.
You’ll see a lot of options. But, here’s a quick rundown on the ones I think are the best to use.
Drop shipping suppliers
Oberlo partners with Shopify to provide over 100 million products to dropshippers.
Whatever your niche, you can likely find matching products in their massive database. It’s easy to install, search, and identify the best products for your store.
The platform is entirely free to use and offers automated inventory and price updates from manufacturers.
Much of the stigma around dropshipping revolves around cheap products and slow delivery times. But, these limitations depend on the supplier and, through your choice as the business owner, can be controlled.
Modalyst, a close partner of the AliExpress Dropshipping Center and a global force in the industry, offers incredibly high product quality. With your selection of US dropshipping suppliers you’ll have access to hundreds of name brands – often boasting delivery times of less than seven days.
Simple order fulfillment, massive dropshipper discounts, print on demand collections, and products from US and European dropshipping suppliers make Spocket a great destination for high quality products and a successful store with genuinely satisfied customers. Partners with Oberlo, Printful, and dozens more.
Speaking of Printful, this is your go-to print on demand company. Maybe you already own a construction company and you’re looking for branded merchandise. Maybe you have a really cute dog and you want to turn him into your brand.
Printful is the premier print on demand dropshipping solution. Design your products, customize them any way you’d like, and only buy what you sell.
Printful offers a true dropshipping solution, with no inventory and straight to customer fulfillment.
A few thoughts on picking drop shipping suppliers and adding products
With only these four suppliers, you’ll have your selection of millions of products for your store. Amazon Print on Demand and Printify round out the most popular print on demand sites (even with print on demand shoes!). But, be careful not to get carried away adding hundreds of products straight away.
There are a few key things you’ll need to do with each of those products before they’re ready to sell, namely:
Select Specific Products
This is where you can niche down even further to match the customers’ exact needs. For example, does the customer want a fat burner? Or does the customer want a fat burner that’s wrapped in an all veggie capsule?
These specifications will make the difference between a sale and a customer who bounces to another website. Get specific!
Optimize Product Pages
It goes without saying – beauty sells. Make sure your product pages look good! Spend some time with the site to make sure the user experience is as seamless as possible.
If need, head over to Fiverr and hire a website designer who can make your site look great in no time. A typical designer can run anywhere between $50 – $1,000 per site. To give you an idea, I spent about $550 making The Money Shark using a quality Fiverr designer named Abdul who I’m happy to recommend.
Categorize, Categorize, Categorize
Finally, categorize your product. Every product has a hierarchy, sometimes called a taxonomy, that it fits into. This is critical for a few reasons.
First, you want your customers to be able to find what they’re looking for. Have you ever been on a website that you just know has something, but you can’t, for the life of you, find it?
It’s frustrating and it detracts from potential sales. Make your products easy to find by categorizing them appropriately. No one’s looking for your Victorian sleeves in the shoe section.
Secondly, people looking for shoes aren’t interested in Victorian sleeves, but people looking at blouses might be. If someone already wants to buy a blouse, don’t try to sell them on a shoe.
Tackle the shirt first.
Now that we’ve selected a few suppliers and added products to our page, we’re ready to start driving traffic to the website. Here’s how that’s done.
4. Create a marketing strategy
Remember when I said you won’t have foot traffic from passersby?
It’s as true now as it was a few paragraphs ago. But, now we’re going to consider what it means and what we can do about it.
It’s not enough to have a beautiful website and the perfect products if no one ever sees them. So how do we get eyes on our site, on our products, and, eventually, on our checkout page?
Marketing your drop shipping website
Google and Facebook are your go-to ad platforms and can match customers with your products for just a few dollars a day. Within Google and Facebook there are a few types of advertising that we’ll touch on here: Social Media, PPC (Pay Per Click), and Affiliate Marketing to grow traffic to your dropshipping store.
Promote on social media
Facebook and Instagram are great go-to sources for ads because of the personal connection you have with the potential audience. Build your company a Page, populate it with all the details of your business, and even import products directly from Shopify to Facebook Shopping to create a second sales channel.
Then, invite all your friends to “Like” the page with a custom note saying “I opened a new business, come check it out!” You might be surprised to see some no-cost conversions come through to generate your first sale.
After that, get started with the Facebook Ads Manager. Don’t spend too much on your first ad sets, just run $10-$20 over the course of a week or two, and at the end evaluate your performance.
Don’t know how Facebook Ads Manager works? No problem. Here’s a quick crash course to get you started.
How does Facebook Ads Manager work?
It’s simple. Once you have a Facebook page set up, you’ll be ready to start running ads.
The first thing you’re going to do is go to the Facebook Ads Manager home page.
Once you’re at the home page, simply login using the same username and password you set up the Facebook page with. From there, click “new campaign“. You’ll be asked to then choose which kind of campaign you want to run. Select “store traffic”.
From here you’ll be led through a variety of options to optimize your ad. It’s all very simple.
One of the most exciting things about Facebook Ads, though, is the manager in which you can segment your target audience. Facebook Ads gives you the option to do this automatically, or manually.
The way Facebook Ads works is based on the typic of dropshipping product (or business) you’re advertising, Facebook will find pages that fit into the same category.
For example, when I set up Facebook Ads for SizeSlim, Facebook automatically targeted people who liked similar types of pages. SizeSlim ads were served to people who liked Skinny Taste, Everyday Health, and Fit Bottomed Girls, to name a few.
And, this works brilliantly.
A few Facebook Ads suggestions
Don’t spend too much on your first ad sets, just run $10-$20 over the course of a week or two, and at the end evaluate your performance.
Ask questions like:
- How many people visited your website?
- How many of those converted into sales?
- How much did you pay for each of those sales?
Once you can answer those questions, you still have to ask yourself if those answers are… good? Bad? Average?
Create a few more ads with the same spending limits, the same timeframes, and see how they perform comparatively. Experiment with different images, text, designs, layouts, highlighted products, and placements.
Once you’re confident you’ve found a quality ad set, increase your spend on it to see where it can take you.
Pay Per Click (PPC)
If you need more marketing in addition to just Social Media, PPC is the next best thing.
PPC is essentially the same as what we’re running on Facebook, but through Google rather than social media. Like Facebook, Google uses data gathered from millions of people to optimize your ads. But, instead of paying per image served, you pay only when a person clicks on your ad.
How to start a pay per click campaign?
To start, head to Google’s ad creation portal and start building some ads with the same guidelines as above.
Try out different strategies, starting with small budgets and experiment.
If you want to get really fancy you can create A/B tests where two ads are run simultaneously with a performance report comparing them at the end (Facebook also offers this functionality).
Notes on Google vs Facebook Ads
It’s important to consider both Google and Facebook for your ad choices because while much of their audiences overlap, there will always be unique users to reach on either platform.
If, after experimenting, you’re seeing 90% of your traffic from Facebook and only 10% from Google, feel free to use that knowledge to focus a greater portion of your ad budget on Facebook marketing.
The third marketing option on the list is affiliate marketing. This is one of the best ways to get “free” marketing for your dropshipping store. Let’s take a closer look.
“But you said this was cheap to start and required only modest – if any – investment! Why are you now telling me I have to buy advertisements?!”
Great point, let’s tackle that right now because I know a lot of folks getting into this either won’t have the capital for marketing. Or, even if the money is available, they may not have the confidence to take that step with their assets.
Enter affiliate Marketing
Affiliate marketing is also known as Influencer Marketing. Affiliate marketing is when someone else creates an audience for you, and you pay nothing out of pocket until making a sale (sound familiar?).
How to start an affiliate marketing campaign
First, find influencers on YouTube, Instagram, Twitter. Pay attention to the influencers’ audience. Is it the same as yours? (It should be.)
Next, reach out to them either through DM or a Business Inquiries email (often listed in their profile) to offer them an affiliate deal.
Affiliate deals can range from free product to a percentage of the sale for the influencer. The more you offer to the affiliate, the more likely it is for them to accept your offer and market your dropshipping store.
You can find various contract templates for this online. But, they essentially all work the same way: the influencer promotes your product and website to their audience, and you pay a commission for each sale generated through their promotion.
Affiliate marketing offers great partnership opportunities for both the influencer and the dropshipper. It’s low risk and requires little to no upfront costs.
5. Optimize your store
Once you’ve selected your products, set up your store, and started marketing your site, it’s time to optimize your store.
Continuous improvement is considered an ongoing activity, unlike marketing. Marketing is typically a “set it and forget it” activity after you find something that works. But, this is not the case regarding optimization.
Optimization is about consistency.
How to optimize your dropshipping store?
Here are a few things you can do to keep your site up to date – and profitable.
Revisit product offerings
Product popularity comes and goes. Continuously review the demand (and the competition) of the products offered on your site. Pay particularly close attention to the products you spend money to promote.
Get feedback from buyers
To do this, I recommend you allow customers to leave reviews on your products. This is essential, not only to attract attention to your popular products, but also to get an understanding of what needs to improve.
If customers are consistently making the same comments about your products, you can easily change the offering with a better product. You might even have to chance suppliers.
The point is, you never really know until you get the proper feedback.
To make the feedback process easier, enable a comment section on your page with Disqus. Disqus allows visitors to leave feedback – and you to monitor the feedback closely. If you don’t like the comment, simply delete it!
Why Start a Dropshipping Business?
There’s a reason “How to start a side business” ranks so highly on Google. Because the options are endless. And, people are usually risk averse when it comes to money.
But what if there was a way to build a real side business – a solution where you can create your own income, generate revenue for yourself, and it’s something you can do it in your spare time?
All without the risk.
Dropshipping is one of those solutions
Dropshipping the perfect foray into entrepreneurship. It allows you to build something of your own and generate passive side income. (It’s even possible to retire on a dropshipping store, taking your future – and your retirement – into your own hands.)
Just a few of the benefits of a dropshipping business are that you get to work from home, spend more time with your kids, and travel. Generally speaking, the world’s your oyster!
How Much Can You Make Dropshipping?
Here’s a an example of the financials behind a drop shipping business.
A customer finds a product they’re interested in on your website and buys it at the price you set. Let’s say it’s $20, with shipping costs included.
You spend $10 to “buy” the product from the manufacturer – the cost of goods. You spend $2.99 for shipping. Let’s also assume that the digital ads cost you about $2 to get the person to your site to buy.
In this scenario you’d be looking at a $5 profit. The manufacturer ships the product directly to the customer and you’re done, hands-off.
And the best part, it’s 100% automated. Remember, you never saw the product!
Once everything is set up, the exchange of money, the shipping information, everything is done through automation, making this a truly passive solution for your side income.
What’s a Good Margin for a Dropshipping Business?
Most dropshipping businesses end up with a margin somewhere in the neighborhood of 15-30%.
It all depends to 2 things:
- the popularity and demand of the products you’re selling, and
- the strength of your marketing.
The better your product selection is and the better your marketing is, the higher your profit margins will be.
To get a better understanding of the demand of your products, use a tool like SEMrush to analyze the keywords related to each.
If you really want to get big fast, the easiest way to do this is by setting up a white label, dropshipping company.
What is white labeling?
Have you ever shopped at your local drugstore only to find two differently labeled products with identical ingredients? That’s white labeling in-action.
In this case, the drugstore has worked with the manufacturer to smack their own brand name on a generic product. This method of selling is completely legitimate and often times results in a better cost for the consumer.
For our purposes, this is a brilliant way to start drop shipping. The advantage white labeling offers you is the ability to customize the branding around a dropshipped product.
The result for you is that you can have a ton of fully customized products on your website without spending a dime on inventory. Your only limitation is how many product images you can produce with your brand on them.
Once your product pages are set up, there’s nothing else to do. The rest is exactly like the normal dropshipping process. Customer goes to your store, buys product. The manufacturer then prints your custom label on the product and ships it to the customer.
The key to success in this model is marketing. This kind of selling can become competitive very quickly due to the low barrier to entry. So, it’s up to each brand to make themselves stick out the best.
How to white label?
In order to start a white labeling company you need two things in particular:
- A designer to design your labels – the easiest way to do this is to find one on Fiverr
- A manufacturer who also prints labels on-demand and ships them on-demand (aka dropshipping)
I’ll admit, the later is not the easiest thing in the world to do. But, with a little bit of research you should be able to find a white label, on-demand manufacturer for just about anything.
Food for thought
You’ll notice that a lot of supplement companies operate like this. Google a generic product like ‘Vitamin C’. You’ll see a variety of results.
I guarantee all of most of them are white label versions of the exact same product all coming from the exact same manufacturer.
Is Dropshipping Dead?
Not at all!
I get a lot of questions about this every day. Things like: “Does dropshipping still work in 2021? Is dropshipping still relevant today?
Both great questions. Dropshipping is still an extremely viable business model, especially in our Covid-19 (and post-Covid-19) world. Now more than ever people are ordering online rather than going to a physical store.
Lockdowns around the world exacerbated this trend, driving many physical stores out of business. But the demand for products still exists.
This creates opportunities for online e-commerce – dropshipping stores, in particular – to thrive.
Despite record unemployment and uncertain income around the US, retail e-commerce ballooned with unprecedented 18% growth in 2020, despite the ongoing pandemic.
In that same period, brick-and-mortar retail slipped by 14%, further demonstrating that the future of retail is online e-commerce.
With low startup-costs, and a time investment that works on your schedule, e-commerce is an incredibly fertile area of opportunity for the new entrepreneur.
So, what’s stopping you? What are your thoughts about starting a dropshipping business this year?
Feel free to let us know in the comments section below. Or, drop a link or screenshot to your store in the comments for us to see your handywork
About Matt Collins
With a rapidly growing team of readers, my mission is to teach hungry professionals how to maximize their net worth with scalable side hustles and responsible financial management practices.
My reputation is of the utmost importance to me, which is why I only provide completely honest, 100% true, unbiased recommendations for systems and software I know and trust.