How to Start a Dropshipping Business: Essential Steps, Success Stories, and Expert Tips

You might be wondering how to keep costs down while still building a profitable venture for your startup. Or maybe you're anxious about finding effective ways to reach customers without taking on too much financial risk. If these are some of your concerns, dropshipping could be the answer you’re looking for.

According to Grand View Research, Inc., the global dropshipping market is set to hit $557.9 billion by 2025, showing its growing appeal and potential for profit. In fact, successful dropshipping businesses make up to 50% more than those that rely on traditional on-site inventory.

So, what exactly is dropshipping and how can you get started? Let’s find out!

Dropshipping is an e-commerce business model that allows entrepreneurs to run an online store without keeping products in stock. You act as a middleman, focussing on marketing and customer service while leaving the heavy lifting—inventory and logistics—to someone else.

So, how does dropshipping work?

In a dropshipping model, the process begins when a seller partners with a dropshipping supplier and sets up an online store. When a customer places an order, the seller receives the order details and confirms it. The seller then forwards the order information to the dropshipping supplier, who handles the packing and shipping directly to the customer. Throughout this process, the seller manages the store and customer interactions while the dropshipper takes care of inventory and fulfilment, ensuring the customer receives their product without the seller needing to handle stock or shipping.

Let’s walk through the steps to set up your dropshipping business.

A niche is the specific category of products that you want to sell. Focussing on a specific niche helps you target a defined audience, making it easier to stand out from competitors. Research trends on platforms like Google Trends and Amazon to identify profitable niches.

Popular options in the dropshipping world include health and wellness products, eco-friendly items, and pet supplies—all of which are currently in demand.

Tom, a 30-year-old entrepreneur from Israel, built his successful high-ticket dropshipping business by focussing on one key factor: finding the right niche. Instead of trying to sell everything to everyone, Tom knew he had to target a specific market to stand out in the crowded e-commerce space. He focused on high-ticket items, which are products that sell for a higher price, typically ranging from $200 to $15,000 or more. These items are often premium products, offering higher quality or more specialised features that justify their price.

By honing in on this niche, Tom was able to differentiate his store from competitors selling low-cost, mass-produced items. His decision to focus on high-ticket products not only allowed him to target a smaller but more dedicated market, it also positioned his brand as one that prioritised quality and value. This gave him a clear edge over those offering cheaper alternatives.

Tom’s deep understanding of his niche helped him earn as much as $6,000 per week. He knew what his target audience wanted and tailored his product selection to meet their needs.

His story is a perfect example of how finding and sticking to a niche can be the foundation for building a strong and successful dropshipping business.

To stay on top of your finances, consider using accounting software like Xero or QuickBooks. Both tools are designed to help small businesses track income, expenses, and profit margins, offering a clear view of their financial health. They also make it easier to monitor cash flow, keep track of invoices, and prepare for tax season.

It’s essential to map out a solid financial plan from the beginning. Start by estimating your startup costs as well as your ongoing expenses. Be realistic about your expected revenue and how long it might take for your business to become profitable.

Here’s a sample breakdown of the typical costs involved in starting and running a dropshipping business according to DoDropshipping:

Along the way, you may also need to make adjustments to your business, and this is where being financially prepared makes all the difference. Take Alex's story as an example. Alex, a dropshipper from Florida, initially sold items with an average order value of just $20. But after switching to higher-value products, she quickly realised the financial benefits of this approach. Her first big sale was a $2,500 couch after she pivoted her business strategy. This kind of change often requires financial flexibility.

Alex also highlighted that she’s been leveraging Amazon ads and social media promotion as her business grows. Advertising can be costly, and budgeting for it from the outset is essential.

Like Alex, you may need to intervene in your business’s growth by making strategic financial decisions. Being financially prepared gives you the flexibility to invest in key areas such as marketing or product sourcing, ensuring your dropshipping business can adapt and thrive.

Finding reliable suppliers is essential for the success of your dropshipping business. After all, your supplier is the backbone of your operations, so it’s crucial to ensure they offer transparent pricing, clear communication, and a dependable shipping service. It’s also a good idea to look for suppliers with warehouses near your target customers, as this can significantly reduce shipping times, improving customer satisfaction.

Let’s have Marc Chapon’s story as an example. He focused on finding local suppliers and Etsy artisans through Spocket, filling his store with 25 to 50 well-sourced items. But he didn’t just pick any supplier—he did his homework. He checked reviews, researched his competitors, and made sure the suppliers he chose were reliable and offered high-quality products.

Marc’s story shows how crucial it is to partner with the right suppliers. Within just a year, Marc was making $60,000 in sales per month, and his success proves that finding a trustworthy supplier is indeed the backbone of a thriving dropshipping business.

Building a brand identity is about shaping how customers perceive your store and creating a distinct presence in the marketplace. A strong, memorable brand identity helps you stand out from your competitors and build a lasting connection with your audience.

This step starts with creating a memorable name and logo that instantly connects with your target audience. Your store’s name is often the first impression customers have, so it should reflect the values, personality, and uniqueness of your business. A carefully chosen name can convey what your store is about and make your brand easier to remember. Along with the name, a professionally designed logo adds visual recognition, helping your business stand out and feel trustworthy. Together, these elements are the foundation of your brand’s identity.

Tze Hing Chan’s story offers a valuable lesson in how a strong brand identity can make all the difference. After initially struggling with a range of products like phone cases, kitchenware, and martial arts items that didn’t quite catch on, Tze noticed the rising popularity of bubble tea, particularly within Asian communities. That’s when he made a pivotal decision, which was to shift his focus to bubble tea-themed merchandise, including plush toys, which resonated with his target audience on a much deeper level.

Within just two months of launching this new product line, Tze’s dropshipping store, Subtle Asian Treats, earned $98,180 in profit. His success wasn’t just about finding a profitable opportunity, but about building a brand identity that connected with both market trends and his audience’s cultural preferences.

Now, it’s time to set up your online shopfront. Platforms like Shopify, WooCommerce, and BigCommerce are excellent for building dropshipping stores. These platforms offer easy-to-use templates and integration options with suppliers to sync products directly.

As you build your store, it’s important to optimise it for search engines (SEO) to ensure customers can easily find you. Incorporate relevant keywords such as “iPhone cases" and “ceramic glass for iPhone 13” into your product descriptions, blog posts, and meta tags. This will help improve your visibility and attract more potential customers.

For a more comprehensive approach, consider checking out our latest blog: How to Make a Website with WordPress. Building your online store with WordPress can offer additional flexibility and customisation options, allowing you to create a unique and tailored shopping experience for your customers. Whether you choose Shopify, WooCommerce, or WordPress, the key is to set up a store that not only looks great but also functions smoothly, ensuring a seamless shopping experience for your visitors.

Once your dropshipping business is set up, it's important to ensure that you comply with local laws and regulations by registering it under an appropriate legal structure. Depending on where you're based, this could involve registering as a sole proprietorship, forming a Limited Liability Company (LLC), or choosing another legal structure. Each structure comes with its own benefits and obligations, so it's essential to understand which one best suits your business needs.

For example, a sole proprietorship is the simplest structure and is often chosen by small business owners as it’s easy to set up and maintain. However, the downside is that your personal and business liabilities are not separated, meaning personal assets could be at risk if the business runs into financial trouble.

On the other hand, a Limited Liability Company (LLC) separates your personal assets from the business’s liabilities, offering more protection. This structure is ideal if you want to limit personal risk, but it can involve more paperwork and ongoing costs compared to a sole proprietorship.

Wherever you're located, it's crucial to check the specific legal requirements in your area. Some countries may also require additional registrations, permits, or specific documents to run an online business.

Take Gustav's experience as a lesson in the importance of finding the right marketing strategy. Initially, Gustav invested in Google Ads, but the cost-per-acquisition (CPA) was too high, particularly during off-seasons. Realising this, he shifted his focus to Facebook Ads, which offered lower entry costs and more effective targeting.

Gustav’s decision to pivot paid off significantly. After spending just $150 on Facebook ads, he achieved a notable $2,500 sale. The efficiency of the algorithm was evident, with a bounce rate below 50%. This means that less than half of the visitors left his site after viewing only one page, indicating that the content was engaging enough to keep them exploring further. Additionally, the average session duration on his homepage exceeded two minutes, suggesting that visitors were spending a meaningful amount of time on his site. Although he faced days without sales, Gustav’s choice to double his ad budget and relaunch his campaigns resulted in a breakthrough, generating over $30,000 in sales in a single day.

This experience underscores the value of persistence and adaptability in marketing to achieve substantial results. For more insights into marketing strategies, check out our blogs:

NicheDropshipping says that dropshippers can make between $500 and $3,000 a month in their first year of business. However, it’s always important to note that the profitability of your dropshipping business depends on your niche, supplier relationships, and marketing efforts. Some dropshipping stores operate on small margins, while others, with the right strategy, can achieve substantial profits.

There are free tools available to help you get started, such as basic website builders like WordPress, free email marketing plans from Mailchimp, and social media platforms like TikTok and Facebook. In fact, some dropshipping businesses operate entirely through Instagram-based stores without a traditional website. However, for greater success and growth, consider investing in premium options as your business expands.

Starting a dropshipping business with minimal investment is possible, but some costs are unavoidable. Key areas such as website hosting, a domain name, and marketing tools typically require some initial outlay. While you can begin with a limited budget, investing in these areas will provide a more professional and reliable foundation for your business.

For dropshipping, the best products tend to be those with strong demand, low shipping costs, and unique appeal. Some popular categories include: