How Does Dropshipping Work? A Quick Guide to Get You Started
Dropshipping is a retail fulfillment model where the store doesn't keep the products in inventory. Learn how you can get started to become an online retailer without investing in inventory.
First things first, what is dropshipping?
Dropshipping is a retail business model in which you (the seller) post and advertise your items online and whenever a customer places an order, the responsibility for shipping and order fulfillment falls on your supplier’s shoulders. You never hold any inventory and never have to worry about stocking issues. Although, you are still responsible for good customer service and finding quality suppliers.
Dropshipping as a money-making source has really picked up in popularity in recent years.
This Google Trends graph shows a rise in interest in the popularity of dropshipping in the previous three years, almost jumping 4x during that time. The lure of dropshipping lies in its simple business model and near-zero costs in getting a business started.
Having a classic case of FOMO?
Worry not, in this post, I’m going to tell you how you yourself can get started with dropshipping to start making money as a side hustle (or even full time if you go all-in).
1. Start with product research to find profitable items
Google Search and Google Trends are great starting points in your hunt for finding dropshipping products. You can use free keyword tools to check how many times a month a product gets searched for. Using these tools, you can type in your desired keyword and find its monthly search volume and also how easy or difficult it is to rank for that keyword.
Using Ahrefs, if I type in ‘baseball caps’, I get all this information:
Ahrefs tells me that 29000 people are searching for caps each month, with 26% of people actually clicking on links after searching. This means 7540 people are searching with real intent for baseball caps.
Then when you find products with good search volume, you can check for their popularity over time using google trends to see how demand keeps changing.
In this two year timeline for the demand for baseball caps, we can see that the overall demand for baseball caps has remained constant, and peaks each year around June-July.
Using these tools, you can find potential products to sell that have high and stable demand.
2. Find a reliable dropshipping supplier
Your next important step in your dropshipping journey involves finding a quality, reliable dropshipping partner. You need to find suppliers who are willing to ship products under your labels and deliver on professionalism every time.
First-time drop shippers always run the risk of getting overcharged by suppliers, not negotiating terms properly, or being scammed outright. To mitigate such risks, look for signs of professionalism in suppliers:
- They offer high-quality products. Good wholesale products will have great reviews, high ratings and a low number of complaints from buyers. Also, check for the number of prior orders placed with a supplier to check if people actually do business with them.
- They offer low per-order fees: A red-flag to look out for is when wholesalers charge exorbitant fees per order. A good way to check if the fees are high is to find out if you can still make decent profit margins even after being charged. If not, move onto the next supplier
- They have helpful sales reps: This is probably the best measure for professionalism as the attitude of sales reps gives you insight into their business. If sales reps are accommodating, respond to your questions honestly, and are equipped to handle possible issues, you’re most likely in good hands.
When you find a supplier who offers the products you researched and is legitimate in their dealings, its time to lock down on a deal with them. To help you calculate the costs of doing business, and the level of support they’ll offer, ask them questions like:
- What payment terms do they offer, is there room for negotiation?
- Do they sell direct? (if they do then you’re also competing with your supplier)
- Are there costs involved like fuel surcharges, restocking fees or delivery fees?
- What is their return policy (there will be times when customers return products for one reason or another)
- What warranty do their products carry?
- Do they have dedicated sales reps?
- Can they make custom items?
These questions will set the tone for your relationship with your supplier and also help you calculate the costs of selling your dropshipping products.
3. Choose a well-suited dropshipping platform
Now when you’ve found your product and a supplier for it, its time to choose the base for your business, i.e. the website where you’re going to host your store.
Your first option is to go with eCommerce software like Shopify, BigCommerce or Wix. These providers help you design and set-up a store and take a monthly subscription fee in return.
With Shopify you can use Oberlo, their own integration, to find dropshipping products and automatically populate your store. Oberlo lets you find products, add them to your Shopify store, and ship them directly to your customers.
If you don’t want want to go down this route and pay extra fees, you can still populate your store with dropshipping products, you’ll just have to do the manual work to find suppliers and display their products.
Here are some sources to find dropshipping products to sell:
Cheap, low monthly subscription costs
Small product inventory. limited website integrations
Over 600,000 items listed
Website isn’t great, bad UI
Big, active community to learn from and interact with. provide research lab to experiment with product profitability
No free trial. training is exhaustive (can be overwhelming)
Over 1.5 million products to choose from. Built-in eCommerce integrations
Communication with wholesalers limited and slow. Limited analytics dashboard
Quick order processing. Access to amazon selling and research manager
Limited product range (around 15000). High restocking fee
Offers free version. good for beginners
Wholesale pricing higher than the competition.
Modern UI, tight integration with Shopify, easy to import products from Aliexpress
It only works with Shopify stores.
Large product listing (2 million-plus items). Email updates regarding suppliers and products
Pro package is expensive ($249 a month)
4. Promote your store to attract customers
Once you’ve set up your store, found products and suppliers, its time to let the world know you’re in business! I
f you’ve put aside a budget for marketing, its good to start with digital ads.
Instagram and Facebook Ads
If we take the example of baseball hats, you can create a post on Instagram and Facebook with an appealing photo of the hat and an attention-grabbing copy that delivers the benefit of the hat. You’ll select a budget and let the ads run for as long as you think they’re beneficial.
The advantages of running ads on Instagram are:
- They have relatively high engagement rates
- Ads are nonintrusive and seamlessly appear in a user’s feed
- You can integrate with Shopify to create ads directly from your store
- Instagram gives you useful metrics to measure ad performance
The advantages of running ads on Facebook are:
- With a Billion+ user base, Facebook is really good with helping you target the right people
- Facebook provides extensive ad analytics to help you find the lowest cost per click
- Facebook helps increase brand awareness by repeatedly exposing users to your ads
Social Media Marketing
If you want to promote your products for free, social media marketing is a great way to achieve that.
You should research and find out where your customers spend the most time. Is it Twitter? Instagram? Facebook?
Once you know where you have the best chance of engaging your customers, start building your profile. Share product updates, tips and tricks, industry content or whatever content you think intersects with your business and what your customers like, the point is to keep them engaged and build a following.
Once you have a following, marketing becomes easy. Whenever you have a new deal on your store or you’ve added new items to your collection, you can instantly inform your audience through a single post and invite them to visit your store.
If you’re in dropshipping for the long haul, email marketing is your best bet at long term success. In fact, email marketing has been known to return $44 for every $1 invested.
Email marketing offers you advantages that can take your store to the next level. Email marketing lets you:
- Build brand awareness
- Attract loyal subscribers
- Instantly inform customers regarding new products
- Inform customers at almost zero costs
- Measure the results of your email campaigns
- Build trust and credibility with your audience
- Own your own data
To set-up email marketing for your dropshipping store:
- Place opt-in forms on your website using lead collection software such as MailMunch or OptinMonster
- Attract people to give their email addresses by incentivizing them using lead magnets (discounts, coupons, ebooks, etc)
- Send your subscriber base regular emails and ask them to share your content
- See your email list grow
To Wrap it up
Dropshipping is a great way to hit the ground running in the world of eCommerce. The model is attractive by its virtue of not needing any inventory to sell products.
To set-up a dropshipping business, first do product research and find products that bring you good margins and you can also feel comfortable selling.
Then look for suppliers who are professional and sell at reasonable prices.
After that its time to set-up an online store, which you can do using eCommerce providers such as Shopify, or BigCommerce.
Once your store is up and running, its time to promote your store through ads, social media, and email marketing.
Remember that a dropshipping business, regardless of its ease of setting up, still requires hard work and effort on your part to make it successful. Make sure to keep testing different tactics and strategies to see which turn out to be the most profitable for you.
Have you ever run a dropshipping business or are planning to start one? Let us know in the comments, we’d love to hear from you!