How to start a dropshipping business: a complete guide

Are you interested in dropshipping? Then it is a good opportunity to learn how to start a dropshipping business, as it remains a strong sector and is growing. In 2024, this global market was valued at $365.67 billion and is estimated to reach $ 1,253.79 billion by 2030, according to Grand View Research. 

Come to know the dropshipping business model, its advantages and considerations, how to start a dropshipping business step-by-step, some strategies to scale your business, the most frequent dropshipping mistakes to avoid, and how we can help you at EP Logistics.  

What is dropshipping?

Dropshipping is a business model where the seller doesn’t handle inventory or shipping. Instead, when a customer places an order, the seller forwards it to a manufacturer or wholesaler, who then ships the product directly to the customer.

Benefits and challenges of dropshipping

Advantages of dropshipping

• Low initial investment. No need to have and store physical inventory. Companies save the costs of hiring warehousing and transportation.
• Trying new products. Without physical inventory, retailers can offer diverse products on demand, testing new items without storage concerns.
• Overall, reduced expenses. Dropshipping eliminates warehousing, shipping, and logistics costs since suppliers handle these operations, significantly reducing business expenses.

Challenges to consider

• Lower profit margins initially. Since there’s no holding any inventory, the cost of goods sold is relatively low, but the profit margin is also lower because of these reduced costs.
• No direct control over product quality. The quality of the products is up to the manufacturer, and the only way to make sure it meets your expectations is by ordering a sample yourself.
• Higher competition. Since dropshipping is a very popular model, there is a lot of competition and many businesses might offer the same or very similar products.

How to start a dropshipping business: step-by-step

According to recent data, dropshipping generates 85% billion in sales, which is equivalent to almost 23% of all online sales. So, if you want to be part of this lucrative market, let’s see step-by-step how to start a dropshipping business. 

Step 1: Determine your starting budget

To determine the initial dropshipping budget, consider these key costs:

• An e-commerce platform that can range from $30 per month
• Domain and hosting, which can range from $10 to $50 per year 
• Basic marketing, including Meta and Google Ads, minimum $300
• Automation tools, which can range from $10 to $50 per month
• A web design template that can range from $50
• An emergency fund for refunds or incidentals, or import fees if you are working with international suppliers   

The initial budget can range from $500 to $2000. Consider some often overlooked costs, such as legal support, which may include terms and conditions and commercial permits, depending on the country.     

Step 2: Choose a profitable niche

In this step, you should determine the type of products and services, price, range, and quality to satisfy customers. Some criteria that can help you select your niche are:

• Choose a niche that interests you or that you are passionate about to make running your business easier and more enjoyable
• Find solutions to your or other people’s problems, so your business will connect more easily with people 
• Find out the best-selling products with product research tools (Google Trends, competitor analysis tools)   
• Research the value of the sector and the size of the market, the target audience, customer buying behavior, and the main competitors 

Step 3: Research competitors

Now that you have your niche selection, it is time to research them: 

• Identify your direct competitor searching for keywords on Google, social media, and marketplaces like AliExpress or Amazon.
• Analyze their strategies with tools like Facebook Ads Library or Minea to study their ads, engagement, and audio-visual material.
• Examine their online shops with Similar Web to measure their traffic and trends, review their product catalogue, and shipping policies.
• Evaluate their presence on social media: TikTok or Instagram to search for viral content and strategy gaps.
• Make a DAFO analysis to compare their strengths and weaknesses to differentiate yourself.

Step 4: Select a selling channel

Although a marketplace and e-commerce platforms (Shopify, WooCommerce) are both online shops, they are not the same:

Step 5: Find reliable suppliers

Look for a supplier that is reputable and experienced: 

• Read reviews, call customer service to ask questions, and evaluate their response time.
• Order a few products first to check their quality and make sure they’re what you want.
• Make sure that the products offered undergo quality control and that they will meet your and your customers’ expectations to keep customer satisfaction and loyalty, and reduce returns and refunds. 
• Stick to suppliers that offer a return policy so that you can manage exchanges or returns, which is key to customer satisfaction nowadays.
• Once you start selling, keep an eye on your product reviews to pick up any concerns clients might be reporting.
• As far as profitability, you want to consider potential profit margins. Ensure that the supplier offers products that align with your business and aim for a profit margin of at least 15%.

Step 6: Build your online store

These are the essential elements for creating an effective dropshipping website:

• Domain and hosting, preferably with a domain extension like .com. Your hosting should be quick and safe.
• A platform and a responsive template with a clean design and optimized for various devices.
• Key pages like the homepage should have an attractive design, featured products, and CTA. Your product catalog should be organized by categories and with search filters. Each product must have a clear title, detailed description, and high-quality images and videos. Also include shopping cart and legal pages.  
• Trusted elements like warranty seals, testimonials, and reviews from real customers, media logos, and if you have been featured on blogs, and live chat.
• Marketing tools like email pop-ups to capture leads, cross-sell products, Google Analytics, and Facebook Pixel to track traffic and conversions.
• Logistics and customer support, order tracking.
• Technical optimization to verify the site speed, basic SEO with optimized titles and meta descriptions, etc.  

Step 7: Set up your business structure and finances

While you do not need a license, it is necessary to do a business registration as a legitimate entity, so you avoid incurring legal violations and increase your chances of working with good suppliers and business partners. Consult your local authorities or a lawyer. 

To ensure the profitability of your dropshipping business, you must keep your finances in order, so we recommend: 

• Open a dedicated bank account for your shop, for business transactions only
• Apply for local permits, ask about tax requirements
• Charges customers sales tax, check with local authorities what the percentage should be
• Set aside money for maintenance, platform fees, and marketing expenses 

Step 8: Import and price your products

Let us look at some recommendations. 

• Select products 

• In high demand
• With an attractive profit margin 
• Light in weight and size to reduce costs
• Preferably avoid fragile or large products
• That solves a pain or generates an impulse because they are viral

Prioritize suppliers with fast shipping. You can search dropshipping suppliers (AliExpress, CJDropshipping). 

• Add products to be imported to your shop: 

• Automate with apps to synchronize inventory and orders 
• Edit descriptions and photos, avoid copying those of the supplier 
• Download images or order samples to take your photos 
• Set up variants such as sizes and colors 
• Test to purchasing process to verify quality and shipping time
• Set selling price

• Consider the competition by checking prices on similar sites 
• If the product is unique, you can increase the margin
• Include a percentage for advertising and taxes 

Step 9: Market your dropshipping business

Once you have your website: 

• Create a landing page
• Create digital marketing channels (social media, email marketing) to drive traffic to your website 
• Implement SEO practices
• Do content marketing
• Make a mailing list for email marketing 
• If you have a budget, invest in Ads   

Step 10: Fulfill orders and provide customer service

When your customers shop on your website, make sure they receive their order. Establish communication channels to provide an agile customer service. 

To increase the credibility of your business while protecting your customers’ purchases, we recommend:

• Create a refund policy, although it is not a requirement, your business will be a safe place to shop.
• Creates a term and conditions section in which you clearly state the rights and obligations of your customers and yourself to protect your business. 
• Create a privacy policy explaining how your business collects, uses, and discloses customer information.

At EP Logistics, we make sure that your order fulfillment is always fast and accurate. We know that orders must be accurate when a customer receives them, as well as the importance of them getting their items in excellent shape and timely manner. 

We offer automated systems that allow real-time inventory management as well as shipment tracking for both your and your customers’ convenience and peace of mind.

Scaling your dropshipping business

Now that you have started your dropshipping business, let’s look at some tips for scaling your business successfully:

• Expand your product catalogue
• Optimize your marketing strategy
• Improve customer experience
• Automate processes
• Make strategic alliances
• Boost your presence on other platforms
• Periodically measure your results to rectify and improve

Common Dropshipping Mistakes to Avoid

There are always things to improve; that’s why you must know the common mistakes that dropshippers make when starting dropshipping and that you should avoid: 

• Not researching your dropshipping suppliers
• Do not do product research
• Not asking for product samples
• Ignoring customer service
• Not having an effective marketing plan
• Not analyzing and adjusting your strategy
• Not having the right logistics partners

To resolve this last mistake, at EP Logistics, we understand that it is essential to have both a reliable partner and reliable logistics services for your dropshipping business. That’s why we focus on providing you and your business with efficient warehousing solutions in the USA and Mexico and order-processing solutions tailored to your specific business needs. We offer you: 

• A secure and organized warehousing service, we have top, strategic warehouse site selection in different cities for your convenience. 
• An advanced inventory management system and specialized warehousing options, such as climate-controlled units. Our warehouses can handle a wide range of products and different shipment sizes.

At EP Logistics we design logistics solutions to suit the needs of your dropshipping business.