Starting a dropshipping business is one of the easiest ways to make money online in 2021.
The growth of Amazon, eBay, Etsy, Shopify, and other online marketplaces and platforms means that anyone can start an online store for as little as $20.
But with the barrier to entry being so low, dropshipping has exploded in popularity over the past decade, meaning that many markets are highly competitive.
If you’re thinking of starting a dropshipping business - either as a side hustle or a means to leaving your full-time job - you can save yourself time and set yourself up for success by following the simple steps outlined below.
But first, what is a dropshipping business?
A dropshipping business is where you are able to sell merchandise to your customer without holding any inventory. A customer purchases an item from your store at retail price. You then forward the order to your supplier, which you pay the wholesale price. Once your supplier receives the order, they ship the item directly to the customer under your business name while you earn the profit margin. All you have to do is set up the retail website, find customers, and handle customer support.
There are thousands of people around the world who make five-, six-, and seven-figure incomes from drop shipping and there’s no reason why you can’t do the same.
In this complete guide to drop shipping, we show you how to start a drop shipping business in 5 easy steps:
Understanding how the dropshipping business model works is important, as it’s quite different to traditional retail and eCommerce businesses.
Dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
In more simple terms, dropshipping works like this:
This means that you - the dropshipper - don’t have to buy and store bulk stock, which saves you having to invest a lot of money upfront.
It also eliminates the risk of buying in bulk and not being able to sell all of the products, leaving you out of pocket.
This is why dropshipping is so popular - it requires minimal investment, but reaps similar benefits to traditional retail models.
The hype around dropshipping means some people are sceptical of it as a viable business model and cautious about diving in.
There is limited information about dropshipping specifically, but these statistics should help to provide you with peace of mind (and, hopefully, a sense of excitement).
Google Trends data also shows a massive increase of interest in dropshipping over the past few years.
Other than a positive attitude, a good work ethic, and genuine motivation to commit to your new business venture, there are only a few essentials required to start a dropshipping business.
They are:
A niche is a segment of a market. For example, bluetooth speakers are a popular niche in the home audio market. You could even say that outdoor, waterproof bluetooth speakers are a sub-niche of the bluetooth speaker niche. You get the idea. The more specific your niche is, the better.
Choosing a niche is the first step to starting a dropshipping business. The rising popularity of dropshipping means it’s becoming harder to find niches that aren’t already saturated. But new products and niches are emerging every week, so the opportunities are almost endless.
A common misconception about dropshipping is that you can be successful and profitable in any niche, but that’s simply not true. If you choose a niche that’s already saturated with sellers or dominated by major brands, you’re going to face an uphill battle with your new business.
Here are a few guidelines to help you choose a dropshipping niche that will make you money online in 2021:
While it’s possible to dropship everything from toothpicks to the kitchen sink, some products are more suitable for dropshipping than others.
The perfect dropshipping product is generally:
Now that you know the criteria for a good dropshipping niche, you can start narrowing down product ideas for your eCommerce business.
You should aim to brainstorm at least 10-20 product ideas and then use the guidelines above to either qualify or eliminate them from your list.
Once you’re done with that process, you might only have a few product ideas that are considered viable. If you have none, then you’ll need to start the process again.
If you have at least one solid product idea at this stage, you’re ready to progress to the next level.
SaleHoo Labs is a powerful market research tool for dropshippers and eCommerce store owners. It provides you with valuable information on tens of thousands of products across 25 categories, such as:
It can help to give you product ideas and save you hours of time that it takes to conduct market research manually.
If you want to set yourself apart from the thousands of others who are thinking of starting a dropshipping business in 2021, you need to have a few tricks up your sleeve.
You need to find a way to be better and smarter than your competition so that you operate more efficiently and make more sales than they do.
How do you do this? The same way that champion sports teams, like the Philadelphia Eagles or the Golden State Warriors, prepare each week - by studying the competition.
When you’re starting a dropshipping business you should absorb as much information as possible from as many sources as possible. Product listings and reviews of top sellers in your niche are perfect places to look for ideas to improve on what your competition is doing.
The first step to starting a dropshipping business is about choosing a niche. To re-cap:
For more information on deciding what to sell online, check out this guide
For product ideas that will make you money online, check out this post
For many aspiring eCommerce entrepreneurs, finding a reliable supplier is the hardest part of starting a dropshipping business.
You rely on suppliers to keep your product in stock, to uphold product quality, and to ensure orders are shipped to your customers in a timely manner. As a dropshipper, your supplier is your most important business partner.
A good dropship supplier should:
There are essentially two ways to find good dropship suppliers. You can either search online manually or use a wholesale directory like SaleHoo.
Questions to ask dropship suppliers before doing business with them
A more in-depth look at how to find dropship suppliers
Finding US dropship suppliers for your online store
If you’re setting up your business in the United States or Canada then you most likely need a sales tax ID (also known as retail or reseller’s license, tax ID, resale number, resale certificate or vendor's license).
Sales tax is a tax levied on all sales of physical goods to consumers and is typically about 6-9% of the sale price. Most states require you to have a tax ID, but there are exceptions, including Alaska Delaware, Montana, New Hampshire, and Oregon.
It’s standard for businesses to pass this expense on to consumers by adding it to the retail price.
Applying for a tax ID is easy and inexpensive. You can do it by visiting your local county clerk’s office or online – just Google “[your state] + sales tax ID”.
To get a sales tax ID, you may need to be a business entity, a company, or a sole proprietor (which applies to a lot of at-home online businesses), and have a Federal Tax ID number.
While it's important you collect the exact amount of sales tax (otherwise you’ll be held liable for the difference), not all eBay sellers need a tax ID.
That said, some wholesale suppliers require you to have one before they will do business with you.
Related: What is an EIN number?
So you’ve decided on a product and you’ve lined up a supplier - now you need a place to start selling and making money.
Choosing the right selling platform or online marketplace is crucial to the success of your business - but which platform is best for you?
You need to decide between selling on an established platform, or starting your own independent online store.
Let’s take a look at the pros and cons of the different selling platforms and online marketplaces.
Most dropshippers use a well-established online marketplace like Amazon or eBay, especially when starting out. Why?
However, there are some cons to be are of:
That said, here are a few of the most popular online marketplaces for dropshipping businesses.
For a full list of alternative eCommerce platforms, check out this post.
A lot of dropshippers take the route of starting their own online store. While it requires more investment up front, this is really the ultimate long-term option for making money and building a business online. There are plenty of online tools, like Shopify and SaleHoo Stores, that make it really easy to get started.
PROS
CONS
If you have the time and money to invest in your dropshipping business and you’re planning to be in it for the long haul, then starting your own store is a good option, especially with established platforms becoming more and more saturated every year.
Now that you have a selling platform for your dropshipping business, you need to attract customers to your store. This is where a customer acquisition strategy comes in.
Customer acquisition is the art of persuasion. You can think of it as advertising and marketing. Sounds expensive, right? But it doesn’t have to be. You can take the fast (paid) path or the slow (free) path to gaining new customers. Let’s take a look at both strategies in more depth.
Facebook Ads for Dropshipping
Facebook is the world’s largest social media platform. It’s a great place to advertise your products as you can tap into a huge audience. This is how Facebook makes its money, so every customer you acquire through this method comes at a cost. Facebook ads are a good option for the following reasons:
For a comprehensive guide to Facebook ads for beginners, check out this post.
Google Ads for eCommerce
Google is the world’s most popular search engine by far. If you have an online store, you want it to rank on the first page of Google. You can achieve this organically, or you can buy ads for your store to appear at the top of the page for the keywords you want to rank for. Google ads are a good option for the following reasons:
Social Media Influencer Marketing
Influencer marketing has become a huge part of customer acquisition for retail brands in recent years. It could play an important part of any customer acquisition strategy in 2021. It can be particularly effective if you are in a trendy niche. For instance, if you’re selling a new style of handbag, you could reach out to an Instagram model and ask if she will share a post of her with the bag, tagging your business. One post can result in a bunch of new fans and customers. The cost of influencer marketing depends on how famous the influencer is. A post from Kim Kardashian might cost $250,000, while a post from a model with 10,000 followers might only cost a few hundred dollars.
Blog or Forum Marketing
This involves finding blogs or forums that are related to your product/niche and actively participating in discussions. By positioning yourself as an authority in your niche and including a link to your website, you can increase traffic and acquire new customers.
Content Marketing
This most commonly takes the form of a blog on your store website, a Youtube channel, trendy Instagram posts, or witty posts on Twitter. Content marketing is meant to involve the creation of valuable content that helps to build an audience that you can then convert into customers. It’s not as explicit as advertising and should always be more about serving your audience than your brand.
If you're looking for a guide, here's a great resource from Adam Enfroy on how to start a successful blog this year.
Social Media Marketing
It’s getting harder and harder to achieve organic reach on social media, but it is still possible. If you can consistently create and share great content on your social media channels you’ll eventually build a following, which you can then convert into customers.
Email Marketing
Building an email list is still one of the most effective ways of acquiring customers. You need a way of capturing email addresses, such as a request to sign-up at checkout, or an offer or competition that requires an email address. Once you have a decent list of email addresses you have a way of reaching a large group of people regularly, for free.
As you can see there are several strategies to attract customers to your store. What is your preferred method of growing a new dropship business?
Huzzah! We’ve reached the end and, by now, you should be well on your way to starting an eCommerce dropshipping business from scratch.
The work is far from over, though. Now you have to successfully run your business.
But don’t worry! As long as you follow these next few tips, you’ll have a successful eCommerce drop shipping business for years to come.
We hope you’ve enjoyed this article on how to start a dropshipping business. Did this inspire you to create one? Leave a comment down below. And don’t forget to share this article with your entrepreneurial friends.
Comments (101)
Alex Disouza on 9:05 29 Jan
Great article, can you explain more about how the duty cost is taken care of in this modelThanks in advance!
Shivam Naik on 9:31 30 Jan
Hey guysI have been using SaleHoo for a year now and my profits are extremely High
Shivam Naik on 9:40 30 Jan
Hey guysI have been using SaleHoo for a year now and my profits are extremely High
Cody Charles Deegan on 6:30 13 Feb
WOW, nice infomations, and the steps also is really important to understand for every readers who interested to create their own business like Drop Shipping, this is really good topic for me because that is the kind of business I want to have, and I learned a lot because of this blog. Thank you for sharing tips.Amaka on 21:03 15 Mar
Hello,Thanks for such a beautiful write up.
I just want to know about the Tax Id.
I am from Africa and I’ll like to dropship to customers out of Africa as well. How do I get around this ?
Thanks
Best wishes
Richelle Monfort on 2:49 16 Mar
Hello Amaka,You will need the equivalent from your country which is VAT. Please consult with a local account for proper guidance.
All the best!
bolu on 12:41 1 Nov
@Amaka I'm also from Africa , Nigeria to be precise. I'm looking forward to starting dropshipping like you. I'm really scared how it's gonna work out.Rhea Bontol on 6:09 2 Nov
Drop shipping is a business model where you send your customers’ orders to a manufacturer or wholesaler, and they send the products directly to your customer. You never see or touch the products.We have actually created a nice little guide that I would suggest you take a look at: https://www.salehoo.com/dropship
Hopefully this gives you a good introduction to it :)
Ramona Reid on 20:19 9 May
Very good information, thanks for taking the time to put together all of this so that we can be on the right path to business. I sure will put this information to good use.tanatswa on 1:47 31 May
hello i hope my question will make sense but i wanted to find out if it is possible to put your niche up and when the buyer pays, use part of that money to pay for the product that has been bought and keep the extra. The reason why i am asking is because some of the sites like ali express hold the money for some time and you wont be able to withdraw it till the customer is satisfied or after a specific period. so i wanted to find out if it is possible to still use the money to make the payment for the customer.Regards Tanatswa
Richelle Monfort on 6:02 1 Jun
Hi Tanatswa,Drop shipping is a business model where you send your customers’ orders to a manufacturer or wholesaler, and they send the products directly to your customer. You never see or touch the products.
We have actually created a nice little guide that I would suggest you take a look at: https://www.salehoo.com/dropship
Hopefully this gives you a good introduction to it :)
Mickey on 5:51 18 Jun
cool tips man! will need to find an influencers niche. Despite I work with visual arts, I had an idea of starting drop-shipping like a year ago. Finally i did! Good I found Bitdegree free secret formula dropshipping courses. Good lecturer and well explained, I made everything by myself and already in the stage of driving sales.Crasicras on 14:32 16 Jul
Thanks so much for your article. That description explains everybody in simple steps, what can be done to keep growing.I recommended your text and wish you page more attention!
Dinarys on 11:04 29 Aug
If you are interested in starting Drop shipping business, you should be aware of technology stack for e-commerce development.Dharamsingh on 12:49 10 Sep
I have a wordpress website, can I start dropshipping business with my own web site?Rhea Bontol on 5:45 12 Oct
You can, yes. For as long as your WordPress site is capable to accept payments (PayPal, credit cards, etc) then you're good to go!You can checkout some suggestions of payment processors here: https://www.salehoo.com/blog/5-top-options-for-online-payment-systems
Good luck!
Gregory k on 5:13 6 Oct
I have always wanted to start a online business and I'm so motivated than ever to startRhea Bontol on 6:17 19 Oct
Our Seller Training Center will guide you on how to successfully start and online business: https://www.salehoo.com/education/starting-onlineNell on 10:48 6 Oct
I agree this information was the easiest and most informative yet. I just need to decide on dropshipping or have my own online. Once my decision is made I now feel more confident I can make this work.Rhea Bontol on 6:18 19 Oct
This article will help you understand with the pros and cons of dropshipping: https://www.salehoo.com/education/finding-sourcing/the-benefits-and-drawbacks-of-dropshippingadeyemi adeniyi on 14:38 21 Oct
THe sales tax ID is it for USA only or for everyone World overRhea Bontol on 6:20 29 Oct
Basically when you open up a business, be it online or offline, a sales tax ID is needed (regardless of location) to legitimize things. It's also referred to as VAT, GST, or ABN in other countries.Stewart on 13:46 3 Nov
Thanks for sharing this interesting article. It was indeed very informative. I would recommend you to add Spocket in this list as well. I had a very good experience with them.Shahroz Afzal on 17:09 3 Nov
I have a question. I am from Pakistan and want to start a dropshipping business store for the USA with Aliexpress. Is the US Sales Tax ID is necessary for me? If yes, then how can I get that ID? Also, which payment methods we can use because PayPal is currently not in Pakistan.Thanks in Advance!
Rhea Bontol on 6:17 5 Nov
If you live in Pakistan and don't have any physical presence in the US (like a physicial store or an office based in the US), then you're not required to have sales tax ID. If suppliers require this, you can present something equivalent that you've acquired in Pakistan. Sales tax ID is also referred to as VAT number, GST, ABN, or a reseller's certificate in other countries.Mod Juice on 11:25 12 Dec
Your thinking is outstanding. By "Dropshipping Business", I must be helpful. I really appreciate your idea.Rhea Bontol on 2:29 20 Dec
Dropshipping is good for starters with minimal capital and it allows you to sell single items at a time.Gilbert on 21:19 16 Dec
Very thorough article - I can see how establishing a niche product(s) for your business is the differentiating factor between just being another online entity and being a specialist in your field - increasing credibility and confidence through focused knowledge of your product line.Thank you this article has been stimulating and has given me good ideas in formulating my own online model thank you
Rhea Bontol on 2:38 20 Dec
Hi Gilbert! You can learn more about dropshipping here: https://www.salehoo.com/dropship And that's true - focusing on a niche, even when dropshipping, narrows down your target market and encourages repeat sales.Mark on 1:42 4 Jan
Hi Sir, is this only applicable.for united states?Rhea Bontol on 6:28 4 Jan
That's the cool thing with dropshipping - you can sell anywhere you want, anywhere in the world. Just make sure you follow you supplier's agreement, as well as your selling site's terms and conditions.Eniola on 17:40 10 Mar
This has been by far the most helpful lesson i have had on starting a drop-shipping business, thumbs up guysRhea Bontol on 6:26 13 Mar
Hi Eniola! I'm glad you found this blog helpful. There's more you can learn from this guide: https://www.salehoo.com/dropship Cheers!Lydia Quintero on 4:47 7 Apr
interested to drop shipRhea Bontol on 5:09 8 Apr
You can definitely do so with minimal capital. First, I'd like you to understand how dropshipping works through this link and when you're ready to find suppliers, you can join SaleHoo here.roshan on 3:51 2 Jun
i'm roshan from sri lanka.i'm going to start amazon FBA .is your paid course(67$) suitable for it. Because there are some differences of dropshipping and FBA.I want to joing immediately please reply me.Rhea Bontol on 1:17 7 Jun
Hi Roshan! The Online Selling Tactics is made specially for eBay. Once you join the full membership, we have an exclusive training guide for Amazon to help get you started.Keegan Pais on 17:35 18 Jun
Hey this article has proved to be very helpful. Gonna keep referring to it. Thanks for this.Rhea Bontol on 2:21 21 Jun
Hi Keegan! You can also refer to this link here for a complete guide to dropshipping: https://www.salehoo.com/dropshipArmin on 6:17 19 Jul
Hi GuysGreat content. I am looking to start a online store with the drop shipping structure. If I decide to buy your package will there be content to help me with the basic structure of the business? I want to create my own brand name store. Would it n be advisable to start with one product and scale it from there? or must i include more than one product and only scale specific products when it comes to my advertising?
I am thanking you in advance.
Harrison on 17:31 21 Jul
Great lesson and I love it, thanks for sharing @SalehooNouman Dildar on 3:01 9 Aug
This article is super amazing!Kay on 10:53 16 Sep
Good day:Does SaleHoo have a monthly fee as well as an annual fee?
Rhea Bontol on 4:53 12 Dec
Just the annual of US$67/year or the Lifetime membership at US$127 one-time payment.Looking to sell on 0:16 19 Sep
I like this idea and enjoyed the article! I do have a question however. When I went to amazon to start an account i read the rules for drop shipping and I found this. "Examples of drop shipping that is not permitted:Purchasing products from another online retailer and having that retailer ship directly to customers;"
So then how does this from your article apply if you can't have someone else doing the shipping?
"supplier receives the order, they ship the item directly to the customer"
Rhea Bontol on 4:52 12 Dec
This means that if your dropshipper ships your buyer's products under their name, then that is not allowed. Any transactions with you and your buyer should not reveal any third party transactions.Mansoor Ismail on 18:15 16 Nov
Very good article. I am starting online digital marketing business and want to make it a success, I had been physically working as Business Administration and marketing manager for 40 years.Rhea Bontol on 6:38 16 Dec
Hi Mansoor! Checkout our Seller Training Center as well to help get you started with your online business.Sheth on 19:32 16 Nov
I am new to drop shipping, exploring it as side hustle.Rhea Bontol on 6:35 16 Dec
Hi Sheth! A helpful tip will be contacting suppliers directly to get better deals.Gbadamosi Akeem on 0:58 3 Jan
Great lecture I must say with simple English to comprehend. God bless the writer, more wisdom. Thanks.Rhea Bontol on 5:19 3 Jan
Glad you found this blog beneficial. Learn more about dropshipping with SaleHoo's Seller Training Center!William on 8:57 7 Feb
Thanks for the info!Mahbuba Islam on 13:42 8 Feb
This is the best operating system. Here anyone earn money easily. It is indeed an activity that can launched without great investment and which has many advantages such as automated order management and no stock management. DropshippingRhea Bontol on 2:58 18 Mar
Yes, dropshipping is a good method to get started for those with limited capital, and space for storage. You just have to find a good niche in order to easily market your product and make sales.Jared Kodhe on 13:44 2 Mar
Good materialRhea Bontol on 3:00 18 Mar
Indeed! Don't forget to checkout our Training section for more guides and advise when you start to get these products in the market.BASSETT DIGITAL on 15:29 25 Mar
Very informative post. Thanks for sharing it with us. Keep it up. Hope that we will get more great posts like that. Stay happy.Rhea Bontol on 4:08 26 Mar
Glad you found this blog very informative. If you want to learn more about dropshipping, you can also checkout think link to guide you in the process.OJO JOSHUA on 12:04 19 Apr
HelloThank so much for this. I really enjoy it.
Thanks
Rhea Bontol on 0:04 14 May
Thanks, Ojo and glad you enjoyed your read!Mishi on 11:18 13 May
The blogs you write include the words that have deep meanings. The worth of your words is the knowledge that you pore your writings. Keep it up and I shall come again to read your magical words.Rhea Bontol on 0:16 14 May
Thanks for noticing and I'll see you around SaleHoo! :)Thomas on 11:42 13 May
The blogs you produce incurs the much to my knowledge. The skills that are established strongly on the knowledge are very much indemand. I would like to add that your writings adds knowledge to my skills.Rhea Bontol on 0:10 14 May
Yes, we aim to provide useful information so our members become successful with eCommerce. So don't forget to checkout the Training section on the site, too!Simon Vicic on 8:05 19 May
Hi great adviseCan you send me or how do l find a comprehensive list of reputable dropshippers to Australia market!
Will they have products list or do I look for a supplier that drop ships my desired product
Thanks
Simon
Rhea Bontol on 3:15 3 Jun
SaleHoo is a product sourcing directory of suppliers located worldwide (yes, this includes Australian suppliers as well). When you join SaleHoo's full membership, you can use our directory and filter your supplier search to find those that allow dropshipping in Australia.Adebayo Suleiman on 19:10 25 May
Hello guys! Am a great JJC hear actually, pls and pls I need more details on how to start,Rhea Bontol on 3:17 3 Jun
You can checkout SaleHoo's Training section here to help get you started.Sampath on 9:46 7 Jun
I need to start a drop shipping . But need a help for that.Rhea Bontol on 22:50 25 Jun
You can contact our support team for further assistance.David Wilson on 8:14 22 Jun
Thanks for you sharing the article. Keep up the good workElohor Oghorodi on 16:08 28 Jun
Interesting article, learnt a lotRodriguez Mosley on 4:13 29 Jun
This is very interesting the business platform of it and I hope to start my own business soonTeri on 23:36 1 Jul
Hello,In the states here. The information here is geared towards selling on eBay. If I want to individually test dropshipping a product to see how it does on Amazon, under my name, is that possible? Or do I still have to spend money to create a business name and obtain an EIN even if I may not decide to move forward after the product dropshipping test?
Thank you in advance.
Anomfueme Lydia on 4:47 6 Jul
This article was really a step by step breaking down on drop shipping. There's still so much to learn tho but I'm feeling optimistic alreadyDavid Chile on 17:19 3 Aug
Thank you for this honest write up. An eye opener indeed.Stefan Hoffmann on 10:28 7 Aug
Really nice guide with a lot of information. However, even though I've been doing research for weeks now, I still can't decide for a niche. I've read a lot of articles and blogs and went through literally every single article here on Salehoo. But as a newbie in the business I find it very difficult to find out what to sell. I can't even decide whether to go for a tech niche, beauty & health, or a pet related niche.Amadi Kingsley on 2:47 19 Aug
List of dropshipping supliersNguyen van Sang on 9:18 7 Sep
Hi!have read your article and Thank you!
The article is very useful for me and many others, hope you will have many useful articles like that.
Jhon Pace on 9:32 15 Oct
Great article. This article is informative for me. Thanks for this valuable article.View more comments...