How to Start a Drop Shipping Business (in 5 Easy Steps!)

Starting an online business has never been easier than it is today.

With the growth of Amazon, eBay, Shopify, and other online retail platforms, anyone with $20 can start an online shop!

If you’re just starting out, however, you may not have a lot of cash and a big house or warehouse to store your goods. Plus it can be daunting to figure out what to sell.

That’s where dropshipping and dropshipping supplier directories come in!

Understanding what a drop shipping business is

Drop shipping is another name for price arbitrage; a fancy term that means you find low-cost products and sell them at a higher price.

With a dropshipping business you don’t need cash or storage space. You just need to set up your store, list your products, and focus on marketing and selling.

It works like this:

First, you find and source a product with a low wholesale price from a supplier. Then, you place that product on your store and list it for a higher retail price.

When your customers purchase the item, you take their orders and send them to your supplier. The supplier sends out your goods directly to your customers and you keep the difference.

The great things about dropshipping:

• It's easy to set up a store.
• You don’t have to worry about inventory.
• There’s little risk to you as the seller.
• There are millions of products you can sell.
• It’s possible to have a dropshipping business anywhere in the entire world.

Now that we’ve talked about what drop shipping is, it’s time to go through the steps needed to start your own drop shipping eCommerce store.

Ready? Let’s dive in!

• Figure out your niche

• Find a dropship supplier

• Get a sales tax ID

• Choose selling platform

• Promote your store

Step 1: Figure out your niche

One of the biggest misconceptions you’ll hear about drop shipping is that you’ll be successful (and profitable) in almost any niche imaginable, even if you have no interest in what you’re selling.

We hate to break it to you, but that’s simply not true.

Without any knowledge about the niche you choose, you won't have the ability to pick up on anything fishy about the quality of the products, the process, the pricing, or anything related.

Picking a niche you fully understand will give you some additional advantages over your competitors. Especially if they haven’t invested the same amount of research or personal experiences!

If you’re struggling to find the perfect niche to dive into, follow these quick (and effective) steps:

1. Identify your interests and passions. You probably already know this, but business isn’t always easy. There are going to be times where you feel like giving up and, unfortunately, if you’re not passionate about your niche, it’ll be that much easier for you to leave behind. If you can’t stand watching baseball, it’s not a good idea to sell items in that niche.
2. Identify problems you (and your niche) can solve. In order to create a profitable business, you’ll want to research problems your target audience may be feeling and come up with a solution for them. Check forums (such as Quora) to see what people are saying about the niche you’re interested in for a better insight.
3. Research your competition. Is the niche you’re interested in over-saturated? If so, is the competition easy to beat? Better yet, is it worth beating them? You’ll often find that the niche you’re most interested in joining is the one that nearly everyone is already a part of. This doesn’t mean you can’t hop on the bandwagon, just be ready for some competition! Rise above the competition by reading this article!
4. Determine whether or not your niche is profitable. Will you be able to get a good amount of money from your niche? A good way to find out if your niche will make or break your bank account is by checking out the top trending items (on both eBay and Amazon). If the niche you’ve picked doesn’t look like there’s much traffic, it’s probably not a good one to go with.

Above everything, remember this: there is no set way to find the perfect niche for you.

Your interests will vary and you may find it hard to settle on a niche. Keep in mind that you’ll learn more from doing than you will from planning.

Pro tip: It also helps if you have the seller’s experience in the niche you pick, such as:

• You're a consumer in that niche yourself. You’ve purchased a number of products in this niche, you know what’s good/bad about them, and you know how to make them better.
• You've witnessed other businesses in your niche rise and fall. You recognize the common mistakes they’ve made and know how to avoid/fix them.

Step 2: Find a dropship supplier

Finding a wholesale supplier might sound difficult, but, lucky for you, we have an entire directory filled with reputable sellers with products ranging from cosmetics to farming equipment!

Let’s say you wanted to sell fashion jewelry. You’d go to our directory, type in “fashion jewelry” and you’d find 36 reputable distributors to choose from:

From there, you’d find a wholesale supplier that you liked, reach out to them, and get your business gears turning.

Hint: Jewelry is a pretty popular niche, check out this guide to see how well it does!

Before you settle on a supplier, be sure to ask them the following questions:

• How long will it take for an order to be shipped once placed?
• What shipping methods do they offer and what are their tracking systems like?
• What are their quality control systems?
• Do they offer warranties?
• Can you use their product photos? Or, better question, are they able to provide you with updated product photos (and videos)?

Step 3: Get a sales tax ID

Sales tax (also known as retail or resellers license, tax ID, resale number, resale certificate or vendor's license) is a tax levied on all sales of physical goods to consumers within most states.

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.

You’ll need to get a sales tax ID if you are inside the US or Canada and running a business (not just selling items from around the home).

Note that some US states, including Alaska, Delaware, Montana, New Hampshire and Oregon, do not require sales tax IDs. So let your wholesaler know if that’s the case, as they may have  another form for you to fill out.

Click on your state to find the right sales tax information for you,
and register for your license.

 

 

 

 

Sales Tax Applies

 

No Sales Tax

 

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.

Related: What is an EIN number?

Step 4: Choose your selling platform

eBay is known as the world’s easiest marketplace for beginners. It’s one of the best eCommerce platforms to start off on, but that doesn’t mean there aren’t other options to choose from.

Amazon is the world’s largest online marketplace. Because it’s a retail marketplace, Amazon has a better venue to sell mass market goods.

Most people think that eBay and Amazon are their only option, but we’re here to tell you that they’re not!

Sites like Ruby Lane and Bonanza are great for new eCommerce store owners, too!

It's a good idea to diversify when selling on online auction sites, as each site has its own unique visitors (not everyone checks eBay first!) and with most sites being free to join, there’s no reason not to give others a try.

For sellers who are really looking to diversify, consider setting up your own eCommerce site such as a SaleHoo Store which is the fastest and easiest way to open your own store.

You can get a free 30 day trial of SaleHoo Stores right now and try it for yourself!

Pro tip: Check out this guide to better understand how dropshipping on eBay works.

Step 5: Promote your store

If you’re just now starting out, you may find it hard to gain traction to your store (even if you don’t have many competitors to deal with).

In order to gain a following, you’ll need to work extra hard on promoting your store.

How do you do this? We’re glad you asked! Here are three strategies:

1. Build a kickass email list

Research done by MarketingSherpa found that 60% of marketers realized email marketing produced an ROI for their company (32% believe it will eventually produce an ROI).

When asked what the estimated ROI from email marketing programs for the company were, the overall group reported 119%, a figure that’s tough for any online store owner to ignore.

To learn a bit more about email marketing, check out this guide!

2. Create referral discounts

Referral discounts are the classic marketing tactics to promote your online store and help you reach new customers fast!

Uber started a referral program which allowed new customers to get a free ride, if they signed up for the app through their friend.

You can offer a similar discount by saying something like:

“Sign up for my email list to get 10% off your first order!”

3. Send samples of your product to influencers

Whether you’re in the beauty or car niche or anywhere in between, you’re bound to have high-ranking influencers who can help you promote your products.

All you’d have to do is email them, explain what your product is (and why’d they want to use it) and, if they’re down to show it off for you, send it their way!

Keep in mind, however, that bloggers and influencers get tons of “Hey, sponsor my product for me!” emails per day. You’re going to need to get a bit more creative with your email if you want an answer!

Pro tip: This guide is incredibly helpful when it comes to reaching out to influencers and takes you on a clear, step-by-step process to hearing “Yes” nearly every time.

Conclusion

Huzzah! We’ve reached the end and, by now, you should know how to start up your own eCommerce drop shipping 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.

• Continue to update your website. Work on your SEO and create high-quality content to bring in traffic.
• Maintain your relationship with your supplier. Keep tabs on the products you’re offering and, when you’re ready, look into adding more. (Hint: You can use SaleHoo’s market research lab to find hot new products!)
• Keep up with your customer service. Answer emails and questions, and update your FAQ page (if you have one).
• Stay on top of your social media. Refine your ads, run contests, and promote like crazy!

We hope you’ve enjoyed this article on how to start a drop shipping 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!