However, questions like: “How to make money dropshipping?” and “Is dropshipping profitable?” keep running through your mind.
And contrary to popular belief, dropshipping isn’t an easy way to make money. You need to come in prepared.
To that end, we’ll share some tips and strategies to help you launch and maintain a successful dropshipping business. Plus, we include several things you should know before getting started with dropshipping.
How does dropshipping work?
With dropshipping, eCommerce merchants sell products to customers without stocking any inventory. This means you liaise with a third-party supplier (i.e., a manufacturer or wholesaler) to ship products directly to customers.
Once a customer places an order on your site, you forward it to the supplier, who prepares and ships it. The customer pays the retail price, and you pay the supplier the wholesale price, keeping the difference as profit.
Benefits of dropshipping
Dropshipping is a great option for new business owners looking to build and grow an online presence.
For example, you don’t have to purchase inventory upfront to sell with dropshipping, meaning its startup costs are low. Instead, you pay your supplier after you’ve made a sale.
In a traditional eCommerce setting, store owners must invest considerable amounts in inventory.
Other benefits of dropshipping include:
- Wide range of products: You can add an array of products to your online storefront because you won’t have to worry about leftover stock.
- Easier to run: Since the supplier handles inventory management, you won’t have to deal with warehousing, returns, packaging and stock control.
- Flexible: As long as you have an internet connection, you can build and scale your eCommerce business from anywhere.
- Test new products: Since the supplier handles tasks related to order fulfillment, you have more time to experiment with new products and determine what sells best.
How long does it take to make money dropshipping?
As much as dropshipping is a low-risk business model, success doesn’t happen overnight. Investing time and money is necessary if you want to turn a profit.
After all, things like creating an optimized eCommerce store, sourcing products and marketing are all part of dropshipping and require time. If your marketing strategies are ineffective, it may take you longer to make money online.
Your choice of dropshipping products also affects the time it takes to generate profit—if you pick the right products, you can earn money faster and generate a sustainable income.
All in all, your dropshipping business can achieve profitability if you invest enough time and resources into it. As the adage goes, hard work pays off.
Tips for starting a successful dropshipping business
Let’s go over some of the top dropshipping tips for creating a profitable and successful dropshipping business.
Sell niche products
One of the biggest decisions you’ll make when starting a dropshipping store is deciding which products to sell.
However, since virtually anyone can start a dropshipping business, you’ll encounter high levels of competition.
One way to mitigate this and stand out from the dropshipping competition is to add niche products to your online store. What’s even better is if they’re hard to find locally.
Moreover, niche products allow you to speak to your target audience’s needs making it easier to drive sales and attract repeat business.
But to increase your chances for profitability or ensure there’s demand for your product, you’ll need to test your business ideas.
Here are a few ways to evaluate your product ideas:
- Google Trends: Google Trends can give you insight into what people are looking for. For example, it can pull up region-specific data so you can pinpoint specific locations where a search term (e.g., hiking shoes) is trending upward. It also helps you understand what people look for over time.
- Social media: You could look into what people say on social platforms or what’s trending to validate your product ideas. Social listening tools like Keyhole can help in this regard. In addition, you can include surveys on your social channels to get feedback and refine your product ideas accordingly.
- Marketplaces: Consumers use marketplaces like Amazon as a starting point for product searches. According to data published on Statista, 36% of online shoppers looked for products on marketplaces. You can compare data from different marketplaces to determine which products are in-demand or narrow down which products you want to sell.
Choose the best suppliers
Once you know which products you want to sell, the next step is to find dropshipping suppliers.
Your choice of supplier is key to success—rising consumer expectations means that if you deliver anything other than quality products, you may have trouble turning a profit.
But with so many suppliers to choose from, how can you find the right one?
There are various ways, including checking potential suppliers’ websites, running a Google search, looking through supplier directories like WorldWide Brands and SaleHoo and marketplaces like AliExpress.
Don’t rush the process, as this will help you avoid hassles and headaches down the line.
Use the following questions to shortlist potential suppliers:
- What are their return policies?
- Do they charge a handling fee?
- What are their shipping times?
- Do they have minimum order requirements?
With the answers to these questions, it will be easier to discern which suppliers are reliable and which aren’t. Plus, vetting your suppliers improves your business’s scalability.
Think about it. If you’re able to consistently fulfill customers’ orders without issues due to working with good suppliers, then growth will come naturally.
And don’t overlook the value of working with multiple suppliers. For instance, if one supplier runs out of stock, order fulfillment won’t stall because you have another in the wings waiting to take over.
Keep adding new products to your store
Adding new products to your store is a great way to attract shoppers’ attention.
And since the dropshipping business model allows you to experiment with new products, you can gauge their profit potential and make substantial revenue should the products become a hit. For example, if you sell pet supplements, you could introduce dog toys to your line.
Adding new products to your store also enables you to:
- Increase brand exposure: Expanding your product catalog means you’ll put your dropshipping business in front of more people and establish yourself as a key player in the market.
- Leverage cross-selling and upselling opportunities: Having a larger line of products means that you can maximize your sales potential by offering cross-sells and upsells. Cross-sells and upsells can also help you to lower customer acquisition costs since selling to existing customers is easier.
- Keep up with the latest trends: The eCommerce landscape is ever-changing. Consistently adding new products to your storefront helps you stay competitive and evolve with changing audience expectations.
Provide excellent customer support
As in any other type of business, providing stellar customer service is essential to making money dropshipping.
You wouldn’t want your shop to be weighed down by negative reviews before it gets a chance to flourish. And according to data collected by BrightLocal, a whopping 98% of consumers read online reviews for local businesses.
And in as much as partnering with reliable suppliers cannot be overstated, things don’t always go according to plan.
For example, If an item arrives late, a customer receives the wrong item or simply doesn’t like the product, you’ll need to address these issues. Plus, as a dropshipper, handling returns is unavoidable.
To ensure customers get assistance when needed, make sure you create an FAQ page, add chatbots to your website or social channels (for round-the-clock support) and implement help desk software.
In the end, great customer support can turn one-off customers into repeat customers, promote positive word of mouth and improve the overall user experience on your site.
Market your online retail store
If customers are unable to find you, they can’t buy from you. So as a dropshipper, you’ll need to be intentional about driving traffic to your online business.
It shouldn’t be too much of a hassle because the supplier already takes a lot off of your plate.
A few options include Facebook ads, search engine optimization (SEO) and email marketing.
Let’s look at each in more detail.
According to Facebook’s Q1 2023 earnings report, the social platform has nearly 3 billion active monthly online users. That’s a huge market for you to tap into.
And the best part? Facebook allows you to create ads based on things like interests and demographics. This will help you target the right users so you can maximize your ROI (return on investment).
You can choose from various types of ads, including carousel, collection and video. What’s more, these ads can appear across the platform, e.g., in users’ feeds or on Messenger.
Search engine optimization (SEO)
SEO is the process of getting your website to rank higher on search engines like Google. Your content, such as your meta descriptions, blog posts and product descriptions, should include the keywords people might use to find your products. Even when writing blog posts, you can add relevant keywords to optimize for SEO.
And if your budget is limited, implementing free advertising tactics like SEO can help you reach your goals.
Another great way to market your dropshipping business is with email marketing.
For example, you can use emails to retarget customers who abandoned their cart. Retargeting emails can also be used to provide post-purchase product recommendations to customers to encourage repeat purchases.
You can also use emails to introduce new products to customers such that it will be easier for them to buy when you finally launch the product.
Use automated emails to streamline the process, especially as you continue to scale.
Overall, email content can help you stay top of mind and nurture long-lasting relationships with your customer base.
Create dropship bundles
Dropshipping bundles are a great way to incentivize customers to spend more. It involves bundling two or more products and selling them at a reduced price. Usually, a customer would spend more if they purchase the products separately.
In addition to helping you make money, bundling products together can help you minimize shipping costs if the products are sourced from the same supplier.
Here are a few ideas you can use when creating bundles:
- Bundle related products together, e.g., a razor and razor blades.
- Group the same product together so consumers can buy multiple of the same product in one go.
When grouping products, consider using your best-selling products to maximize sales.
Once you’ve created dropship bundles, you’ll need to find ways to promote them and generate sales. For example, you can add them to post-purchase emails or your social channels. You can also present them at checkout as an order bump.
Implement dropshipping automation
With an automated dropshipping business, you have much to gain in terms of time savings and ensuring the order fulfillment process happens without a glitch.
For instance, as you scale, sending out orders to your supplier using a manual process is cumbersome and can keep you from attending to core business activities like launching a new product or executing well-thought-out marketing plans.
With automation, manual and repetitive tasks are turned into automated workflows. For instance, as soon as a customer places an order, it’s automatically sent to your supplier.
Besides streamlining order processing, automation can help increase customer satisfaction. According to data from Statista, 13% of respondents cited faster delivery as the single thing that would most affect their shopping experience.
Other benefits of using automation with dropshipping include:
- Automated order tracking: The end user will know when their package has left the warehouse and when it will arrive.
- Automated stock levels: If a supplier runs out of an item, you’ll be aware. This will keep you from selling out-of-stock items as it can cause a dip in potential sales. For example, retailers in the United States and Canada lose roughly $350 billion in sales every year due to stockouts.
- Improved accuracy: Manual processes are prone to human error. For example, a mistyped address can lead to a lost sale, a negative review, or both.
What you need to know before you start dropshipping
Before investing time into starting your dropshipping business, there are several things you should be aware of. Let’s look closely at each of them so you know exactly what to expect.
Dropshipping is highly competitive
Since low startup costs are involved, the dropshipping business venture will expose you to stiff competition. This is especially true if your main competitors are established businesses with better resources and bigger budgets or if you choose a popular niche like the beauty industry.
To truly stand out, you’ll need to employ various tactics, some of which we mentioned above, like choosing niche products and others like establishing a brand.
You have limited control over order fulfillment
Since the supplier handles everything from warehousing to packaging to delivery, you’ll only have limited control over order fulfillment as a dropshipping business owner.
If the supplier runs out of stock, it will result in longer lead times, and customers may choose to go with a competitor.
As mentioned earlier, it’s important to vet suppliers to decrease your chances of having issues with order fulfillment.
Establishing your brand can be challenging
Dropshipping is lucrative because you don’t have to invest copious amounts into producing your own product. There is, however, a major drawback associated with this benefit: limited branding.
Since the product isn’t custom-made, branding is out of your hands—it’s handled by the supplier. As such, all the credit goes to your dropshipping suppliers, and you lose out on the opportunity to build a brand and make lasting impressions on customers.
Smaller profit margins
There are several reasons why dropshipping reports lower margins. Firstly, your pricing needs to be competitive to keep your business afloat. In other words, other retailers can gain a competitive advantage if they include lower prices than you.
And although dropshipping has a $0 upfront inventory investment, things like marketing your retail store and building your website can cut into your profits as you work to gain traction in your dropshipping business.
Finally, your profits may be smaller due to the amount you have to pay your suppliers. So in as much as outsourcing order fulfillment has its perks, it comes at a cost.
You can run into scammers
It isn’t unusual to come across fake dropshipping suppliers when starting your business. And since dropshipping success is largely attributed to working with a good supplier, you’ll need to keep an eye out for scammers.
Here are several ways to know whether a supplier is legitimate:
- They don’t charge monthly fees.
- They don’t sell to the public.
- They include a physical address on their website.
Final thoughts: How to make money dropshipping — top tips for success
There you have it. We’re confident you no longer ask yourself how to make money dropshipping. If done right, any of the above strategies can help you meet your financial objectives.
Add a reliable eCommerce platform into the mix, and you have a winning formula for success.
At Bluehost, our WooCommerce Hosting plans are designed to give you the tools and resources to scale, market your store and grow a loyal customer base. Plus, if you run into any issues, our 24/7 support team is on hand to assist you.
Contact us today to learn more about how partnering with Bluehost can benefit aspiring dropshippers like yourself.
How to make money with dropshipping: FAQs
Yes, dropshipping is legal. Even so, it’s not a bad idea to protect your business in a number of ways.
For instance, have an attorney draw up a contract when signing up to work with a dropshipping supplier just to ensure everything is above board.
In addition, if your store is located in a state that collects sales tax and orders come from residents of the state, you must pay sales tax.
It’s possible to create a profitable business with dropshipping. Setting a profit margin of at least 10% is a good place to start. Moreover, to increase your margins, focus on in-demand products, compare pricing markups from competitors and source products from suppliers at a low cost.
Here are the essential steps for starting a dropshipping business as a beginner:
Step 1: Find a profitable niche
Step 2: Choose the right products to sell
Step 3: Cover your legal bases
Step 4: Build your eCommerce website
Step 5: Choose the right suppliers
Step 6: Market your online storefront
Affiliate marketing refers to promoting other people’s products and earning a commission when someone makes a purchase. Dropshipping, on the other hand, is when you sell existing products created by someone else but from your own website.
Dropshipping doesn’t require upfront inventory investments. That said, dropshipping business owners will need an eCommerce site, meaning they’ll need to pay for a domain name and hosting.