If you want to build a new company or generate a new stream of income through a side hustle, starting an eCommerce business is a great idea. eMarketer projected worldwide retail eCommerce sales to reach $6.3 trillion in 2023 and $8.1 trillion in 2026.
That said, not everyone has the capital required to start a traditional eCommerce business. If you don’t have much cash to invest upfront, dropshipping might be a great option for you.
While the term might sound unfamiliar, you’ve most likely already purchased a product online via this popular business framework.
Dropshipping presents its fair share of challenges. However, it’s also a low-risk way to start a successful business without high startup costs. If you want to know how to start a dropshipping business, this step-by-step guide to doing it with WooCommerce is for you.
What is dropshipping?
Dropshipping is a method of fulfilling online orders in which an eCommerce store sells items to consumers by “forwarding” orders to a third-party supplier. The supplier then ships those items directly to buyers.
Dropshippers don’t stock any inventory themselves. Instead, they make purchases from their supplier each time buyers do, getting each order filled via the manufacturer.
Businesses may use this method for some products but adopt traditional production/shipping approaches for others.
Many entrepreneurs have used dropshipping to start their own online businesses or expand their current offers. But why exactly is it so popular?
Related: A beginners guide to dropshipping.
Why dropshipping is popular
As a business owner, dropshipping allows you to avoid the hassles associated with manufacturing, inventory management and order fulfillment.
And many manufacturers are happy to work with a dropshipping business, as it allows them to avoid time-consuming eCommerce, marketing and branding responsibilities.
Advantages of dropshipping
There are many other upsides to this business model, including:
- No need to manage logistics:Your manufacturers will handle everything associated with designing products, producing items and fulfilling orders. You won’t need to worry about operating a supply chain, shipping or running warehouses.
- Low financial barriers to entry: You won’t need to produce anything. You also won’t need to hire production brick-and-mortar store employees. Plus, you won’t need to build a stockroom or warehouse. So, your startup costs will be low.
- Low overhead: Your operating costs will also be low, especially compared to those of traditional retailers.
- Scalability: You can work with a single supplier or 50. You can offer just a few products or sell a vast range of items. It’s simple to expand your offerings and reach as needed with dropshipping.
- Flexibility: You can sell almost anything you want — from anywhere to anywhere. You can adjust your offerings and capitalize on trends.
- Less financial risk: Since you don’t need to purchase in bulk or invest much capital, you won’t incur as much financial risk.
- Potential for profit: You’ll buy at wholesale prices — without having to buy wholesale volume — and sell at retail prices. If you manage your business well, the potential for profit is high.
Challenges of dropshipping
Dropshipping offers many benefits. But like with any business model, there are some challenges, including:
- Lack of control: You won’t have as many responsibilities as with traditional eCommerce models. However, you also won’t have control over shipping times, product quality, wholesale prices or anything else on the manufacturing side.
- High competition: Because of the low barriers to entry, many entrepreneurs start dropshipping businesses.
- Need to find reliable suppliers and manufacturers: This is absolutely essential, and it won’t be easy. We’ll go into more detail on this later.
- Relatively low profit margins: As a business that essentially purchases items from third-party providers and resells them, your margins will be much lower than traditional online retailers’.
- Customer service responsibilities: Offering a well-trained customer support team is essential. In fact, a 2022 Latana report found that 86% of American consumers said customer service was important or very important to them.
- Branding and marketing challenges: Products won’t be made by your business or associated with your brand. This makes establishing a brand identity tricky. You’ll also be responsible for marketing your eCommerce business.
Despite these difficulties, this eCommerce business model can be a streamlined path to success. Weigh the advantages and disadvantages to determine whether it’s right for you.
If it aligns with your unique goals, needs and processes, you’re ready to learn how to start a dropshipping business with WooCommerce.
How to start a dropshipping business
- Research, research, research.
- Find a profitable niche.
- Choose the right products to sell.
- Cover your legal bases.
- Build your website with WordPress.
- Develop your online store with WooCommerce.
- Build your brand identity.
- Find the right suppliers.
- Negotiate your supply chain and terms.
- Pinpoint your target customers.
- Mark up products at optimal margins.
- Promote your business and acquire customers.
1. Research, research, research
Do a competitive analysis. Get business ideas from successful dropshippers. You can keep your finger on the pulse with useful systems like Google Trends.
By researching regularly, you’ll understand what’s going on in your industry. You can then adapt your business in response to trends and potential problems.
2. Find a profitable niche
Your niche is key to forming a successful dropshipping business. But how can you find a profitable niche?
Ask yourself what your special place in the market will be, and consider what you can offer that your competition can’t. Brainstorm about industries you’re interested in or experienced with. Once you’ve determined a few potential niches, evaluate their profit potential.
Seek out market segments with high demand and low competition. If there’s low demand, you’ll probably have few competitors but also few customers. If there’s too much competition, you’ll probably see high demand but have trouble getting people to buy your products.
Make sure that the dropshipping niche you choose strikes a good balance. Consider how you can market your brand through the lens of that niche. Don’t pick something too trendy or specific.
3. Choose the right products to sell
The next step in starting a dropshipping business is deciding which specific products to offer.
Ask yourself how wide you’d like your range of products to be and curate your product mix. Choose your products based on your market research and niche, looking for items with a high demand/low competition balance.
It’s a great idea to select products that you have personal experience with. However, you can sell anything from baby clothes to car parts.
Just don’t choose items that you can’t advertise through major channels, like weapons, surveillance equipment or tobacco products. It’s also a good idea to avoid items that are heavy, fragile or difficult to ship.
4. Cover your legal bases
Expensive fines are the last thing you want, especially when you’re just starting out. So, make sure you fulfill all the legal requirements when you start your dropshipping business.
The requirements will vary based on your state’s laws, specific products and business structure.
You’ll need an employer identification number (EIN) and sales tax ID. In addition, you’ll have to adhere to all compliance regulations for your state. You’ll also need insurance and other protections depending on your selected legal structure.
5. Build your website with WordPress
If you haven’t already, you’ll need to build a WordPress website. If you build it yourself, you may want to use a WordPress website builder. You also could hire website-building experts to build your website for you.
Creating a website also involves choosing the perfect domain name. Use a reliable service like Bluehost’s domain name registration to get yours.
This step also entails selecting a reliable WordPress hosting provider. You can choose shared hosting, VPS hosting or dedicated hosting, depending on your needs. And if you opt for a Bluehost hosting package, you’ll even enjoy a free domain name for an entire year.
6. Develop your online store with WooCommerce
Once you have your website, you can build your online store with WooCommerce. You should cultivate a user-friendly online marketplace with an effective design and essential elements like checkout sequences, transaction tools and product pages.
Use WooCommerce strategically, taking advantage of practical themes like Divi to make managing your store easier.
7. Build your brand identity
Your brand identity is how customers see you and what makes them want to buy from you rather than another seller. So, building your brand identity is one of the most critical steps in starting a dropshipping business.
According to Semrush’s 2023 State of Content Marketing report, 45% of marketers said increasing brand awareness was their top priority. Don’t fall behind your competitors. Stand out with a personalized brand identity to help customers remember your business.
To start, choose a unique business name. Then, determine your mission and vision statements and add them to your “About Us” page.
Next, decide on your brand colors, and develop a great logo. Then, you can build your brand voice and personality.
8. Find the right suppliers
Choosing the right dropshipping suppliers is critical, as they’ll be responsible for fulfilling your customers’ orders in a timely manner. They’ll determine the quality of your products, the prices you’ll pay and the support you’ll receive.
This will probably be the most difficult part of starting a dropshipping business. But if you use a supplier marketplace or directory — such as DSers, Alibaba or AliExpress — you can find connections to suppliers and automated supplier-sourcing tools in one place.
Once you’ve expanded your business, you can form more direct partnerships with vendors. Look for experienced, reliable suppliers that offer fast shipping and high-quality products.
Consider these elements when evaluating potential suppliers:
- Return policy.
- Production practices: Are the manufacturing practices ethical and consistent?
- Integration options: Can the supplier’s data and product listings easily integrate with your WooCommerce store?
- Shipping options: Does the supplier offer multiple shipping methods?
Ask any potential suppliers for test orders. Reputable manufacturers likely will oblige.
9. Negotiate your supply chain and terms
Once you’ve chosen your supplier(s), collaborate to make sure your dropshipping process, model, order fulfillment framework, and shipping costs and times work for everyone. Negotiate on the unit prices, cancellation policies and shipping terms.
Be professional and firm, but not aggressive. Don’t be afraid to ask for what you need. Showcase your strengths — like high website traffic, marketing experience or a well-developed business plan — to get more from suppliers.
10. Pinpoint your target customers
Make sure you know which type of potential buyers you’re marketing to. Understanding your target audience makes advertising more effective and increases your chance of developing a high-quality customer base.
Forming a buyer persona can help you here.
11. Mark up products at optimal margins
If you don’t mark your products up enough, your profit margins will be too tiny. If you mark them up too much, customers will never buy them.
Look at your competitors’ pricing to see what you can reasonably charge. Leverage your unique brand identity and niche to demonstrate added value.
You can also implement strategies like odd-even pricing, free shipping, bundles or regular discounts to bring in more sales and offset low margins.
12. Promote your business and acquire customers
Make a marketing plan for your small business. Consider paid direct-advertising efforts, like Facebook Ads or Google Ads campaigns. You can also use longer-term approaches like search engine optimization (SEO) and content marketing.
Be creative with your marketing strategy and mix. Make your brand more visible online by using a variety of lead generation approaches. Try different customer-acquisition strategies to see what works best for your business.
Your efforts don’t end here. Running your business strategically is key to building a business that will truly last.
Strategies for successfully running a dropshipping business
- Provide reliable customer service.
- Scale up when the time is right.
- Prioritize product reviews.
- Don’t stop marketing.
- Continuously optimize your website.
Provide reliable customer service
Consider having your customer support team available 24/7. Train your technicians to be positive and attentive to enhance customer retention. If you focus on improving the overall customer experience, you’ll have a much greater chance of success.
Scale up when the time is right
As your business grows, you can offer new products or expand your target audience. If you’ve chosen a content management system (CMS) with scalability options, like WordPress, this process will be simpler.
Prioritize product reviews
According to Brightlocal’s 2023 Consumer Review Survey, almost half of all consumers feel that online business reviews are just as trustworthy as personal recommendations from friends or family.
This illustrates the importance of cultivating a positive customer experience and asking buyers for reviews. Direct your efforts primarily toward Google, which the same survey confirmed is the most trusted product review platform across all industries.
Don’t stop marketing
You shouldn’t stop promoting your business once your dropshipping business starts to succeed. Revisit your marketing plan regularly and update it according to trends.
Here are some tips for marketing your business:
- Showcase your offerings in innovative ways.
- Keep using strategies like email marketing and social media marketing to bring in traffic.
- Write compelling blog posts to educate and entertain potential customers.
- Take advantage of influencer marketing to boost brand awareness.
- Try new media platforms, like TikTok.
Continuously optimize your website
For the best results, you’ll need to optimize your WordPress website regularly. You can outsource this task to professionals, if you’d prefer.
Install useful eCommerce plugins and automation-driven systems to streamline website management tasks. Pay close attention to Google’s updates and adjust your website’s SEO as needed. You also can take advantage of the many monitoring features some hosting providers offer.
Final thoughts: How to start a dropshipping business with WooCommerce
The dropshipping business model is a great way for entrepreneurs to enter the eCommerce industry or offer more products. Starting a dropshipping business is possible even if you don’t have much capital to invest.
If you follow these processes and tried-and-true strategies, you can build a sustainably successful dropshipping company.
Are you interested in starting a dropshipping business with WooCommerce? Or do you want to add a new stream of income to your current business?
Bluehost’s WooCommerce + WordPress packages offer everything you need to start selling products online. Enjoy easy setup, a dedicated team of customer support experts and a secure payment system.
We also offer WooCommerce hosting services that will make starting your new business easier.
Choose the perfect plan for your needs and get started today.
Dropshipping is a business model in which an eCommerce retailer sells products to consumers and gets them fulfilled by a third-party supplier. In this approach, the seller doesn’t produce or stock any inventory. Instead, they act as the “middleman” between suppliers and buyers.
A buyer places an order through an eCommerce website. The seller — who is managing that website — “forwards” that order to the supplier. The supplier then ships that order directly to the buyer.
Dropshipping offers low barriers to entry, minimal startup costs and generally low overhead. The process is relatively simple, as there’s no need to manage logistics or set up an entire supply chain. This model also allows for flexibility and scalability, so you can adapt your business as needed.
Due to the accessibility of this business model, dropshippers face a lot of competition. This approach also presents some challenges, such as a lack of control over product quality/shipping times and the need to manage customer service. Dropshippers also face difficulties with branding/marketing and finding reliable suppliers.
If you’re willing to put in ample time and energy — and truly commit to this business model — yes! Although the profit margins are relatively low and the competition is high, with the right niche, a great website, a curated marketing mix and strategic planning, you can certainly succeed at dropshipping.