(Written in US Engish)
How to start your own Dropshipping business
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| Image by Animation Production Company from pixabay.com |
What is Dropshipping?
Dropshipping is an E-Commerce model for retail fulfillment that does not require a business to keep products in stock. Instead, the online store attracts customers, sells the product, and passes on the order to wholesalers. The wholesaler supplies & ships the product. Thus the dropshipper need not invest in inventory or a warehouse.
Starting a dropshipping store is so simple that you can start with it even while working 9-5! As you grow, you can transition into working full-time on your dropshipping business as cash flow and profitability allow.
How to start a Dropshipping store?
1. Choose a niche
First, you have to choose a profitable niche. Now, what is a profitable niche? A Niche is profitable only when the product is in demand. It is easier to fulfill demand than to create it. And how will you know which product is in demand? The market is already full of products. Well, there are a lot of online tools available for this purpose:
a) Facebook Audience Insights
Facebook is the largest social media network in the world. Facebook Audience Insights is a great product research tool for finding a trending product. It is a free tool that helps you learn more about your audience. It aggregates information about Facebook users' Demographics, likes, location, language, activities, and much more.
b) Google Keyword Planner & Google Trends
The best way to measure demand for an item online is to see how many people are looking for it using a search engine like Google. Just type in a word or phrase, and the tool tells you how many people are searching for it every month.
You can use Google Trends for more detailed insights like Geographical concentration, seasonality, search intent over time, etc.
2. Perform competitor product research
Competitor analysis is a must in the dropshipping business. Know your competitors and their products. What makes them successful? How do they do it? Try to know their strengths and weaknesses, their strategy and objectives. Look at their customer reviews.
What are their best sellers, and for which keywords do they rank? On which social media channels are they good? There are a lot of Competitor Analysis Tools also for in-depth analysis.
3. Decide a business structure
Available business structures may differ country-wise. Commonly available options are LLC, LLP, Partnerships, Ltd.co., C-corp, S-corp, Sole proprietorship, etc.
However, Sole proprietorship is considered the simplest one, but it may be a bit challenging if a judge rules a case against your business. In the case of Sole proprietorship, there is no personal liability protection. So take legal advice and choose it carefully.
4. Tax registration requirements
You will have to apply for Income tax, sales tax, and other local authority registrations as per your country's requirements. So it is advised to get a legal opinion from experts in your area for proper compliance.
As some legal requirements may differ country-wise, it is not feasible to mention different details here.
5. Separate Bank account and Credit card
In the case of Sole proprietorship also, you may like to keep your business and personal finances separate. The best way to do that is by opening up new accounts in your business name.
Similarly, you must use a separate credit card for this dropshipping business for routine purchasing. It will help you maintain cleaner accounts and get better rewards from credit card companies.
6. Choosing the right platform
Choosing the right dropshipping platform plays a vital role in the success of your business. Some of the available choices are:
a) Amazon, eBay, and other marketplaces
You can directly start your store on any established marketplace like Amazon or eBay. While selling on established marketplaces, you benefit from their infrastructure and traffic, but the customization and personal branding would be missing here. Anybody shopping from your store will broadly remember the names of the marketplace only, like Amazon or eBay.
Further, the marketplace could lack essential features like shipment tracking, fulfillment monitoring, or website integration. Or it may limit the number of products you can offer.
b) Hosted platforms like Shopify, Wix, and Woocommerce
If you want to set up a store with just a few clicks and start selling products, then well-established dropshipping platforms like Shopify, Wix, Woocommerce, etc. will be great.
Out of these stores, Shopify is the largest E-Commerce platform, being used by more than 1 million E-commerce and Dropshipping stores in 175 countries. It is versatile enough to be used by SMBs and enterprise-level companies to set up and manage online stores.
The best part of having your own store is personal branding. Unlike selling on marketplaces like Amazon and eBay, if a customer buys from your website, they will mention your brand name or store name while referring to your products in their circle. However, in the case of your own store, you need to invest time and effort in bringing traffic to your website.
c) Self-hosted website
If you have enough resources, then you always have the option to build a website from scratch or set up a store as per your requirements. Remember that you’ll have to do everything from scratch, including coding part, and designing.
Further, a technical team would always be required to maintain the site. However, you can manually set up plugins and other integrations with a self-hosted platform and customize it per your taste. A one-time setup cost is there in self-hosted sites, but with the increase in the business size, you need not cough out hefty monthly charges like in the case of hosted platforms.
Conclusion
If you are a newbie, the best route would be to start with hosted sites to get a taste of it. Choose one out of all available ready-made options! After earning money through this and also gaining experience from this business, expand as per requirement. The marketplace option can even go along with your self-hosted website to get the benefit of their traffic.