How to Start a Dropshipping Business in 2025: Complete 10-Step Beginner’s Guide

Starting a dropshipping business is an excellent way to enter the e-commerce market with low startup costs and minimal risk. The global dropshipping market size was valued at $128.6 billion in 2020, and is expected to grow to $476.1 billion by 2026. 

Clearly, with the e-commerce industry growing rapidly and more consumers turning to online shopping, dropshipping will go a long way. So, if you are looking to venture into a dropshipping business or develop another income stream, it’s a great time to start.

Did you know the global dropshipping market was valued at $128.6 billion in 2020 and is expected to grow to $476.1 billion by 2026?

While this figure is convincing enough, you must know how to start a dropshipping business and make it successful. 

So, we’ve got this exhaustive guide that covers everything about a drop shipping business, including what it is, pros and cons, and the steps to becoming a drop shipper. 

What is Dropshipping?

Dropshipping is a business model wherein a company (the dropshipper) does not keep products in stock. Instead, it purchases the product from a third-party supplier and then ships the order to the customer.

What is a dropshipper?

The dropshipper acts as a middleman and sells a wide range of products without having to handle the inventory or shipping logistics. 

You need comparatively low startup costs to start such an eCommerce business. E-commerce giants like Amazon are using a similar business model to ship products from one country to another.

Consider an example for a better understanding. 

Let’s say you are a dropshipper in the US who sells high-quality ergonomic office chairs online. 

• To avoid maintaining a warehouse full of chairs, you can partner with a supplier who manufactures and ships them.
• Create an online store that lists the chairs and promotes them across different channels.
• When a customer from New Jersey orders a chair, you forward the order details to your supplier.
• The supplier packs and ships the chair directly to the customer.
• You earn a profit as a middleman by setting a price above the wholesale cost and your operational expenses

This way, you run a profitable e-business without handling inventory and shipping.

What are Dropshipping Suppliers?

Dropshipping suppliers are responsible for fulfilling orders that retailers make on customers’ behalf. They store products, pack them for shipping, and execute the delivery to the customer. You can partner with individual suppliers or look for platforms that host multiple suppliers. In some cases, there are some manufacturers, wholesalers, and independent makers who offer dropshipping services.

How Does the Dropshipping Business Model Work?

There are 3 major faces in the dropshipping business model: the supplier, you (the dropshipper), and the end customer.  The process typically works as follows:

1. This step involves finding a supplier who offers products at wholesale prices. This supplier may be a wholesaler or manufacturer.

2. The next step is setting up an online store, where you list your products for sale. You must consider your competitors’ prices and profit margins to determine the prices of your items. It’s recommended to add a dropshipping app to your store so you can update product lists and forward orders to suppliers on the go. 

3. Once your customer visits your store and makes a purchase, you can send order details to your supplier. Using a drop shipping app can help automate this step.

4. The dropshipping supplier packs and ships the ordered product to your customers’ address, and you handle customer support if required. 

As a dropshipper, you can offer a wide variety of items without investing the time and money related to inventory or shipping logistics. However, it also means that you will be responsible for all customer service and returns. So, you should establish a good relationship with the supplier for smooth and efficient order processing.

10 Steps to Start a Dropshipping Business

“I want to start my own dropshipping business but IDK how to start.”

That’s a question from a Reddit user looking to venture into dropshipping. 

1. Determine if you should start dropshipping

Dropshipping is exciting – but not necessarily for everyone. 

So, the first question is: Should you start dropshipping, and whether this business is worth it for you or not?

Let’s look at some signs that indicate dropshipping will suit you as a career:

• You are a skilled search engine optimization specialist and have good knowledge of social media marketing. It will help you make the most of channels or platforms, such as Google, YouTube, and Instagram, and drive traffic to your online store.
• You focus on driving sales more than establishing your brand. It’s because dropshipping is more about achieving high order fulfillment rates and not about adding branding to products, packaging, or communications. 
• You prioritize expanding your product range and selling a wide array of items using a worldwide network of suppliers. However, you may have less control over product quality as you don’t control manufacturing. The most you can do is order samples from suppliers so you can test them for quality before they reach customers.  
• You don’t mind longer shipping times, especially if you partner with overseas suppliers that may take longer to deliver orders to customers. If you can manage customer expectations despite this, dropshipping is a viable option. 
• You are ready to look into issues that don’t lie directly within your control, as and when needed. For instance, you may need to investigate shipment delays, product defects, and return requests. 

2. Identify your niche 

To start selling products and gain traction from the beginning, you must decide what it is that you can sell. You can look for Google trends to know which products are in high demand. Pick a dropshipping business idea that doesn’t just earn you revenue but also interests you.

However, you should not just look at trends when deciding your niche. Rather, you must also look for what’s trending in your niche. For example, if your niche is clothing fashion, and you notice “denim apparel” trending, you should also consider promoting it more. Such niche items attract customers more, which makes it easier for you to sell to your target market.

Here are a few dropshipping business ideas to consider:

• Home Decor
• Phone-related products
• Appliances
• Gardening supplies
• Children related items
• Toys and games
• Sports and entertainment
• Lights/lighting
• Tools and accessories 
• Healthcare delivery services
• Beauty products
• Jewelry
• Clothing
• Food and drink

3. Conduct a competitor research

Once you know the market niche, look into your competitors and analyze how they work. Focus on researching the top competitors, including Amazon and Walmart.  

As they have been in the business for a long time, you will get a better understanding of success-driven strategies.

Here are a few ways to start your research:

• Google search

  You can start with Google to check your competitors. You can enter key search terms related to your product niche and analyze the top 10 results. These will most likely display your top competitors and their promotion methods.

• Tools such as Similarweb and Semrush 

  These online tools are your best bet to find your competitors and track their online activity. Semrush and Similarweb give you a list of competitor website information, including their website’s audience and traffic information, social media profiles, and advertising campaigns.

• Social media

  Look at Facebook, Instagram, Twitter, and other social media channels for ads related to your niche. Check how your competitors have developed their online presence through their feeds and their engagement levels.

4. Form a business structure

In this step, you need to register your dropshipping business with a unique name as a legal entity. Although you must seek advice from a legal counselor, we have jotted down the three common business structures below.

• Limited liability company (LLC)

  An LLC protects your personal assets (more than a sole proprietorship) as it establishes your business as a distinct legal entity. You will need to comply with all the requirements and pay relevant fees.

• Sole proprietorship

  While this is an easy structure, it doesn’t offer personal liability protection. In a situation wherein the business is sued, there are chances of potential threats to your personal assets.

• C corporation

  Major companies set up their business structure as C corporations. These are the most reliable ones in terms of liability protection. However, they may cost you more and need double taxation, as the income isn’t directly passed to the shareholders.

Once you have determined your business structure, you should also apply for your employer identification number. 

It serves as your social security number that you may need for business tasks, such as filing taxes or opening a bank account. You can check if you need it based on your dropshipping business structure and apply online for it. 

The permits and license requirements are minimal in this business. However,  you still need a general business license and sales tax permit. It’s always a good idea to visit your Secretary of State’s website to confirm if you need any additional permits.  

5. Set up your finances

One of the most important aspects of starting any business is keeping your personal and business finances separate. It will help avoid any confusion, make accounting easier, and save you from any mishaps when there’s an IRS audit.

• Business bank account

  All your business finances, including income deposits and withdrawals, must be handled using one primary account.

• Business credit card

  As you will have expenses related to setting up your online store, marketing, and related ones, you must have a business credit card. It can bring some amazing rewards with the right business cards.

• Sales tax collection

  Sales tax is mandatory in most states. So, you must check your state laws regarding the same so you stay adherent.

• Permits and licenses

  Most of the dropshippers work from home. So, you must check with your government and complete the relevant procedures. 

• Business EIN number 

  An employer identification number (EIN) may be needed to perform various tasks associated with your business. You can check if you need it based on your dropshipping business structure and apply online for an EIN number.

6. Look for a dropshipping supplier

There are multiple ways and places where you can look for a dropshipping supplier.

• Start looking for reliable suppliers at places like DSers. This marketplace helps you search for online products including fashion, toys, and electronics. It allows you to find and add products from various dropshipping suppliers globally. DSers is a great app with lucrative profit potential. 
• Another good marketplace to look for large-scale suppliers is AliExpress. Check the suppliers’ reviews and the duration of their business so you can decide which ones to pick. You can then contact the selected ones and inquire about shipping terms, timelines, and order quantities. 
• Look up independent suppliers, like the dropshipping app Importify, directly on Google. You can also find suppliers through a dropshipping marketplace, where you can connect with a wide range of pre-vetted partners. 
• For a more bespoke offering, you can also integrate with print-on-demand companies, like Modalyst, Printful, and Printify.

7. Select your product catalog and set prices

What you sell in your store directly depends on your supplier’s inventory. So, you must pick the items that cater to your niche niche customers’ demands. 

Ideally, pick products that offer cross-selling opportunities so your customers don’t purchase only what they are looking for but buy add more relevant items. 

Let’s say you sell electronic items and a customer has visited your store for a mobile phone. You’ll want to suggest cases and glass back covers as your customers are likely to purchase them alongside, even more at discounted prices. 

A pricing strategy is also a crucial aspect that keeps your business afloat and thriving. To determine your price point, calculate your costs, including what you pay to your supplier and operational expenses. You can then set a desirable profit margin and mark up your product’s price accordingly. 

However, you must avoid charging too high or lower than your competitors selling similar products so your prices stay competitive.

8. Develop a website for your eCommerce store 

You need a dropshipping online store where people can find your products and buy them. You must be creative to stand out against your competitors and make a memorable impression on your business.

You will need the following:

• A website domain name 
• A website design with a unique logo, trendy brand colors, and fonts
• List your products with shipping information and payment methods 

Platforms like Shopify help create websites and reach a satisfactory level of selling through an eCommerce store. You can also integrate Shopify to a route planner to automate your delivery processes. 

Once you have a website, you need to ensure that you optimize it with proper content. You can hire an SEO professional to help you with targeted keywords that you can include to gain visibility among your potential customers.

9. Ensure effective order fulfillment 

So your customer has made a purchase, congrats on that! It’s time to set up a process to forward these orders to your suppliers. While you can forward them manually, it’s best to go for an automated process so you can save time and avoid errors. 

Plus, automated fulfillment processes can easily handle increasing order volumes as your business expands. Nowadays, businesses are also using white-label drop shipping where you pay your supplier a little extra to add your branding to packaging. While this option eats into a little of your profits, it can help make people remember you and your brand.

10. Come up with a marketing strategy 

Marketing is an excellent way to reach your target market and gain dropshipping clients. You can check out your competitors for their marketing strategies and what works well for them. BuzzSumo will help you see the type of content that gets the maximum shares on social media.

Here are a few ways you can reach a wider audience for your dropshipping services:

• Google Ads: The most commonly used marketing technique is to showcase your online dropshipping store through Google Ads. It will help promote your dropshipping products and gain visibility among target customers faster.
• You might want to consider ad campaign costs though, especially if you are on a tight budget. Starting with one or two paid ads can be a good idea to assess your return on investment. If everything goes well, you can consider expanding your spending on ads. 
• Facebook Ads: You can start getting leads once you post your dropshipping services through the right targeting on Facebook. You can keep a low budget at first and try posting different Ads to see which one is working.
• Email marketing: Emails matter a lot in the online business world. So, you can utilize their potential to engage your target audience and increase traffic and leads. You can consider sending promotional offers, discount information, or personalized product recommendations to repeat customers.
• Influencer marketing: Using influencers to promote your dropshipping services is a great way to build trust in your target audience. You can leverage this marketing method with a little budget and get going.

Pros and Cons of a Dropshipping Business

At first sight, the dropshipping business idea looks flawless. Though much like any other business, the drop shipping business model has its own set of benefits and drawbacks. 

Let’s have a look at both pros and cons.

Pros 

1. Minimal monetary investment 

As you don’t have to purchase or handle inventory, you can run a dropshipping business with minimal investment. As the supplier takes care of most expenses, you don’t have to worry about them.  

2.  Minimal overhead costs

When you don’t manage inventory, you don’t have to rent a warehouse. Plus, there is no need for insurance as you don’t have drivers on board. All you need is a digital storefront and an active internet connection. 

So, overhead costs are negligible in dropshipping, unlike in a traditional retail business. Even if your products are not doing too well, you are free from the headache of mounting overhead costs, to say the least. 

3. Opportunity to expand your offerings

Dropshipping empowers you to introduce new products real quick. You can simply contact new suppliers and expand your offerings with dropshipping services. 

4. Hassle-free shipping process

People with dropshipping stores using an e-commerce platform don’t have to handle the ‘shipping’ part. They don’t need to arrange a mail carrier or hire vehicles for it.  

It’s because suppliers handle product delivery. In fact, there are some dropshippers who let suppliers handle returns management as well.

5. Collaboration with new suppliers

Every supplier brings a unique proposition to the table. It allows you to constantly scout new opportunities and potential ventures. 

Cons

1. Difficult to manage logistics

As the supplier manages your business logistics, you don’t have a lot of control over it. However, this is not unexpected, as the whole purpose of dropshipping is to have the supplier handle fulfillment.

2. Tight profit margins

Look at any dropshipping agreement contract and you will quickly see how thin the profit margins are in this industry. It’s because a third party taking care of the majority of expenses also takes a chunk of the profits.

3. Lack of product customization

Since your products are usually premade, there is hardly any room for additional customization. As your supplier may be shipping products for many dropshippers like you, they may be producing goods in bulk. 

So, customizing your products may be economically unscalable and infeasible. Thus, it may not suit those who want to offer a truly unique product to their customer base. 

4. Complex fulfillment process

Unlike other business models, the dropshipping model has a very complex fulfillment process. The reason is that a customer has to place an order through your site for your supplier to acknowledge it. However, any issues arising from this system are rare. 

5. Chances of losing inventory control 

As the dropshipping model makes you so distant from the entire supply chain, you can’t have much control over inventory. This leaves the supplier in charge of the inventory and could lead to stock shortages during high-demand phases.

Conclusion

Dropshipping is a well-known and low-cost business model that enables you to enter the world of e-commerce with minimal risk. By finding reliable suppliers and focusing on the key marketing strategies mentioned above, you can sell a lot of products without investing in a large inventory.

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