It’s day four after you have quit your 9-to-5 job and you are contemplating a career switch. You think of starting your own enterprise but you are short of the investment to start right away.

You come up with the idea of opening your own eCommerce business, but the thought of investing in a warehouse and purchasing an inventory discourages you further.

That is where a dropshipping business comes in. Without investing a cent in inventory, warehouses, or employees it has the potential to be a solid alternative for your full-time job.

It also has the capability to operate on autopilot for months, providing you with the freedom, time and money for a luxurious vacation with your family and friends.

An entrepreneur named Andrew Youderian did just this by investing 1,500$ in radio equipment.

Today, he has numerous online stores to his name that collectively generate annual revenue of over a million dollars. They are all operated by his team. Andrew also provides dropshipping business ideas to help young entrepreneurs and small businesses.

What is Dropshipping?

Dropshipping actually goes back to the 70s and 80s when the term was used to define an inventory that does not involve a middleman who initiated the drop-ship order.

The product was thus directly shipped to the customer of the middleman by a manufacturer. Marketing authors described dropshipping with limited potential.

However, with the advent of internet, this process subsequently adopted online methods.

The idea of analyzing consumer data and offering them products based on this information has made the dropshipping business plan a great source of revenue.

Contrary to traditional retailing which requires a significant amount of investment upfront, you can start a dropshipping business with less than $1,000. You start it as a side hustle to earn an extra amount of money and then gradually grow enough to rely on it for your full-time income.

Here is how you can start a dropshipping business in 2022.

Understanding Dropshipping

First and foremost, before starting a dropshipping business following are the several things you should keep in mind.

1. Supply Chain

It is a term that is used to describe the whole process a product takes: from its manufacturing to the supply to customers.

It is a long process, however, there are three primary parties that you should know to start your own dropshipping business.

a. Manufacturer

They create the product but do not directly sell it to the public. Manufacturers sell in bulk.

Buying products directly from the manufacturer is going to cost you significantly less, but they have a minimum purchase requirement that wholesalers and retailers need to meet.

b. Wholesalers

They usually buy from manufacturers and sell them to retailers at a slightly higher price.

They do have purchasing requirements but they are comparatively lower than manufacturers so it is easier for retailers to buy from wholesalers.

Wholesalers operate in a specific industry and do not usually sell to the public.

c. Retailer

That is where you come in, the retailer for your dropshipping business. After buying products from wholesalers, you are able to sell them directly to the public at your desired pricing.

However, in dropshipping you or your store does not keep the products in stock nor do you have an inventory, saving you the trouble of investing in a warehouse.

You purchase products as per your customers’ needs and have them ship directly to your customers from the manufacturers or wholesalers.

Keeping real-time track of your consumer data is one of the most important factors for your business to consistently perform well.

You need to know which of your products are satisfying your customers and which of them are not generating profits for you.

2. Dropshipping Process

Now that you are aware of key terms, let us get you started on some real-time action.

The first thing you are going to need is a store where people can browse your products and buy them.

To place your products in your store, you are going to need a dropshipping supplier. It can be a hefty task if you are not sure of what you are doing. There is a considerable risk of fraud as well.

Using reliable platforms like Oberlo will let you ship products from trustworthy suppliers to your store. You can use Shopify to set up your store for which you are going to need a domain name and a design.

Let’s assume you have successfully set up your store. Here’s an example of how it will work. Suppose your store’s name is U-electronics. You specialize in electronics such as fridges and fans. You dropship your products directly from your dropshipping supplier named Allelectronics to your customers.

This is how it will all pan out:

-One of your customers needs a fridge. They will place an order at your store upon which you and your customer will receive an auto-generated confirmation email.

-Your store’s bank account will receive the deposited amount once your customer checks out at your store.

-The next thing you or your team has to do is to forward the order to your dropshipping supplier (in this case it is Allelectronics) who will then charge you for the amount of the product (fridge) and other processing and shipping fee.

-Your supplier will then send the product for shipment directly to the customer’s address. The product packaging will have the name and logo of your store on it. Your supplier will also send you a confirmation email with a tracking number once the product has been dispatched.

-Last but not least, you will send the tracking information to your customer via email.

Keep in mind that this whole process can be automated using paid tools and features. Moreover, just like the traditional retail industry, wholesalers or dropshipping suppliers do not get credit for the product. Your store does.

3. Fulfil Legal Requirements

Before getting in a boat, you need to make sure there are no holes in it. Make sure you are in line with all the legal requirements to own a business.

Apply for a license and permit.

Register your business name and apply for a federal tax identification number.

Do thorough research and seek the help of an expert so you are clear of committing any breaches.

Once you tick all the boxes for starting your own business, follow these tips to sail dropshipping business smoothly.

Stick to a Niche

Starting out, it is always smart to pick out a niche and plan accordingly. Dropshipping business might sound like a sweet dish but it has a lot of competition. Offering specific products will help you stand out and know your customers.

Again, dropshipping depends heavily on consumer data. Spreading yourself too thin will just confuse you in analyzing different types of demands.

Quality Over Quantity

As a beginner, customer satisfaction should be your goal. Build an audience. Have them trust you. Get to know them and let them get to know you.

Once you have a set of customers visiting your store, you are only going to climb upwards. Unless you show a decline in the quality of your products. The more you offer the harder it will get for you to manage your goods.

Beware Of Fake Wholesalers

In any industry, you are going to find frauds. It is no different for a dropshipping business.

Avoid wholesalers who ask for a monthly or advance fee from you to do business with them. You should not be paying for anything else except for what you buy from them i.e., product, shipping and packaging costs, and processing charges.

Moreover, avoid suppliers who are selling directly to the public. There is a high chance that they are retailers selling their products at inflated prices.

Go to a Trade Show

Going to a trade show will allow you to know your wholesalers, manufacturers, and competitors at once. It is one of the best ways to connect with like-minded business leaders and get to know the market.

Know Your Competition

As a start-up, it is essential to know who your competitors are. How they are performing. What methods and techniques they are using. Do extensive research. Try to get to know their supplier. If their prices are good, order from them.

Search Engine Optimization (SEO)

Since your store will be operating wholly on the internet, it is critical that you optimize it with respect to SEO. Do keyword research for your niche. Include SEO-relevant keywords are phrases in your product descriptions. Hire an SEO expert if you can afford it.

Hire Accounting Experts

For any business to flourish, as an owner you need to be aware of your finances and in what areas you can spend. Consider hiring bookkeeping services.

Leverage Expertise Accelerated’s professional offshore resources that provide excellence in a range of business services through outsourcing and staff augmentation solutions, including accounting & finance, at a fraction of the US cost, delivering 60 percent payroll savings.

Conclusion

Starting a dropshipping business can be substantially profitable. It requires less capital. You do not have to manage a warehouse or hire employees. Your supplier pack and ship the product for you.

Moreover, you can literally run a dropshipping business from anywhere in the world. All you need is an internet connection meaning you do not have to worry about the costs of setting up a workplace.

However, dropshipping business is not a ‘get rich overnight’ scheme. You have to be consistent and put in regular efforts and hours.

The high competition can be discouraging since many retailers are going to offer rather lower prices with poor websites and stores. But that does not stop the customers from using their services.

Starting it as a side hustle and gradually growing your dropshipping business is the efficient way forward. Offer consistent quality and be patient.