Dropshipping is an emerging entrepreneurial trend gaining traction at astronomical rates. In fact, as of 2021 approximately 27% of online retailers had adopted a dropshipping fulfillment model — a number that is only expected to rise in the coming months and years.
But, as with any business format, there’s a lot to learn and calibrate before entrepreneurs can start to make money dropshipping — especially if they are looking to achieve long-term profitability and success.
Be wary of business blogs and industry influencers who claim dropshipping is an opportunity to “get rich quick” without experience or elbow grease. This simply isn’t the case. It can, however, be a lucrative business model for those who are willing to do their research, study the mistakes and successes of their competitors, and commit to continuous improvement.
If this sounds like you, you’ve come to the right place. We’ll be breaking down everything entrepreneurs need to know about starting a dropshipping business model and setting their venture up for future success.
First up — what is dropshipping, exactly?
The Definition of Dropshipping
Dropshipping is a method of fulfilling online retail orders that eliminates the need to maintain inventory. The business owner relies on a third-party vendor to fulfill and ship orders to customers on an as-needed basis, completely bypassing the responsibility of sourcing, storing, packaging, or transporting goods or products.
How Does Dropshipping Work?
Before you begin studying how to make money dropshipping, you need to have a strong foundational understanding of what dropshipping is and the various benefits and challenges that come with operating this specific type of business.
Let’s cover the basics.
|Customer Places Online Order||You Process the Order (and Make a Profit)||Order is Forwarded to Wholesaler||Wholesaler Prepares and Ships Order||Customer Receives Order|
|Their desired products are selected via your ecommerce website and payment is completed.||You receive the order specifications and the customer’s payment via your chosen ecommerce platform.||You provide your third-party vendor with the order specifications and shipping information.||The wholesaler prepares and packages the items, adds shipping labels, and sends items via the appropriate mail service.||The order is delivered directly to the customer in accordance with your shipping standards.|
Keep in mind that this is simply a general outline of the process. Precise workflows can vary slightly from business to business, but the vast majority of dropshipping businesses adhere to the above format.
How Do Dropshippers Make Money?
Primarily, you make money dropshipping by charging the end consumer more for a particular product than your wholesaler charges to make and ship it. Many wholesalers or manufacturers will also provide a discount if you meet a specific number of orders per month, providing an opportunity to further increase your profit margins.
Let’s say you’ve decided to open a dropshipping business that sells pet toys and accessories. Your profit margins are 30 percent and you get an additional 10% discount if you bring in $10,000 worth of orders per month.
If you sold $18,000 worth of product in a given month, you would profit $54,000 (30 percent of $18,000) plus you would be eligible for the additional 10 percent discount, bringing your total profits to $7,200.
So, does dropshipping make money? The answer, as you can see, is a resounding yes!
How to Make Money Dropshipping: Tips for Starting Your Business
Now that you understand the business model, it’s time to carefully consider the process of opening a dropshipping business. This is important, because there is a lot that goes into launching an online store and operating a dropshipping business full-time.
Below is a general overview of the various stages of launching a dropshipping business. The order of these steps may vary, but each is a requirement for success when deciding to go with a dropship business model.
STEP 1 – Research Products
The profitability of your dropshipping business is largely dependent upon the products you decide to sell. This is partly because certain items are more in-demand than others, but also because profit margins vary from product to product. Electronics and tech accessories like wireless cell phone chargers, gaming headsets, and security cameras, for example, are highly sought after and often have considerable profit margins.
But on the flip side, you don’t want to choose products that consumers can find at most major retailers, as they’ll likely decide to avoid shipping fees and purchase the item in person. Speaking of shipping fees — you’ll also want to choose products that aren’t too heavy, since bigger items will be far more expensive to ship and can quickly eat away at your profit margins.
Use these dropshipping product research tools to conduct thorough market research before adding products to your store. We recommend that all dropshipping entrepreneurs keep the three S’s in mind when making a final decision on which products to sell:
If you can find items that fit inside a padded envelope (t-shirts, books, small kitchen utensils, jewelry, etc.) you’ll receive the lowest shipping rates, which is why many individuals interested in making money dropshipping choose to go with smaller products. But don’t feel like your options are limited — it is possible to run a profitable dropshipping business with larger-scale items. You’ll just need to thoroughly research potential carriers, seek out discounted shipping rates or special promotions, and find the solution that best aligns with your business needs.
It’s impossible to answer the question “Can you make money dropshipping?” without carefully considering how saturated the market is for a particular product. Ideally, you’ll want to select items that aren’t readily available to your target market or being promoted by major competitors.
Many manufacturers are located overseas where product and toy safety regulations may differ from those in the United States. For this reason, it’s critical to familiarize yourself with all safety standards and choose products that won’t pose any risks or potential issues. Children’s toys with small components, bicycle helmets, and medical devices are a few examples of products that could be safety hazards. Remember, dropshipping entrepreneurs are liable for their products, not the manufacturer or wholesaler, so being diligent in this regard should always be top priority.
STEP 2 – Choose a Supplier
Working with the right supplier truly makes all the difference when it comes to making money dropshipping. A difficult supplier will not only negatively impact your daily operations, they will also make the experience your customers have when buying from you less enjoyable — and that’s never good for business.
Look for a supplier with a proven track record of maintaining positive relationships with their buyers. Be sure to ask about their minimum order size and any fees or additional costs prior to agreeing to do business. And last but not least, ask as many questions as you need to feel confident — it’s far better to be proactive than to be caught off guard when customers are depending on you.
STEP 3 – Set Up an Online Store
A well-designed and functional website is the cornerstone of any successful dropshipping business. Customers will ultimately make the decision of whether to purchase or not based on the visual appeal and navigational ease of your site. If they encounter issues along their online shopping journey they’ll likely leave and seek out a competitor, so investing in your website upfront is a wise decision.
Platforms like Shopify, Wix, and Squarespace all make it easy to set up and manage an ecommerce site. They each offer their own unique advantages, so you’ll just need to do a little digging to determine which option best suits your needs. We definitely recommend considering a website builder or service that allows you to add unlimited products, though, and prioritizing advanced built-in reporting, as not all platforms offer these features. If you already have an online store, hiring services like Brandafy will take it to the next level by designing your logo, adding products, and setting up your entire branded dropshipping store. If you’re starting from scratch, Brandafy will take care of everything from start to finish.
STEP 4 – Secure Your Sales Tax ID
Your business is not legally valid without a federal or state sales tax number. Without one, you can not file taxes, open a business bank account, or hire others to work for your company. Fortunately, you can apply for a sales tax ID online, so this step is relatively quick and painless.
STEP 5 – Strategically Acquire Customers
This is where learning how to make money dropshipping becomes more complex. Developing a strategy to attract customers is never a simple task, but it is even more challenging for ecommerce businesses due to the high level of competition. Social media advertising, SEO, referral programs, and giveaway contests are examples of marketing channels that can be utilized to attract new customers and build a loyal fan base.
Only you can determine which methods will work best for your business, so you’ll need to meticulously research your options and build your strategy based on the data you gather.
Common Pitfalls to Making Money Dropshipping
Those who want to know how to make money dropshipping in 2022 and beyond need to be aware of the most common setbacks dropshippers encounter. Being aware of these setbacks ahead of time is the best way to spot them before they occur and (hopefully) avoid them in the process of establishing your own business. These common pitfalls include:
- Being Overly Dependent on Vendors
Dropshipping entrepreneurs must remember that if there’s an issue with a product or its delivery, the customer will associate that issue with their brand, not the wholesaler or manufacturer — which is why having a plan in place to deal with subpar vendors is essential.
We recommend putting a clause in all vendor contracts that protects your business in the event a vendor does not fulfill their obligations or causes issues which impact the viability of your business.
We also advise dropshippers to establish strong relationships with back-up vendors who can step in and fulfill orders should their first choice fall through.
- Dropping the Ball on Branding
Did you know that businesses who consistently present a strong visual brand earn 33 percent more, on average? Branding is an essential part of distinguishing your online store from competitors and making it memorable to your ideal customers. It also builds trust with your target audience, which is a major factor in most buying decisions.
Let’s say you’ve decided to sell athletic apparel and your top competitor has a compelling visual brand (logo, imagery, color palette, etc). You’ll need to consider how you can establish a visual identity that is both captivating and distinctive from other brands. You can leave it in the hands of the experts with dropshipping stores for sale with Brandafy.
- Poor Product Quality
This is one of the deadliest dropshipping mistakes. Customers rarely come back and make a second purchase if their first order failed to meet their standards or expectations. Plus, in today’s digital world, word travels fast — negative online reviews and social media comments spread like wildfire, threatening the sustainability of your business.
Never, ever cheap out when it comes to product quality. It is far wiser to invest in higher quality products from the beginning, as you’ll recoup the cost with longer customer lifecycles and repeat purchases. We recommend asking potential suppliers about their product testing and quality control processes prior to formalizing a business agreement.
You can ask questions like:
- What are your quality standards for (specific product)?
- How many products do you test from each batch?
- What is your process for addressing defects or potential issues?
- Do you reject batches if a defect is identified?
- What is your process for preventing packaging issues?
- Are you willing to work with a third-party quality control inspector?
Remember, the more proactive you are in clarifying quality control standards and practices, the less risk you’ll need to worry about in the future.
Is Dropshipping Worth It?
Now that we’ve answered the burning question of “How do you make money dropshipping?”, there’s just one question left to ask: “Is dropshipping actually worth it?”.
Absolutely! If you’re willing to put in the work. Here’s why we think so:
- The Online Retail Industry is Thriving
E-commerce accounted for 18% of global retail sales in 2020 and that number will undoubtedly rise in the years to come as more and more businesses adjust to a post-pandemic future. In fact, it’s predicted that ecommerce sales will account for 21.8% of retail sales worldwide by 2024.
Whichever way you look at it, the future of ecommerce is bright and it makes sense for emerging entrepreneurs to consider capitalizing on an industry with so much potential for return on investment.
- Suppliers Want to Work With Dropshipping Entrepreneurs
The dropshipping business model doesn’t just benefit entrepreneurs — it also benefits manufacturers and wholesalers, as it provides them with a more steady and reliable source of income. To be more precise, suppliers earn 18.33 percent more profit if they sell to dropshippers as opposed to shipping directly to consumers.
Knowing suppliers are eager to work with ecommerce entrepreneurs adds another layer of appeal to the dropshipping business model. The mutually beneficial arrangement motivates both parties, making it easier to establish working relationships and business agreements that work on both ends.
- There’s Fewer Logistical Headaches to Deal With
Most entrepreneurs are dead set on shaping their own destiny and building their own empires. In these cases, it’s less about whether or not they will build a business, and more about what kind of business they’ll build.
When you compare a dropshipping business model with a more traditional model, there are plenty of advantages, but perhaps the most compelling is how simplified operational logistics are for dropshippers.
There’s absolutely no need to worry about designing products, sourcing materials, investing in manufacturing equipment, overseeing production, storing inventory, packaging or shipping items, and a host of other responsibilities that come with a typical ecommerce fulfillment model.
This in itself is an extremely attractive advantage for most entrepreneurs, but even more so for new entrepreneurs who either do not have the initial capital to purchase inventory upfront or who would prefer to wet their feet before diving into more demanding business operations.
As you can see, there are many aspects of dropshipping that make it a worthwhile endeavor. The key is to remember that a dropshipping business is still a business, and the most successful business owners are those who are resilient, determined, and capable of overcoming the obstacles that will inevitably come their way. Dropshipping shouldn’t be viewed as an “easy way” to make money. It should be viewed as an alternative approach to traditional business, which requires an equal amount of dedication and persistence.
Congrats! You now have a strong foundational knowledge of how to make money dropshipping. Now it’s up to you to decide if dropshipping is your ideal path to success. But before you make that decision, we want to remind you that you don’t have to do it alone. We’re here to help!
At Brandify, we ensure dropshipping entrepreneurs start off on the right foot with an expertly branded ecommerce website, premium resources, and a lifetime of customer support.
Whether this is your very first dropshipping business, your third, or you’re a seasoned professional, we take the hassle out of setting up, designing, optimizing, and launching a premium ecommerce store with our branded turnkey dropship websites for sale.
Here’s why our customers choose to launch their dropshipping businesses with us:
- We’re a Certified Shopify Partner
All of our websites are built using the Shopify platform — a top-rated ecommerce platform as per the 2020 eCommerce Data Quadrant Awards from SoftwareReviews.
But that’s not all! Because we are certified partners, all of our customers receive a free 14-day Shopify trial with the purchase of their modern, high-performance website.
- We Complete Websites Within 24 Hours
Yes, you read that correctly. Our talented team of website designers gets to work immediately upon the completion of your purchase, designing your ideal website based on your initial input and specifications.
We’ll conceptualize a contemporary and eye-catching website that functions precisely as you need it to and have it over to you (fully operational!), all within a single business day.
We know that when it comes to profits there’s no time to delay, so we work overtime to ensure our customers receive everything they need to begin selling as quickly as possible.
- We Complete Conversion Optimization For You
We understand that making money dropshipping is all about the online customer experience, so our conversion optimization experts will fine-tune your website, adding all the necessary features and components you’ll need to maintain a competitive edge and turn those visitors into paying patrons.
We have 10+ conversion optimization apps that integrate seamlessly with our custom-built websites, giving you the best available performance — without exception.
Are You Ready to Make Money Dropshipping?
So, can you still make money dropshipping? Well, it’s up to you! You know there’s profit to be made and you’re willing to take the leap. So why not give yourself the greatest chance of success with a professionally designed and optimized ecommerce site?
You can get started today for as low as $47!
Don’t build your business on a shaky foundation, build it strong from the start. Let us take care of branding your ecommerce store so you can start off selling with complete confidence. We’re confident you won’t regret it.