How to start a DropShipping business [updated for 2022]

What is DropShipping?

DropShipping is a hands-off retail fulfilment method where the seller does not keep stock. In plain English, that means that sellers don’t have to purchase their stock – they can sell an item before they have bought it from a supplier, and the supplier simply sends the item when the seller has paid for it. Here’s how it works:

Notice how the seller never sees, or owns the item?

That first point is important though – that the seller has permission from the supplier to sell their product. If you go ahead and sell something you don’t own, without prior permission by the supplier of the stock, you might find that you encounter problems.

When people are talking about DropShipping, generally they’re referring to making a sale online. However, DropShipping isn’t a purely eCommerce method. Retailers in bricks-and-mortar locations have been using DropShipping for years to extend their offering – especially where the items are not in high demand. We like to use the example of a motor factors company selling car parts. The company might occasionally get a request for specific parts for older, or vintage cars, but not often enough for them to invest in stock or have a particular item taking up room in their warehouse. In this example, they might have an arrangement with a supplier of those items, so that when an owner or mechanic approaches them, they can take payment for the item and have it delivered either to their store, or directly to the customer’s address.

Is DropShipping legal?

DropShipping is legal in the UK and in most countries worldwide. However, before starting to conduct business in any country, it’s a good idea to check what is required – especially if you are considering selling items that might be illicit in those countries, such as products containing alcohol, tobacco and meat-based items. You’ll also need to ensure you’ve paid relevant taxes and so on, so make sure you obtain legal advice before you start and accountancy services that can help you avoid large fines because you didn’t realise there were additional taxes to pay!

Is DropShipping eCommerce?

We sometimes get questions about how DropShipping and eCommerce are related. eCommerce covers any type of business transaction that can be made online. Many people, when they’re referring to eCommerce, are talking about online shopping – either from marketplaces or websites belonging to individual retailers – but eCommerce actually covers much more than just online retail. Other practices that are also sometimes covered by the term eCommerce include wholesale, DropShipping, crowdfunding, subscriptions, physical products, digital products and services including banking.

Why do people start DropShipping?

There are loads of reasons that people decide to move into the world of eCommerce and DropShipping. We hear of a lot of people say that they want to increase their income alongside their career – for family reasons, to pay for additional travel and so on – students who want to build a business to supplement their skills for their CV after they graduate (and make money while they are at college or university, of course!) and people who want to carry on working on their own terms – they don’t want to work for a boss anymore, or they have officially retired but want to supplement their pension and learn something new.

Benefits of DropShipping

Now we’ve looked at the reasons that cause people to start looking into DropShipping – now let’s take a look at why DropShipping makes a great option.

You can manage your business anytime, anywhere

eCommerce doesn’t stop – people are making purchases every single second of every single day. That means there’s no restrictions when it comes to managing a DropShipping business either. If you’re a Mum, and you want to get up an hour before your children do, (or an hour after they have gone to bed!) and handle your sales then, that’s no problem. Thinking about managing sales while commuting home? No problem! Even if you’re travelling internationally or are on holiday with your family, you can manage an eCommerce business. As long as you have an internet connection – either Wi-Fi or using mobile data – you can manage a DropShipping business wherever you are, whenever you have time.

Low costs, and low risk

DropShipping businesses are fortunate in that they don’t have many overheads. You’re selling items that you don’t own, and haven’t paid for – so you don’t have to store them, keep them at an ideal temperature or deal with postage. Your suppliers are doing all that for you. So as long as you have reliable suppliers and a technology solution that won’t let you down, the only other things you will need to pay for is listing fees or commission on marketplaces such as eBay and Amazon, as well as your marketing costs.

Because you don’t need to invest in stock, if you start your business using a DropShipping platform that has a free to start option, you literally pay nothing until you’ve made your first sales and are already making a profit. The only investment you’ll have made is the time you put in – and you’ll have made money from almost nothing!

Everything can be automated

We just mentioned technology solutions, by which we mean DropShipping platforms, inventory management tools and connections to marketplaces and shipping companies. The best DropShipping tools incorporate all these things into one platform, so you only need to learn one system to do absolutely everything for your business. When you’re learning how to build a new business, and style of working, keeping everything all in one platform is the best way to minimise errors and increase your success.

Not only can all your DropShipping processes be automated, but you can automate a lot of your marketing tasks, meaning you can manage your time much more effectively.Your customer research, and the data from the items you’ve sold can help you tailor much of your marketing, from email marketing to social media posts. There are plenty of tools that can help you automate your marketing, especially for social media – we love Hootsuite for managing your social media posts, and Canva to help you create great posts without needing in-depth knowledge of design tools like Photoshop or InDesign. These aren’t the only tools that can help you though – there are absolutely loads of options, so give a few a try and find the one that suits you best.

Challenges of DropShipping

Making money from DropShipping can be straightforward with the right strategy, but we think it’s important to remind you, DropShipping is not a magic solution that will make you a million overnight. You’ll need to overcome some challenges, but with the right approach and armed with some knowledge, you’ll get past these. These aren’t the only problems your DropShipping business might encounter – but some of the most common ones.

Finding great suppliers

There’s a lot of information online about DropShipping from suppliers in China and other overseas countries. Some of them are great, and we know of sellers that have made money working with them, but working with international suppliers can come with a whole swathe of issues – language barriers, time zones causing problems when trying to communicate with them, slow delivery times and quality of products not being quite what was promised. Finding a domestic supplier then, could be the answer? Well yes, but finding suppliers in-country can be tricky too, and many will have their own methods of providing you with their product feed, that you then might end up needing to manually upload to your marketplaces and websites.

Finding good suppliers is getting easier since DropShipping platforms such as Avasam have been developed, especially where there are supplier verification processes in place to increase trust, and feedback available from current users of those suppliers. Where suppliers are UK-based, you’ll have much faster delivery times, and there are far fewer issues with communication too.

Building customer trust

Many of your potential customers will remember a time before internet shopping was a thing. That means their trust in mainstream, trusted marketplaces such as Amazon and eBay developed, but suspicion of lesser-known eCommerce brands and websites is still a problem for sellers. That means if you want your customers to buy from your website, you’ll need to gain their trust in other ways first.

Here’s a quick checklist of things you can do to help increase customer trust in your brand starting on your website.

What you can do to increase customer trust other than on your website:

Customers might end up buying from you via Amazon or eBay, but once customers are on those marketplaces, you risk losing the sale to another seller who might end up being a bit cheaper. Increasing customer trust will mean that when they find your product either on a marketplace or on your website as a result of a Google search, they’re more likely to add to cart and complete their purchase.

Competition

Wherever you’re planning to sell, it cannot have escaped your attention that marketplaces are saturated with businesses trying to do what you’re doing. We spoke about it on our posts about Amazon and eBay, which are two of the most popular marketplaces in the UK alone. The scary truth is that over 90% of eCommerce businesses fail in their first year – and for the most part, that’s to do with the amount of competition and how that impacts on profits, but it’s also to do with lack of planning.

If you’ve successfully identified a niche, you won’t have to fight against the competition so hard – and certainly not as much as if you try and chase sales on what’s trending right now.

Technical issues

This only really applies if you don’t take our advice below about choosing a great DropShipping platform. It is possible to start your DropShipping business without using one, but even if you’re a developer, it can be hard to connect to multiple suppliers, to automate your website and marketplace listings and send shipping tracking updates, and to keep on top of updates made by suppliers. Using a DropShipping marketplace will help you to eliminate those issues, and allow you to connect with multiple suppliers, without the hassle. You’ll also need to find the right systems for handling your social media and your accounting too – both of which could cause you headaches if you don’t get the right systems in place.

Initial spend

Costs can be minimal with DropShipping. Pick the right platform, and as we mention below, you can start your business with absolutely no initial outlay at all. If the DropShipping platforms that allow you to start for free don’t suit your business for some reason though, you might end up needing to pay, so you’ll need to take that into account when you’re doing your initial business planning.

How do you get started DropShipping?

Once you’ve decided you want to give DropShipping a go, you’ll still have quite a bit of work to do to get started. Don’t believe the stories about people quitting their job and living in the Bahamas and driving a Porsche inside a week! That might happen to a lucky one or two, but it’s definitely not the experience of most people who start DropShipping. Building a strong, sustainable business takes time. While you’ll hear lots of people say DropShipping is easy, (and it can be simple, but it is hard work!) you need to do the groundwork before you get to the plain sailing, can handle your business wherever and whenever part.

Choose a great platform

Almost all DropShipping businesses that are starting out today will choose a DropShipping platform. If you want to, and you have the technical knowledge to link up systems, it is possible to build a DropShipping business without a platform. But what we can tell you is that it will be significantly harder, and require more time investment than using an automated DropShipping platform. Why make what is already a pretty difficult endeavour – starting a new business – even harder than it needs to be?

There are a number of DropShipping platforms out there that might suit your needs. It depends on what your end goal is for your business – are you aiming to earn a certain amount of money from it each month, or are you aiming as big as you can? If it’s the latter, then you’ll need to find the platform that gives you the most amount of flexibility, so your business can scale up and sell on different marketplaces worldwide. You’re unlikely to want to change your platform in a year or two when you’re ready to sell further afield, so doing your research now will save you time in the future.

Here’s our checklist of recommendations of what to look for in your DropShipping platform:

Not every DropShipping platform will suit your needs, but by doing your research you’ll be able to narrow your shortlist significantly. Once you’ve identified three or four, it’s time to test drive them! Most platforms will have a free trial period, or allow you to use them for free until you are making a certain number of sales, so test them thoroughly. If more than one does exactly what you need, check to see if they also answer your future needs, and if there are differences in pricing models that will suit you better in the long term. Remember, you’re saving your future self, and yourbusiness time and energy, so it’s worth doing rigorous testing now.

DropShipping platforms

There’s range of DropShipping platforms that sellers can choose from, and which one you choose will depend on where you want to sell in terms of marketplaces and websites, which countries, and how you expect your business to grow. We looked at some of the most popular DropShipping platforms in depth on our post here, but here’s a quick run-down of the most popular ones:

DSers

DSers is recommended by Shopify, and to use DSers, you’ll need to have a Shopify website to sell on. Products available for you to list on DSers are mostly from the AliExpress platform, which means they are delivered from China and may have longer delivery times for your products. You can select products that get sent using ePacket, which is a bit faster, but since your products are not in-country, you’ll need to manage customer expectations when it comes to delivery times if you want to avoid negative reviews.

There’s a free package for DSers, and although sellers can market their products on some social media channels, there’s no plans (that we’re aware of) to allow DSers users to sell on marketplaces like Amazon and eBay.

Dropified

Dropified is another platform that is primarily linked with AliExpress suppliers, which presents all the issues we discussed above from DSers. It’s got some good functionality, and has an easy to use interface with some nice integrations with productivity tools, but there’s limited connectivity to other sales platforms. You can sell Dropified items on marketplaces like eBay and Amazon, but that has to be managed with manual uploads, leaving you at risk of overselling – which can cause problems on those marketplaces. It’s an expensive platform too, and if you want more advanced features, could end up paying up to $127 per month. That could be simply too expensive if you’re just starting out in DropShipping.

Doba

Doba operates in the USA, and has over two million products available on the platform. Like Dropified, Doba has some great features, but there’s a lot that isn’t actually automated – such as overselling notifications. They’ll notify you if inventory is low, but won’t actively pause your listings. That means if you miss a notification, you might end up needing to cancel orders, potentially leading to negative reviews.

The major downsides to Dobais that users can only ship to US addresses, and it’s expensive; we’re talking a minimum of $69 per month. It’s a good option for existing sellers that are selling in the USA, but for beginner DropShipping businesses, it’s unlikely to fit the bill.

Avasam

We can’t talk about DropShipping platforms without talking about our very own platform! Right from the very start, we designed Avasam to do absolutely everything you need from your DropShipping platform – whether you’re a seller or a supplier. That means complete automation for all your processes, integrations with marketplaces (including Amazon and eBay, amongst a whole host of others) eCommerce websites including and shipping providers, easy ways to find new suppliers (or sellers, if you’re a supplier!) and easy access to sales reporting. Avasam suppliers are based in the UK and Europe, with more suppliers joining weekly, making Avasam a great choice if you’re just starting out, and your aim is to grow a truly reliable DropShipping business.

Choose your supplier

As the seller, you are responsible to your customer, and to your marketplaces for everything – from the quality of the products, how long orders take to arrive, how well you’ve described your items and so on. Most of that is provided by your suppliers – but you’re the one who will be taking the flack if something goes wrong.

Since you’re going to be incredibly dependent on your suppliers for the success of your business, it makes sense to invest time in finding businesses you can trust, and rely upon to provide great service. You can do this manually, but if you’ve taken our advice and found a DropShipping platform that can do everything for you, it gets a bit easier to find your suppliers. Most platforms will conduct due diligence when allowing suppliers to register, but especially where suppliers are overseas, it can be difficult for platforms to do more than cursory checks, so you might still encounter the odd bad apple.

Since we started building Avasam with a view to make selling online simpler, especially when you’re starting out, we have checks that we carry out on all our suppliers. We’ve also implemented a feedback and rating system, so you’ll know how other suppliers have found working with them.

The Avasam platform makes it even easier to find great suppliers through the Avasam Verified Supplier Programme. There are currently two levels that we award to suppliers on this programme; Avasam Verified Supplier and Avasam Verified Platinum supplier. To qualify for either of these awards, suppliers must have:

Those suppliers who perform in an exemplary fashion – with 99% of Avasam orders delivered on time, and less than 1% of those orders disputed, receive the coveted Verified Platinum Supplier status.

Although we’ve given these awards to some of our suppliers, you don’t need to avoid suppliers who haven’t received the Verified Supplier award yet. It doesn’t mean they’re supplying poor quality items or bad service! They might simply be newly listing items on the platform, or they might have narrowly missed out for some other reason that they’re working to improve. We’ll be working with them, so they can achieve that status. In the meantime, you can rely on the Avasam ratings and feedback, or check out the name of your proposed supplier on Trustpilot, Feefo or Reevoo.

Select your products carefully

You’ve found a niche, you’ve done your target audience research, and you know what your customers are looking for. Your next challenge is finding suppliers that have the products that your customers want; with the quality and price point you need to make great sales. With your DropShipping platform, this will be easy – on Avasam, it’s as simple as clicking to add the product to your items! Not only that, you’ll be able to work with more than one supplier, so you can start listing the products you want from whichever suppliers have the right items, at the right prices.

Develop your branding

Creating your business branding is imperative if you’re aiming to build customer loyalty. Although there are thousands of businesses out there already, try to find a business name that is unique, and doesn’t simply rip off another. Think about how you shop. Would you buy from a company that rips off another one? Probably not, because using a name that is similar to another looks dodgy, right? That’s how your customers will see it too.

Once you have your business name, design your logo. You don’t need InDesign or Photoshop skills for this, or to employ a designer (although you can if you want to and have funds available!) Canva and other design websites can help you create a logo you’ll love in very little time. Once you have your logo, make sure you apply it to your social media (try and get the same handle across your channels, so it is easy for you – and your followers) and on your eCommerce website, if you’re going to implement one.

Pick where you’re going to sell

When you’ve done your target customer research, it should be relatively easy to decide which marketplaces are going to serve you well. If you’re a UK resident, depending on your products and target customers, you might choose Amazon and eBay, Wish and Groupon for your first marketplaces. But have you thought beyond domestic customers? Thinking longer term and building your success further is likely to mean selling internationally, so find where your potential customers are in other countries. Doing this now means that your business can grow internationally as soon as you have the hang of selling to domestic customers. You could be selling to customers on the other side of the world inside a week – and that’s not a pipe dream, it’s a reality! Want to sell in Russia? List your products on Ozon. Selling to ex-pats in New Zealand? Easy, add items to Trade Me.

If you’re going to be developing, and selling on your own website, you’ll need to establish which eCommerce website provider is going to serve you best. Some of the best known ones include Magento, WooCommerce and Shopify, as well as our partners BigCommerce and EKM, but there are plenty of other providers that can help you build your website without needing a developer. Make sure that your website provider is easy to connect to your DropShipping platform, so you don’t end up needing to create a solution to sync your orders and so on.

Keep selling

There’s nothing like the feeling when you’ve had your first sale. And when you hit 10 sales. And 100 sales. And all those incredible significant milestones that you thought you might never reach! Carry on working to hit smash those goals, grow your social media following on the channels that are most relevant for your business, and soon you’ll have a business to be proud of.

Starting DropShipping with no money

It is absolutely a possibility to start a DropShipping business with no money – in fact, the biggest investment you will need is your time. We mentioned earlier about putting in the time when it comes to doing your research when you’re starting out – that really is a must. Perfect planning preventing poor performance isn’t a piece of advice for nothing! But with careful planning, you can be up and running making money from your business with no actual cash investment needed.

The key to this is finding a platform that enables you to start selling without a credit card. For our platforms we talked about previously, this is going to be either Avasam or DSers, depending on whether you want to be able to sell on Amazon, eBay and anywhere else. (if you do, Avasam is the way forward) Once you’ve made your first sales, you can then use the profits from your sales to invest in your first subscription, and continue to scale up from there.

You can help to increase your sales by growing a social media following – we’ve talked about growing your Instagram followers, getting more YouTube views and Pinterest marketing on the blog before. You can use paid-for tools to help you manage these, but when you’re starting out, there’s no reason that you have to pay to manage your social media. If you’re creating original videos, to start with, you don’t need much more than a smartphone (although in time, it might pay you to invest in some other equipment) and your social media posts on Facebook and Instagram can easily be created using tools such as Canva, who don’t charge for their use. You don’t even need a PC to get started – some of our Avasam sellers have started their business very successfully just using their smartphone!

After your sales have grown sufficiently, your business will have generated enough profit that you can then consider putting towards building your website – either on a build-it-yourself platform such as Shopify, BigCommerce, or EKM, or if you want a fully customisable option and you want to employ the services of a developer, then Magento or WooCommerce. As your sales grow, you’re likely to need a bigger subscription for your DropShipping platform, but since both Avasam and DSers have scalable pricing options, you won’t need to pay for more than you need.

How to make money DropShipping

Of course, this is going to be the main aim of your business – if you’re not making money, there’s no point! Once you’ve got your business plan, your DropShipping platform and you’re making sales, you need to maintain those profit margins. It’s tempting to undercut your competitors when it comes to price, but if you make your prices too low, customers will end up only buying from you when you list items at super-low prices.

Each DropShipping business is different, but here are a few pointers that can help you keep your business growing once you’re past the initial setup stage, so that you don’t end up cutting your margins too finely.

Support your business with your social media

We already mentioned using your logo on your social media – but don’t make your social media presence an afterthought. Simply using your own personally preferred social media won’t cut it. Go back to your target customer research, and establish which social media your target demographic are likely to be using. Develop your brand voice, but use each social media channel that applies to you consciously – don’t just slap the same post on all the different social media channels, and definitely don’t use your social media to simply put pictures of the items you have for sale. Think about how you engage with social media, and look to the social media for the brands that you would like your business to emulate the success of. Don’t outright copy them, of course – but look to them for inspiration and to guide your content.

Once you’ve started your social media channels and your followers are growing, keep your posts going in a thoughtful manner. Use tools such as Hootsuite to automate your posts, and most importantly, interact with your followers! Encourage them (gently!) to tag you in their posts, especially if they’re delighted with their purchase. If they’ve taken the time to tag you, they’re sharing your brand with their followers – basically, increasing your brand awareness for you, for free. The least you can do to show them gratitude in return is to give their post a like, or a quick ‘thanks for letting us know how much you love it!’. It doesn’t take you long, but that customer will be much more likely to remember you, and use your business again.

You can also reward your social media followers for following you by offering your followers exclusive discount codes, or free gifts. This might end up affecting your margins in the short term, but can help to build brand loyalty and increase shares with their followers.

Track your progress and refine your strategy

Since you’ll have your DropShipping platform in place, you’ll be able to see your sales figures pretty easily. Good DropShipping platforms will have automated reporting that you can manipulate to give you the information you need, without having to do massive data exports and needing to spend hours trying to get the same data from Excel. That data gives you the power to establish which marketplaces are working for you, whether you should continue to list a product or not, change your supplier, add another line or start selling on another marketplace… DropShipping businesses are incredibly dynamic, and constant assessment and updates of your strategy are key to your long-term success.

Make sure you do your taxes!

This should go without saying really – but the biggest problem you could encounter is if your business takes off, you forget to do your taxes and you end up with a giant fine. If you’re in the UK, taxes are now done digitally, meaning that all the information you will need will be available to you from your DropShipping platform. If you have other expenses, you might want to consider using a system like QuickBooks or Xero to make the process simpler and make your tax return simpler.

Elsewhere in the world, there are accounting and tax solutions that can work for you so that you don’t get caught out and end up with a fine – but the main message we want to get across here is don’t forget about them, so check with an accounting professional for advice if you need to.

Buying a DropShipping business

If you’re looking to jump straight into eCommerce, and DropShipping, and you have some money to spare, buying a business might suit you. We’re going to talk about some of the things you will need to consider before you jump into buying a DropShipping business, but if you’re investing your own cash, always get legal advice before signing anything.

Do your research

We say this a lot, but it really is for good reason. When you’re purchasing an existing business, you’ll need to ensure that there are ways you can develop and grow it. Are there competitors out there that are dominating the market in this niche? Technical aspects of the business are key too – you’ll need to know about site rankings, check your website analytics, patterns of traffic and where the majority of sales come from as a bare minimum.

Is the opportunity right for you?

It might be a great business that has huge potential, but if you don’t have the time to invest, it won’t be worth it. If you can’t employ someone and keep the business profitable, or have the skills you’ll need, you will need to learn them – so you’ll need to take this into account when you’re considering your purchase.

Check the books

Before making a business purchase, you’ll need to have a look over the accounts. Don’t make a purchase of a business without having an experienced, qualified accountant to carefully analyse the state of the accounts. Get as many reports as you can, and ask all the questions you can – even if they seem like they are unnecessary – it might save you from an expensive problem in the future.

Post-purchase costs

While you’re considering your purchase, you will want to check your guaranteed outgoings. We’re talking about branding, website maintenance, costs of any digital assets and any supplier costs that have been committed to. You’re going to be putting work into creating more sales, but you need to know that you can cover these costs and that there isn’t going to be any nasty surprises.

Strategy

Does your intended purchase have a strong digital presence and strategy? What about their social media presence? Is the quality of the content on those channels good?

You’ll also need to consider where the traffic is coming from in terms of the website (if they have one). Is the business going to provide adequate return on your investment? If the business isn’t currently profitable, but you know exactly how you can turn this around, then this might actually work in your favour – but you need to be fully aware of what you’re getting yourself into, and factor that in your purchase price.

Taking a look at the customer relationship strategy is a good plan too. Check the customer service levels on the social media channels, ask a question on their website and call to ask a question about delivery. Word of mouth on social media and review websites are hard to fake, so if there has been negative feedback – and there nearly always is – then check what issue prompted the review. If a high percentage of the feedback is negative, then you’ll need to dig deeper – building back from negative feedback isn’t an easy thing to do.

Examine supplier relationships

You’ll need to establish whether what is in place in terms of supplier agreements are going to work in your favour or not, and whether there are contingencies in place if a supplier ceases trading, and so on. The deals currently in place may become invalid if the business changes hands – so it’s wise to check. It could also be worth a call to the suppliers to discuss whether the arrangement has worked well for them.

If the business is for sale because they’re not doing well with their suppliers, this might not be a problem for you. If the problem is a personal one – well, you won’t have that problem! But you can always look to change suppliers, especially if the business doesn’t currently have any automation – you can simply bring them on board with Avasam and start rejuvenating the business straight away.