1- Market Research
To start your own drop shipping business from scratch, you need to identify a profitable niche, to decide on the products you want to sell and to identify your competitors.
There are hundreds of drop shipping business ideas, but you need to find a niche where you can add value. When you find the business field that interests you the most, you need to research on products’demand, number of competitors in that niche and the potential it has for additional merchants.
2- Find Suppliers
One of the most important tasks is to find reliable suppliers who will offer you the option to sell their products without buying them first.
There are several potential sources to find suppliers:
- Search online for “wholesalers” and the product you want to sell;
- Search through Yellow Pages under Suppliers or Wholesalers;
- Search for manufacturers of the products you want to sell and ask them for distributors;
- Search through your competitors’ websites.
Finding reliable suppliers who will carry on product shipping successfully and handle customers’ complaints professionally is one of the most important factors for the success of your drop shipping business. Any fail in product shipping or a supplier’s error can directly influence your online business’ reputation and future sales.
In order to ensure that you’ve found a reliable supplier that will work with you smoothly, you might want to ask them the following questions:
- How long it will take for an order to be shipped once you have placed the order with them?
- What shipping methods do they offer?
- What are their quality control systems and do they offer warranties?
- How do they handle customer complaints and what is their return policy?
3- Administrative Tasks
When you build the foundation to start with your drop shipping business, you will need to register with your state and obtain all required permits to start operating.
Select a business structure – Every business has a certain legal structure, and you must get your government’s permission to create some of them. You need to decide whether you’ll be a Sole Proprietor, Limited Liability Company (LLC) or a Corporation. Each structure has advantages and disadvantages, and it is recommended to discuss it with a lawyer or accountant.
Obtain necessary licenses and permits – You need to pay taxes to the federal government, so you need a tax identification number, sales tax ID and a resale certificate that will exempts you from paying sales tax when you buy items from your supplier.
4- Create An Online Store
Last but not least, you need to choose online platform and available domain name, create and optimize your website and advertise it properly in order to bring on the customers.
Choose online platform – You can create your own eCommerce site, or you can sell on an existing online marketplace, such as eBay, Amazon.com, or Bonanza.com. Selling on an existing marketplace will require less work, but you might get lost in the crowd of sellers. If you decide to set up your own eCommerce store, it’s recommended to choose between Magento, WordPress (WooCommerce) and Shopify. All of these will provide you custom flexibility and work with the most popular payment gateways.
Create your online store – You need to choose a unique and available domain name and to get your products online. When deciding on the retail price for your products, you are free to choose the margin but it’s recommended not to deviate much from the competition.