Imagine using your spare time to create a dropshipping business that generates passive income while you sleep. Sounds like a dream, right? 

Ryan Hogue turned that dream into reality. He discovered dropshipping while juggling two jobs. He now uses the dropshipping business model to sell products online without ever touching inventory. 

Today, he’s a multimillionaire.

In this blog, Ryan explains how to start dropshipping without spending a fortune upfront. We’ll also show you how to research product ideas, choose suppliers, and start marketing your new business.

Keep reading or click on any of the links below to jump to that section:

Learn About Dropshipping

Any time you start a small business, you’ll need to do some market research to understand the industry. We talk about some of the common questions about online selling with dropshipping.

What is dropshipping?

People might also ask: what is dropshipping?

Either way you spell it, dropshipping is a logistics strategy that ships products from the manufacturer to the final consumer. This strategy allows both the manufacturer and the dropshipper to make more money by cutting out a distribution center.

Ryan told us: 

Check out our interview with him about opening a dropshipping store:

Then apply for Amazon Merch on Demand.

How much does it cost to start a dropshipping business?

You can get into the dropshipping business for almost free. Most blogs say you need less than $100, but I would say you need to have at least enough money to cover the first couple of purchases depending on how your own dropshipping business is set up. Ryan told us:

He also let us in on how to start dropshipping for free.

How to start dropshipping with no money

Ryan explained that dropshipping suppliers allow you to start for free. In addition to Amazon Merch, he had these ideas for where and what to sell:

• eBay: This platform works for anything you sell on Amazon Merch.
• Etsy: Design files sell well on Etsy.
• Amazon Central: Sell the same designs or your own dropshipping products.
• Amazon Kindle Direct Publishing (KDP): Apply the dropshipping business model to books.
• Redbubble: This is an Australian dropshipping supplier that Ryan has had success with.

Ryan emphasized:

How does dropshipping work?

Dropshipping follows a simple process:

• Customer orders a product from an online store
• Online store takes their profit and sends the order and payment for product and shipping to the supplier
• Reliable supplier manages the fulfillment process and ships to customers

Ryan told us:

Is dropshipping worth it?

The dropshipping business model can be extraordinarily profitable.

Just to give you an idea, Amazon spent $288 million paying out vendors for the online business earnings, according to page 35 of their annual report.

This accounts for about 20% of the dropshipping business in the U.S., which means dropshipping is making over a billion each year. Profits are typically around 6%, but when you start a dropshipping business on Amazon you can mostly add your products and they do all the work.

Ryan told us:

I’d say getting into the dropshipping business is worth it.

Is dropshipping legal?

Yes, you can legally dropship products. You’re required to follow local, national, and international laws about selling merchandise in both the place you live and the buyer’s location.

The business model is low risk as long as you pay sales tax and comply with the laws. You can start by checking your state laws then use software like Avalara to simplify compliance.

Dropshipping Case Study: Stone Ross

Stone Ross dropped out of college and started bitcoin mining, which introduced him into the world of entrepreneurship. He started dropshipping when the fidget spinner craze started. He figured out how to sell fidget spinners, then branched into other products. 

When TikTok introduced their stores, he realized the potential for many dropshipping stores to make a great profit margin. Today, he’s made over $3 million:

Stone also started teaching people how to dropship using his eCommerce sales strategies. His course explains how to sell without making your own videos or spending a fortune on advertising. 

If you’ve ever wondered how to start an eCommerce business, this could be the perfect opportunity for you. Learn more by checking out UpFlip Academy.

How to Start Dropshipping

You can start a dropshipping business in just seven steps:

1. Research dropshipping ideas.
2. Choose a dropshipping opportunity.
3. Write a business plan.
4. Choose a business structure.
5. Select a dropshipping supplier.
6. Open an online store.
7. Market your dropshipping store.

Next, we’ll show you how to dropship.

Step #1. Research Dropshipping Ideas

There are a ton of ways to drop ship depending on what dropshipping niche you want to get into. Ryan suggests:

He also suggests looking through whatever site you are on to figure out what is trending. Ryan told us:

Check out our blogs to get more great online business ideas.

Step #2. Choose a Dropshipping Opportunity

In this step, you’ll choose a dropshipping business idea and dig deeper into what it requires to set up. Remember, Ryan told us he suggests starting on Amazon Merch. He also said you might want to overstate your credentials.

He also told us that Amazon can take a while to approve your dropshipping business ideas.

Learn how to evaluate business opportunities.

Step #3. Write a Business Plan

It’s always helpful to write a dropshipping business plan.

When starting a dropshipping business, it might be as simple as stating what your target revenue and profits are, the channels and countries you’ll sell in, and the products you’ll sell. If you want to expand like Ryan has, you might want to plan for additional costs like development, design, and creating YouTube videos.

For those who want to dig deep into a dropshipping business plan, check out our blog about business plans or watch the video below:

Next, let’s look at forming your dropshipping business.

Step #4. Choose a Business Structure

Dropshipping businesses will need to comply with local laws. Every state has different requirements, but most states require every online retailer that makes over $600 in their state to pay sales tax. That means your eCommerce store will need:

• Limited liability company: This business structure offers personal liability protection and protects personal assets under most scenarios if you keep your personal and business finances separate. Apply with the secretary of state’s office for your state.
• Business license: In most states, you’ll need a business license to operate. You may also need local or county licenses.
• Sales tax permit: To collect sales tax, you will need a tax permit, which may also be called a tax ID. You’ll also need to pay the sales tax office after you collect the taxes. Each state handles these differently, so just search “sales tax permit” in Google.
• Business bank account: You’ll want at least a business checking account to accept payments and pay multiple suppliers.

You may also need a tax exemption document to avoid paying sales tax on every purchase from your dropshipping supplier, or some states will allow a dropshipping store to count that as your taxes. Consult an attorney before your dropshipping business counts the taxes from the dropshipper as satisfying the online stores taxes.

Step #5. Select a Dropshipping Supplier

When you start a dropshipping business, there are a ton of dropshipping suppliers to choose from. We’ll discuss some of the more popular drop shipping companies and wholesale suppliers. 

You should always check the dropshipping website’s reviews and note whether they are a trustworthy supplier and where they are located. Drop shipping companies in the U.S.A dropship much faster to U.S. addresses than overseas suppliers.

Wholesale Central

This site offers third party tools to help store owners find companies selling products. The two most relevant categories for a successful dropshipping store are:

• Amazon FBA suppliers
• Wholesale dropshipping suppliers

Any companies listed as wholesale dropshipping accounts should be capable of meeting the dropshipping prices, but make sure to understand how their wholesale price and dropshipping process works.

Amazon Dropshipping

You have a ton of options for a dropshipping store on Amazon. Your dropshipping business can use:

• Fulfillment By Amazon: Have Amazon fulfill orders for your ecommerce store. Find out how to sell products using this business model.
• Amazon Merch: Make between $1.93 and $9.32 in royalties per t-shirt sold with an Amazon Merch online store.
• Amazon KDP: Start a dropshipping business selling books on Amazon KDP.

In addition, you can use most print-on-demand or external dropshipping ecommerce businesses in conjunction with Amazon, but your dropshipping business won’t qualify for Amazon Prime shipping.

Alibaba Dropshipping

If a dropshipping business wants products that are sourced in China without a minimum order quantity, you can order from Alibaba. Dropshipping from China takes a while longer to reach the customer after you sell products, but you’ll have higher profit margins on all your customer purchases. 

If you use this method, make sure your ecommerce website explains that using this dropshipping business model reduces waste and prices, but takes 10 to 14 business days for products to arrive. People appreciate knowing what to expect.

AliExpress Dropshipping Center

AliExpress sells products in wholesale quantities. This makes it easy to start a successful dropshipping business if you order products from their ecommerce platform, then ship to a fulfillment center. This makes selling on online stores like Amazon and Shopify more efficient.

Shopify Dropshipping

The dropshipping model thrives on Shopify. There are a ton of dropshipping suppliers with plug-ins for selling products on the Shopify website. The following are some of the best ones to consider when starting a drop shipping website.

• DSers: Connect AliExpress to your website and pull in the information from the AliExpress website with this dropshipping Shopify app. There are free and paid plans as low as $19.90 per month.
• Spocket: Find dropshipping suppliers. USA, Canada, Europe, Australia, Brazil, and China are all places you can connect your ecommerce business to with a free plan. A small business can upgrade for $24.99/month.
• Modalyst: Sync AliExpress to your own site on Shopify. Starting a dropshipping business is easier with this app because it provides branded dropshipping lists to make your marketing easier. It isn’t free, though. You’ll be paying $35 per month.
• Print on demand: Companies like Printful and Gelato are great for branded dropshipping. A customer makes a purchase, then the company prints the product and then mails it directly to them.

Find more great apps on the Shopify app store.

Step #6. Open an Online Store (Optional)

When you start a dropshipping business, you may want to open your own online store. A dropshipping business store will normally have lower transaction fees than selling on other ecommerce platforms once you reach enough volume to cover the monthly fees.

You’ll want to consider multi-channel selling because some social media platforms change their algorithms frequently. When you sell the same products on multiple platforms and bring customers to your website, you have more control of your retail business. 

Stone explained:

The online store also makes the customer data yours instead of it belonging to the ecommerce platforms.

Popular ecommerce platforms where you get to keep the customer data include WordPress and Shopify. Learn about building a website.

Step #7. Market Your Online Business

After you’ve narrowed down your business ideas, chosen reliable suppliers, and have an online site, it’s time to turn your dropshipping store into a profitable business model. That means you’ll need to start a marketing strategy to sell products. 

There are a lot of ways to market your business concept when you start a dropshipping business. After creating a marketing strategy, you’ll want to:

1. Register with search engines.
2. Create content.
3. Collect data
4. Automate email marketing

Let’s look at how to create your own brand for a dropshipping business.

Define Your Marketing Strategies

The dropshipping business is a low-risk business model, but you’ll still need to get your dropshipping business ideas in front of people to sell products. How are you going to get your dropshipping business ideas to be seen by your niche market?

• Define what online tools you’ll use.
• Choose how you’ll communicate with your target market.
• Specify the kind of content you’ll post.
• Be consistent with how often you post. 

These next sections will focus on essential aspects of a successful marketing strategy.

Register with Search Engines

Every small business needs to be paying attention to Search Engine Optimization (SEO). SEO is focused on using the keywords that people use to find the products you sell. You’ll want to make sure you show up in Google search and other search engines (Amazon and YouTube are search engines too).

When you want to start a dropshipping business, you’ll want to make sure to add your business info to sites like Amazon, Google Search Console, and other major search engines. Check out this list of 120 online business directories.

Ryan told us:

Create Content

You’ll want to create new content for your own brand as often as possible. You can use a free tool like Google Trends to find trending keywords, then add designs that match them. This helps get your small business seen on Google search results easier. 

You can also use SEO tools like Ahrefs and SurferSEO. We use both of these for our content on UpFlip.

Every platform has different algorithms, so the content you  create will need to be based on best practices for that platform. Ryan told us he prefers to create dropshipping business content for the following platforms:

Collect Customer Data

While a dropshipping business has low startup costs, a business owner will find that they can improve their profit margins if they collect customer data.

Information like customers’ names, email addresses, phone numbers, and products purchased can make it easier for you to personalize marketing for your own dropshipping business. 

Automate SMS and Email Marketing

Another way that a dropshipping business markets is by sending customers SMS and email marketing updates when new items have been added to their ecommerce platform.

Many dropshipping business ideas will not make a profit on the first sale to a customer because the cost of customer acquisition in 2023 is nearly $22 for consumer goods—and even higher for some types of companies. 

One of the key things you will have to learn for your own dropshipping business is how to increase the lifetime customer value. As you sell each customer more products, you will reach a break-even point and eventually a profit margin.

A legitimate business entity will find that the best way to get customers to return to their own site is through SMS and email marketing. The more you drop ship to each customer, the more profit you’ll make. 

Consider some of the SMS automations suggested by SendLane.

Never Make These Dropshipping Mistakes

There are a lot of mistakes you’ll want to avoid while learning how to start a dropshipping business. Some of the biggest mistakes people make include:

Mistake #1. Choosing the Wrong Target Market

If you choose a target market that’s saturated, you’ll have a difficult time breaking into the market. Use Google Trends to find new opportunities.

Mistake #2. Underestimating the Importance of SEO

As we stated above, SEO is critical for customers to find your products. If you’re building your own site, you need to make it easy to use.

That takes a lot of time, but running a shop on Amazon just means adding the new products, titles, and descriptions. The format is already conducive to being SEO friendly.

Mistake #3. Not Automating Processes

Painstakingly typing each variant of a print-on-demand product could take hours. There are faster methods.

Ryan told us:

The system Ryan uses is called Automate POD:

Mistake #4. Negative Customer Experience

One mistake the print-on-demand and dropshippers make is forgetting to disclose the lead time. Most people expect Amazon-like quickness and will not be happy if they pay extra for shipping costs and the product doesn’t arrive before an important date. Solve this problem by disclosing how products are handled. 

Mistake #5. Relying Too Much on a Single Supplier

When considering how to start a dropshipping business, you may be tempted to make a deal with a supplier and just work with them. This can be a dangerous mistake because they might run out of products or raise their prices to where you aren’t competitive. 

You should always have a backup plan for if something goes wrong. In addition, you’ll want to always have contracts in place. 

Mistake #6. Poor Customer Support

Customers like to know the status of their products. Automate emails to send these notifications:

1. Thank you email after they purchase.
2. Shipping email once the order has a tracking number.
3. Delivery email (or text) once the product arrives.
4. Satisfaction questionnaire after they’ve had time to test the product.
5. New product updates they might like periodically.

On top of that, if there’s a problem with a product, don’t argue with the customer. Just solve it. You don’t gain anything from ticking off a customer.

Mistake #7. Failing to Build a Brand

There is plenty of competition in dropshipping, meaning you have to provide customers a reason to keep coming back. Everyone has something that makes their business unique. You just have to share it. 

You might have low prices, quick shipping, higher quality, a sense of humor, or better customer support. Build your brand, and you’ll build loyal customers.

Mistake #8. Accepting Payments for Undeliverable Products

Before accepting a purchase, you need to be sure that the products are available. No customer likes paying for something they expect to get in a few days and finding it is on backorder for months. This will lead to cancellations, and those customers aren’t likely to return.

Mistake #9. Marketing Something That’s Then Hard to Find

Have you ever clicked on an ad because you liked something and when you opened it, you couldn’t find it? That’s annoying, right!?!?!

Don’t do that. Send the customer directly to the right landing page. Make it easy for them to buy and for you to make money.

Make the Dropshipping Business Model Work for You!

Now you know the basics of how to start dropshipping on Amazon and other platforms. Join the ranks of store owners who spend less time fulfilling orders and more time growing their businesses.

What dropshipping websites have you found that make your business easier to run?