Being your own boss can sound enticing to many people, but when faced with the realities of buying and stocking products, many may think it unfeasible. If you’ve recently begun considering launching your own business, you may have come across the idea of drop shipping.
How to Start an Online Business with Drop Shipping
It certainly sounds appealing, the idea of being able to start an online business in just a short time, with a small investment, and almost no overhead cost. There are thousands of merchants online who rely on drop shipping to grow their business, and perhaps you’re considering joining the ranks. So let’s talk about how to launch your drop shipping business, and what to look out for on the way. (If you're curious about the basics of drop shipping, check out our previous article, Drop Shipping: Is it Right for your Business?)
Before you begin the process, you need to understand that a drop shipping business is not one that you can set up and then check on every once in a while - it still requires daily work, and good customer service skills. Even though you do not need to keep up with your own inventory, products can still sell out or be delayed, and you need to make sure your customers are kept aware of these changes. If your goal is to own a business that runs itself you will need to look elsewhere, unless you employ a team to do everything for you.
If you’re looking for an entry into the world of e-commerce, drop shipping is one of the better ways to do so. You may read of some business owners who brag about their sales volumes right off the bat, but like any small business, it does need time to grow. Evaluate your goals for starting a business, and ensure drop shipping is the best option for you.
Understand that a drop shipping business is not one that you can set up and then check on every once in a while - it still requires daily work, and good customer service skills.
What to Do Before Setting Up Your Business
You need to follow a few simple steps in order to legally open your online business, for taxes and in order for distributors to take you seriously. First, you will need to request an EIN number from the IRS if you are an American citizen; for other countries, this is different, but it sets you and your business apart and reputable drop shippers will request this. Your state may also require you to have a seller’s license, so check both the federal and state laws.
For tax purpose, choose which type of business you’d like to register as, and if you need assistance, the IRS website breaks each type down, and there are plenty of tax law offices either near you or accessible by phone that can help. To further help you distinguish your business as a separate entity, set up a business checking account or PayPal account so your personal and business finances are easy to distinguish.
An EIN sets you and your business apart and reputable drop shippers will request this.
Now that you have the legal side of things taken care of, it’s time to find a drop shipping warehouse. Which one you choose depends on what you would like to sell. If your business sells everything from electronics to towels, you may have a hard time finding customers, since visitors to your site can be turned off by the random assortment of items. Start with a few products that are related, and then you can begin to move forward in adding in a few new products once you see what sells and what doesn’t.
When you are looking for a warehouse, if you only use Google you will need to do quite a bit of research, since some drop shippers are better than others are. There are databases with information on warehouses, and some of them do require paid access. It may be worth it to invest in this, since it will eventually save you time and possibly some frustration down the line. Most directories will even sort warehouses by niche, which means it’s easier to find who specializes in what you want to sell. Visiting forums or discussion boards for people who own their own online business and use drop shipping can also give you some valuable insight on which warehouse, or warehouses are best for you.
It may be investing in a database that provides information on drop shipping warehouses in order to save time and avoid frustration down the line.
Setting Up Your Business
There are a number of new website platforms that easily integrate e-commerce into their templates, with most working with WordPress or the new Squarespace platforms. To get an idea on which one you like best, begin with a free account and set up a mock website, which will also help you understand how to work all of the features correctly. You’ll want to register your own domain name, making it simple yet unique, with correct spelling so customers feel that you are a trustworthy website.
Domain names and website hosting are inexpensive these days, but research which one will work best for you before diving right in, the last thing you want to deal with is a website platform that gives you nothing but problems from the get go. If you are selling on a website such as eBay or Amazon, you don’t need to worry about a platform, but you do have other considerations such as seller fees.
Domain names and website hosting are inexpensive these days, but research which one will work best for you before diving right in, the last thing you want to deal with is a website platform that gives you nothing but problems from the get go.
If you are using your own website, you need to understand how to market your business. You can have the most amazing interface and products, but if customers don’t know you exist, you’re not going to last long. Gaining knowledge in SEO and social media marketing is your best bet at this point, since you can reach a targeted audience who is looking for exactly what you sell.
You might want to consider adding a blog to your website, with news and updates on the products you sell. Just listing your items won’t make visitors want to add products to their cart, you need to give them a reason why they should purchase and why it should be from your store. There are plenty of resources available on how to market your website, but being able to understand your customers will allow you to narrow in on the strategies that will work best for your drop ship business.
Utilizing drop ship warehouses for your small business can make it successful, but you need to put work into your website and keep up with the listings and any hiccups along the way. No matter which platform you choose, or warehouse you decide to work with, there are always challenges along the way. While drop shipping is often seen as the most cost effective way to make your mark on the e-commerce landscape, what will drive your success is the amount of organization, effort, and time you put in.