Search “dropshipping” on YouTube and you’ll be presented with thumbnails of grinning influencers holding out phones that show their ecommerce dashboards. Each displays an upward-trending graph and implausibly large sales figures: $50k/month, $100k in just 6 weeks, total sales in the millions. It reads like a dodgy get-rich-quick scheme that someone would peddle on your neighborhood Facebook group. But it isn’t.
Dropshipping is a simple ecommerce business model and $100B+ industry with loads of major (authentic) success stories. Part of the appeal is that it is accessible. You can get set up with just a laptop and an internet connection, meaning dropshipping is viable for full-time entrepreneurs, digital nomads, and stay-at-home parents alike. That said, be warned. Just like crypto investing, flipping houses, and other “foolproof” schemes, dropshipping success is not necessarily easy — and many have tried and failed.
We’ve put together some advice to help you avoid the pitfalls and get started on your own successful dropshipping business.
What is dropshipping?
Dropshipping is an order-fulfillment method in which products are sent directly from the manufacturer to the customer. Unlike other ecommerce businesses, dropshipping retailers don’t own a warehouse full of inventory. In fact, they may never touch the product they’re selling.
Instead, the retailer’s focus is on branding, marketing, and customer service. Popular niches include hobbyist products, sporting goods, beauty products, health supplements, and gadgets.
Dropshipping retailers only order goods from manufacturers after a customer has paid. That means you can get started without much capital or risk. The dropshipping model also makes it cheap and easy to test new products on the market.
Dropshipping is a remote fulfillment method, which means you can run your business from a beach cafe in Bali, your parents’ basement, or at the kitchen table between school pickups.
Another upside is scalability. Once your online shop is set up and you have a product that sells, you can in theory sell as many units as the factory can produce. If you reach that stage, you’ll have the holy grail: passive income. You can put your feet up and watch the profits roll in, or you can keep testing products and expand your business.
Dropshipping is highly competitive, and the kind of products that are suitable for this model are often easy to copy. Businesses are always looking for products with proven demand — if they catch a whiff of your success, you could find yourself in a price race to the bottom that will crush your profits.
You’ll most likely source products from China, which means shipping and returns are expensive and slow. Margins are therefore often low. Ordering remotely also limits the control that retailers have over the product. Delays, poor quality, and legal problems (such as stolen intellectual property) are common issues.
How much can you make dropshipping?
Factors such as relationships, experience, product selection, and marketing will all play into exactly how much money you can make as a dropshipper.
To shed some light on the possibilities, we connected with three different dropshippers to gauge their success with the method:
Andreas König and Alexander Pecka
Andreas König and co-founder Alexander Pecka launched their dropshipping business, PA & KA Commercial Trade, with $8k in 2017. Like many dropshippers, they keep the details of their most successful products close to the vest to avoid tipping off the competition, but they did reveal that they are in the dog niche.
By 2022, they hit $13m in revenue. “It’s not quick money,” says König. “It’s hard work. Thousands of hours in front of your computer. A lot to learn. But you can make a lot of money.”
Andy Mai got started early. From age 8, he bought virtual items (such as “skins”) in video games and sold them for a profit. In his early teens, he moved on to physical goods, buying branded clothing from Facebook groups and Gumtree and reselling them on eBay. He was 18 when he first came across dropshipping on YouTube in 2017.
For the first 4 months, Mai lost $50 a day. But he stuck with it. By the time he finished his first year of college, he was earning $500 a day selling baby products. Unsurprisingly, he’s postponed his 2nd year of study indefinitely.
Jeff Neal is a self-described “prototypical, millennial side hustler” and the founder of The Critter Depot, an online store that sells live insects to reptile owners. He started out in 2016 with under $1k. After a couple of years he started raking in $15k+/month. Now that he’s proven a market fit, Neal is moving away from dropshipping and breeding his own insects.
How to get started with dropshipping
1. Choose a dropshipping product to sell
Successful dropshipping is about finding a niche that works for the model and isn’t already saturated. "The product has to be small because the shipping costs are very important,” says König. “The best advice is to search for customizable products. If customers can choose anything about the product — like different parts or text or if they can upload an image that becomes part of the product — that will work because it’s not available at the grocery store around the corner."
He recommends looking at the bestseller lists on Chinese ecommerce platforms AliExpress or Alibaba to see what products people love. “Then see if you can maybe change a product a little bit or make it better.”
Mai recommends clicking on every ecommerce ad on your Facebook feed until Facebook fills your feed with products. “If an ad is live on your news feed, then you know it’s current and you know it’s working,” he says.”If it has more than 5 comments within the last 24 hours, test that product.”
Don’t be discouraged if your first product doesn’t sell. Neal spent years trying to find the right one. “I tried women’s shoes, but quickly discovered that outcompeting Amazon and Walmart was impossible.” Next, he tried binoculars, but after building a website and hiring a logo designer, he couldn’t find a supplier. “Then, through Google’s Keyword Planner, I discovered that live feeder insects were a highly searched product, with little competition. And that was a killer combination."
2. Find a dropshipping manufacturer
The most common way to find a supplier is to search for the product on Alibaba or AliExpress and contact the manufacturer. When Mai started out, he looked for suppliers that had thousands of fulfilled orders and at least 100 orders for the specific product he wanted to dropship. He made sure that their reviews are at least 95% positive. Now he uses agents in China who source products and conduct quality checks on his behalf.
“There are suppliers that offer a shipping time of 3 or 4 weeks,” says König. “You can forget those. You will be blocked from the credit card institutes and from PayPal.” He recommends looking for a supplier that can ship in 10 days, or ideally less. He also suggests ordering some of the product yourself to check the quality before you start selling. “The supplier should be specialized in dropshipping,” adds König, “because you do not want to be the one that trains him.”
One thing retailers should be thinking about in the wake of the pandemic is securing your business against supply chain disruptions. Neal says suppliers let him down all the time. “You learn to get as many suppliers as possible. If one runs out of product, you can pivot to another to get through the hurdle.”
3. Set up shop
There are 2 main options when it comes to setting up an online shop: your own website or an ecommerce marketplace. The advantage of developing your own website is that you control your customer data. For entrepreneurs building their own websites, Shopify is the go-to tool. Oberlo, ShipStation, and DSers are popular order fulfillment software that make life easier once you start moving products.
On the other hand, an ecommerce marketplace gives you access to an existing customer base. Forty-eight percent of online shoppers head straight to a large ecommerce marketplace.
But if you sell products on Amazon or eBay, those businesses own the customer data. Amazon has even been accused of copying products sold on its platform and using customer data to rig search results in favor of its own brands.
4. Make a plan for marketing your products
Harry Coleman (AKA Beast of Ecom) used to Google “how to make money online” after coming home from his 9-to-5 marketing job. One of those searches led to his discovery of dropshipping. After he was laid off in 2016, he started an online store selling nail products. Since then he’s brought in $8m+ in sales — including $1m in his best month. Now he runs a course that helps others start their own ecommerce stores.
Coleman says Facebook ads have been the bread and butter of his marketing strategy, but increased red tape and rising costs have pushed him to start exploring other platforms like TikTok and Pinterest.
But marketing strategies are not one-size-fits-all. “Some products may be better suited to TikTok due to the younger demographic and impulse purchasing nature of the product,” says Coleman. “Others may be suited to Facebook where the customer may need more education on the product through longer-form videos.”
He recommends an omnichannel marketing approach. “There are studies that have found that customers will initially see your [ad] on one platform, but only complete their purchase when they see you on another.”
In terms of the ads themselves, for the most part, he sticks to short-form videos.“This can be clips mashed together or user-generated content from customers or influencers. It doesn’t need to be studio quality. In fact, the best ads are from content that isn’t highly produced since they blend into the platform you’re advertising on.”
Most importantly, take time to understand your customer. “People purchase with emotion and justify it with logic,” he explains. You have to ask, “How is this product going to help them or solve their problem? Will it save them money or time? Will it increase their confidence or social status? Once you know that you can communicate this message in your [ads] and product descriptions.”
5. Retain your customers through quality service
It costs 6-7x more to attract a new customer than to retain an old one, so it’s essential to keep your customers happy. Good customer service is especially important for ecommerce because around 20% of online purchases are returned, and a poor return process makes people wary of ordering again. Offering good service is also a way to differentiate yourself from competitors.
There are bound to be problems fulfilling orders in the beginning, but focus on getting all the right systems in place to avoid future issues. Both König and Mai outsource their customer service to freelancers based in the Philippines who specialize in dropshipping. König and his partner use customer support software Zendesk, while Coleman uses Re:amaze.
The ecommerce space is currently ripe with opportunities. Shopping habits formed during the pandemic look set to become permanent, creating online demand for everything from zero-waste deodorants to nurse outfits to portraits of your bulldog. Ecommerce is now thought to make up ~20% of all retail sales worldwide.
But before you set up shop, consider this pearl of wisdom from the guy who earned $170k/year before he was 20. “The best advice I can give,” says Mai, “is don’t give up. People give up after testing 10, 20, 30 products. They don’t have the grit to push through. I think mindset is the most undervalued factor in dropshipping.”