Becoming a drop shipper is a great first step into entrepreneurship. As a drop shipper, you will be able to set your own product prices, market your brand and sell to your customers. What’s more, you will not have to pay for inventory or require any advanced entrepreneurial skills to start.
As long as you are ready and willing to put in the work and effort, you can build a successful brand as a drop shipper. We are going to explain how to become a drop shipper, how to find the right drop shipping business ideas and low budget marketing ideas for your first few months as a drop shipper.
Register for an Employer Identification Number (EIN)
When looking to become a drop shipper, you need to register for an EIN- the number assigned to your business by the state government for tax purposes. Some suppliers will not do business with you if you do not have the EIN.
Obtaining an EIN is free and normally takes 1 to 3 days. If you are doing business from the US, consider having an LLC as it provides numerous benefits, including tax write-offs, liability protection and more. However, the LLC is not mandatory for starters.
Choose a niche
In drop shipping, a niche is a focused group of products. To become a successful drop shipper, you need to select a niche that you are genuinely interested in. Choosing a niche that you are genuinely interested in makes it harder for you to become discouraged as it takes a lot of hard work to scale as a drop shipper successfully.
Things to consider when choosing a niche:
- Attractive profits: As a drop shipper, your main focus is on marketing and customer acquisition. The amount of work and effort you need to sell a $50 item is essentially the same you will need to trade a $2,000 item. Always select a niche with higher priced products.
- Low shipping costs: Even if the cost of shipping an item is handled by a supplier, if it is too high, it will repel potential customers. Always look for products with low shipping costs as it also gives you a chance to offer free shipping, which aids in attracting more sales.
- Analyze your competitors: Check and estimate their sales and profit margins to determine if you can survive at those margin levels.
Secure a drop ship supplier
The goal here is to find a reliable supplier who is affordable, responsive, supportive and will ship products to your customers faster. You should aim a getting a supplier willing to provide your niche products at the best and lowest prices enough for you to make profits. Once you have found that supplier, negotiate shipping terms. Let them know that you will be acting as a drop shipper and will not directly handle the products.
Set up your business
Prepare all the documents that you will need to successfully run the business such as invoices, order forms, shipping labels and a company letterhead. After that, you will need to select a selling platform. You have the option of selling on an existing online retail platform like eBay, Shopify, and Amazon or creating your own e-commerce store. Setting up an online store makes it easy for potential customers and suppliers to find you. Don’t forget to establish a return policy for your customers that fit the terms of your suppliers.
Market your business
While having a great product, supplier and website are incredible; you do not have a business without customers. When starting your online business, you may find it hard to attract customers to your store. Hence, you will need to put in extra work to promote your store. There are many marketing techniques you can use to reach potential customers, including;
- Creating a mailing list where your customers can sign up for
- Running Google or Facebook ads
- Running a blog or a guest blog
- Attending conventions
- Advertising in retail trade magazines
- Creating a referral discount
Although drop shipping is not the path to overnight success, it provides an easy way to start a business and leverage other people’s capital without needing to invest your own. When running and managed well, drop shipping can form the foundation of your successful online store.