The Ultimate Guide to kickstart your Shopify dropshipping business

Running a dropshipping business is a surefire and cost-effective way to start your successful Shopify venture. There has been a striking increase in Shopify dropshipping stores, and the trend is still on the rise. Eager to make a foothold and be the next dropshipping champion? Here is an ultimate guide to starting your own Shopify dropshipping business.

Definition of Dropshipping

Dropshipping is a retail order fulfilment method where a store doesn’t keep the product it sells in stock. Retailers act as a storefront and purchase the goods directly from a third party. This third party can be a manufacturer, a wholesaler or another retailer. The goods are then shipped directly to the customer, and the merchant can charge the customer without actually handling the projects. 

Besides the retailer, there are three different parties involved in dropshipping. First, the manufacturers or wholesalers provide you with the raw product. Then, customers would buy from your retail store, and once a customer places an order with your retail business, you can alert the manufacturer or wholesaler. After that, these manufacturers or wholesalers will charge you, package, and ship the product to the customer. The dropshipping cycle is then completed once you charge your customer for the service. 

4 Major Advantages of dropshipping

Low overhead cost

With dropshipping, you can avoid the huge initial cost of paying for inventory and warehousing upfront. Your only pay per sale and your overhead costs remain low. 

Run dropshipping business anywhere

Because you don’t have any physical inventory or facilities, you can technically run your dropshipping business anywhere as long as you have internet access. 

Flexible offering

Since you can choose from the millions of readily-available options, you can either stick to a niche with a loyal following or adapt quickly to the latest trends. The choice is yours. 

Flexible inventory

Without holding physical inventory, you can skip the hassle of managing your warehouses, watching stocks or fretting over expiries. Use your brainpower on something more value-adding. 

The profitability of a Shopify dropshipping business

According to Shopify’s figures, many dropshippers can stack up to USD100,000 in sales per year. As long as you find the right market and supplier, you can also generate USD1,000 to USD2,0000 per month within 12 months by working around 10-15 hours per week. 

Two main types of dropshipping business models offer different returns. First, the low-ticket dropshipping method is designed for large quantities of low-cost products. While it can be very profitable, it often only generates short-term income as customers are unlikely to return, and products have short lifespans. Conversely, high-ticket dropshipping focuses on delivering superior quality to a dedicated consumer base. While it takes more time and effort to build, the results are more sustainable as you build a loyal fanbase with evergreen products. 

Usually, dropshippers make around 20% or 30% of the profit from each sale. This number can stack up to around USD100,000 per year on average, or USD1,000 to USD5,000 per month. The usual expenses include products, overhead fees, and your usual Shopify fees. An important note here would be that high-quality products usually have a higher dropshipping profit margin despite selling fewer products and vice versa. Hence, sellers need to make their decision based on the amount of time that they are willing to contribute and the objective of their business.

Besides,  if you were to run a business that will be predominantly online, it would be crucial to include the online ad budget into your regular and overhead costs. On average, a cost per click ad on Google is worth USD1-2, and each campaign usually generates 1-3 sales for every 100 clicks. So that’s something to take into account. 

Click here to know the steps to start dropshipping on Shopify!