Starting a Successful Dropshipping Business; How Much Does It Cost?
How much do you need to start a dropshipping business? Can you start a successful dropshipping business with no money? If the above are among the questions lingering on your mind, keep reading.
In the end, you will learn the following;
- What dropshipping is?
- If dropshipping is still profitable
- How to start a dropshipping business
- What skills do you need
- If you start a dropshipping business with no money
- How much money do you need to start a successful dropshipping business
What is Dropshipping?
Dropshipping is a retail fulfillment model where a seller lists products on their online store without keeping inventory. When the seller gets an order, the order is transferred to a manufacturer or supplier who ships the product directly to the customer.
So, how does the seller make money?
Well, it’s pretty straightforward. Say the manufacturer or supplier sells a dress for $15; the dropshipper will list the product on their website for $25. The difference, which is $10, is what the dropshipper keeps as their profit after all expenses have been paid for, including shipping costs if there is no free shipping.
Is Dropshipping Still Profitable?
Before going deeper, let’s find out whether dropshipping is still profitable. Many entrepreneurs believe that dropshipping is dead, but it is not.
Dropshipping is growing exponentially. It’s projected to blossom into a $500 billion industry by 2027. More interestingly, data from Forrest Research shows that over 23% of global online orders in 2017 were fulfilled through dropshipping, and the trend is witnessing a steady rise as there is more profit in dropshipping versus having own inventory
Advantages of Dropshipping
Dropshipping has several advantages over other fulfillment methods. That’s why the interest in dropshipping is skyrocketing.
Below are the main reasons to consider dropshipping.
- Low-risk investment
Dropshipping is a low-risk investment as you can launch your business and sell without owning inventory. It’s also flexible because you can run your business from anywhere and make passive income.
Dropshipping is also a clever investment as it allows you to sell anything you can think of as long as it is a winning product, be it the latest waist trainers in the sports and fitness niche or even a car alarm in the automotive niche.
You can also sell globally, giving you better reach. Notably, it is also easily scalable as you have more time to take care of the core aspects, such as marketing, and customer service, now that the suppliers handle fulfillment.
The Challenges to Expect
Dropshipping is among the most lucrative ventures, but there are challenges. These challenges keep the dropshipping success rate at around 10-20%, which can be quite discouraging. But as long as you fill all the bases and find ways to mitigate some of these challenges, you can succeed.
So, what are some of the dropshipping challenges to expect?
- Reliance on suppliers
- Shipping complications
The biggest challenge dropshippers face is competition. As an emerging online market, many entrepreneurs are heavily involved in dropshipping. The result is low-profit margins, especially in a crowded niche.
The fact that the supplier handles the fulfillment means your business entirely relies on them. Sadly, many beginner dropshippers fail to do proper supplier and product research and end up selling the wrong product and working with unreliable suppliers, ultimately leading to unnecessary returns and order cancellation. Remember, shipping turnaround is a critical dynamic in the success of your business.
How Much Money Can Be Made From Dropshipping?
As a visionary entrepreneur, the most critical question to ask yourself is, how much money can you make from dropshipping? Well, it is hard to answer this question as the success of your business will be decided by your input.
One thing you should know is that dropshipping is not a get-rich-quick scheme. Most YouTube streamers will tell you they make $100k monthly, but it’s all lies, though there are successful businesses that make that much.
So, what are the numbers saying?
To start, the margins are between 20% and 40% for most dropshippers. Regarding monthly profits, it depends on how well-established the business is. On average, a well-established store will make around $2,000 a month, while stores run by experts can fetch up to $10,000 a month or even more.
A good example is eBay dropshipping, where an average eBay dropshipper processes around 1,000 orders making an average monthly profit of $2,587. The established eBay dropshipping stores can process around 4,759 orders a month, raking in an average of $12,706 monthly.
Even though the success rate of dropshipping is low, these numbers should give you the psyche to give dropshipping a try.
NB: Dropshipping has made many rich, including millionaires such as Tze Hing Chan, Cole Turner, and the duo of Andreas Koenig and Alexander Peckajust, to mention a few.
Can You Start a Dropshipping Business Without Money?
One of the most common questions regarding dropshipping is whether one can start a dropshipping store with no money. This is a controversial question. Many claim it is possible, while others assert it is impossible. We will separate the wheat from the chaff in this segment.
Technically, you can start a dropshipping store with $0 now that you don’t need to have the inventory you sell. There are also free options for building a store. But remember, there is a difference between launching just any other dropshipping store and a successful dropshipping store.
In this article, we want to focus more on launching a successful store that can bring you an extra source of income, not just an average store that brings in no sales. To ensure you get the most out of this guide, we will discuss what you need and the costs.
How Much Does It Cost To Start A Successful Dropshipping Business?
To start a successful dropshipping business, you will need to find find the right niche and a winning product. Next, you will have to find a supplier, create listings, and scale the business. It is also essential to have reliable customer support. Some of these costs may not necessarily require money, but others will.
1. Finding a Niche
One of the reasons many dropshipping businesses fail is because of selling anything and everything. To succeed, you must find a good niche with products that are in demand, with good margins, and are less competitive.
Finding a niche is a fundamental step but shouldn’t be a bother, as you can find profitable niches by checking out what expert dropshippers are saying and what other successful dropshipping stores are selling. There are also many dropshipping blogs and courses out there that can give you key insights. You should also keep up with the trends to know what are the upcoming niches.
Just to mention, there are two types of dropshipping niches; steady and trendy. The former are evergreen throughout the year, while the latter are seasonal niches. Steady niches are the best.
Some of the best dropshipping niches in 2023 include health & beauty care, women’s fashion, jewelry and watches, toys and baby products, home improvement tools, phone cases, and pet supplies.
As far as finding a niche is concerned, you can do without a single cent.
2. Product Research
Now that you have a perfect niche, the next stage is finding a winning product. This is another critical step that can, in the long run, be a deal-maker or breaker. Make sure you do proper product research to be successful in dropshipping. Proper product research ensures that you settle on products that qualify as winning products.
A winning product has the wow factor, solves a problem, makes life easier, has good margins, and is the perfect size for shipping. But think of it, how many dog collar categories will you comb through on AliExpress if you want to sell dog collars?
Well, it can be a tedious exercise to get a winning product by doing manual product research. Besides, manual search doesn’t give you enough accurate data to determine the product’s potential and profitability. This is where product research tools come in.
For starters, product research tools are software solutions that enable dropshippers to find the best dropshipping products faster and with more accuracy. Product research tools, for example, Easync.io, have been engineered to scrape eCommerce sites and extract data on the best-selling products and other insights.
How Much Do Product Research Tools Cost?
There are free and paid product research tools. For example, if you are dropshipping from AliExpress, there is a great tool called AliExpress Dropshipping Center that you can use to make product research easier. For those into eBay dropshipping, there is also a free product research tool called Terapeak Product Research.
Now, just how good are free product research tools? Well, they are not as good as paid solutions which come with all the tools you need to conduct proper product research. For that reason, we recommend investing in a robust product research tool in as much as you can do manual product research with the likes of ADS, Terapeak, and Google Trends.
If you are just starting and have no money for a premium tool, you can opt for a free trial to get started. The Easync.io free trial is a fantastic option as it gives you access to the service for 7 days which is enough to do thorough product research. The paid plan will cost you around $50 a month but it is worth the effort.
3. Supplier Research
Once you have that winning product, you need to find a supplier. Finding the right supplier is crucial as the supplier affects vital dynamics, including; product quality, profit, shipping turnaround, and customer satisfaction.
A good supplier should have high-quality products, agreeable per-piece prices, fast shipping infrastructure, and excellent packaging for that remarkable customer experience.
But finding a supplier is not an easy task. There are several ways to find suppliers, including search engines and supplier directories. But to be successful, you will need a supplier research tool. Supplier research tools, for example, Easync, link you up with the best suppliers worldwide.
As far as costs are concerned, you can save a lot by using online directories and Google to find the best suppliers. But it all depends on your platform. Some eCommerce sites, such as AliExpress, have supplier research tools you don’t have to pay for, but a good supplier research tool should set you back anything between $20 and $40 a month.
4. Creating an Online Store
Creating an online store is what you need to do next, and here, there are several options. You can choose to sell on marketplaces or create your website. Both options have advantages and disadvantages.
Selling On Marketplaces
Selling on marketplaces like Amazon and eBay is a fantastic idea as they are already well-established sites with a ready customer base. You also don’t have to spend much on setting up the store, but there may be some applicable costs.
For example, selling on Amazon is free with the Individual Plan, but there is a $0.99/item fee. The other plan is Professional, which charges a monthly fee of $39.99 but no per-item fee. When starting, you are better of with the Individual plan. As for eBay, there are several costs you need to be aware of, including store subscription costs, insertion fees, and optional promotional fees.
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Creating Your Store
The other option is to create your store, a fantastic idea if you want to take charge of your business and eliminate competition. But then, there are costs, so it is slowly becoming clear it is impossible to start a successful dropshipping business with no money.
If you are not a techie or want to spend less, getting a hosted platform is the best choice, as much of the technical work is already done. You just need customization and a subscription fee or a free trial. For example, Shopify, one of the best eCommerce platforms, has a 3 months free trial for $1/month on select plans. That means you need $3 to get started. But a basic monthly subscription for individuals and small businesses costs $32.
The other option is creating a self-hosted website, which requires some technical skills but gives you the power to do more. Here, you will need a domain and a hosting plan. A domain averages $15 annually. As for hosting, you can go for a free hosting plan, but it is not recommended for security and reliability issues or a basic paid hosting plan starting from $2 a month. You can then use platforms such as WordPress, Magento, Prestashop, etc.
5. Creating Listings
Next, it is time to start creating listings (uploading products). Here, you need to ensure you write optimized product descriptions and have enough high-quality images.
When starting, you can create the listings manually as you don’t have many products. But later on, as your store expands, a dropshipping tool such as Easync.io will be useful as it can automatically import products.
You can also hire a product description writer from sites such as Upwork to create listings for you. For 20 products, you might have to part ways with $50 to $100 for this. But it would be best if you create listings yourself manually when starting.
Managing your dropshipping can be time-consuming, and you may have other errands. That said, you should think of automation to get those mundane tasks off your back so you can have more time to focus on aspects such as marketing and customer service.
Even though all these tasks can be handled manually, you are better of with dropshipping tools like Easync. Dropshipping tools can automate product search, creating listings, inventory management, repricing, etc. Automation doesn’t just save time. It also eliminates human errors.
Now, what is the cost of dropshipping automation? There is no exact figure, as it depends on the tool and its offerings. However, on average, the subscription costs start from $10. If you want to automate your business, you will have to get a subscription, as most free trials last for just a few days, and your business falls back to manual mode. Importantly, go for an all-in-one dropshipping tool to handle product and supplier research, inventory management, and ordering.
Now that you have a running store, the next fundamental is marketing. You need to ask yourself, how will you bring in those sales? Marketing is what will make you start raking in sales or remain with a non-performing store.
But what marketing methods should you use, and how much does it cost?
Running ads is among the best ways to market your eCommerce dropshipping store. Ads have excellent Return On Investment (ROI). For example, the ROI for Google Ads is 8:1, meaning for every $1 spent, you can rake in up to $8 in profits. But this is if you run the ads the right way. Facebook and Instagram Ads also work, especially when selling fashion and jewelry. On average, you will need like $100 to run ads monthly, but you are better of with a bigger budget.
The other option is Search Engine Optimization (SEO), intended to generate organic traffic. SEO can be expensive, but it is worth every coin, considering the long-term results. If you are skilled, you can start doing SEO and may later hire a link-building agency. The average SEO agency costs start from $100 monthly.
Other marketing options include email marketing which is quite effective in the retail sector but also expensive and tedious now that you need email marketing tools such as MailChimp. One thing we like about MailChimp is its effectiveness and the fact that you can start with the free plan and step up your budget as sales start trickling in.
Besides Ads, SEO, and email marketing, think of smart ways, such as offering free shipping. According to statistics, 24% of buyers are likely to spend more if offered free shipping, while 73% are more likely to buy items with free shipping.
Can You Lose Money With Dropshipping?
As you have seen above, starting a successful dropshipping business with no money is…um…impossible. You will need at least $100 or more for the basic requirements such as platform, whether marketplace or you have your store. You also need to take care of automation and marketing. But does it mean if you have money, you will definitely succeed?
No. Like any other business, there are risks. As much as you may have money, budget for it wisely. Many dropshippers have used huge budgets to set up dropshipping stores but failed in the long run because of unprofitable advertising campaigns, high return rates, and high-risk products. But with proper planning and marketing, you will be on your way to financial success.
Frequently Asked Questions
1. How long does it take to start making money dropshipping?
Dropshipping requires patience, so don’t expect to make money instantly. The time it takes for a dropshipping business to make money varies depending on the input. For some, it takes a few weeks or months, while for others, it may take a whole year.
2. Can you start a dropshipping business with 0 capital?
Yes. You can start the business with no capital, but you will need a budget to take it to the next level, as the free options have shortcomings in one way or another.
3. Can anyone start dropshipping?
Yes. Anyone can start dropshipping if they have the required basic skills, including sales and business strategy, bookkeeping, excellent customer service, data analysis, adaptability and dynamism, and time. Those with huge budgets and no skills or time can hire dropshipping experts who handle all the heavy lifting.
There you have it, folks, a detailed guide on how much it costs to start a successful dropshipping business. As you have seen, you will need money to start a thriving dropshipping business despite the fact that you don’t need inventory.
You may not necessarily require money for product and supplier research, but you will, in the long run, need automation tools such as Easync for proper product research and putting the business on autopilot. To stay ahead of the competition, you also need finances for marketing. So, if you are thinking of a low-cost investment, think dropshipping.
You can start your business with anything between $100 and $200 and turn it into a steady income stream. If you have a higher budget, well and good but spend wisely. So, what are you waiting for? Start your dropshipping today and automate it with Easync so you can have more time to focus on marketing and customer service.