Dropshipping is when you sell a product that’s shipped directly from the manufacturer to your customer. It is never held by you in a warehouse or a spare bedroom, and you’re not responsible for the packaging or shipping. Your dropship partner takes care of all that.
Sounds dreamy, right? No warehouse rent to pay, no upfront investment in purchasing inventory, and no shipping work on your end. Those are the perks.
But those are also the drawbacks. You don’t have the inventory in your warehouse, so you don’t have control of a customer ordering something that’s out of stock. There’s no shipping work on your end, so you can’t control the shipping speed, or the packaging. Long ship times = canceled orders. Weird packaging = bad reviews. And, you’ll still need upfront money for advertising, building your website, and all the other steps you’ll need to take to start your business.
And, because you’re basically outsourcing those storing and shipping tasks to your dropshipper, you may not have as great of margins that you would if you took that all in house.
Like any business partnership, before you get involved you need to do your research on who you’re working with, what it’s going to cost you, and what you’re expecting to get out of it.
What’s the best dropshipper?
Trying to find the best dropshipping company is a little bit beside the point. It’s like asking for the best eBay seller or the best store on Etsy.
There are things that make dropshippers great, and they’re a lot of the same things that make an eBay or Etsy seller great: They’re super communicative and have fast shipping. The product arrives as promised. It looks like the listing and it arrives in one piece in packaging that looks nice and not chewed up by an alligator.
Just like an eBay seller, the best dropshipper for you is the one selling what you’re interested in buying. They will reliably, communicatively, and quickly shipping the product you’re after at the price that’ll be profitable for you — that’s your best.
Dropshipping suppliers, databases, and tools
It can be hard to break into dropshipping because most dropshipping businesses don’t like to share their items or their suppliers. The thinking is: you’ll just replicate their shop and eat into their market.
Shopify dropshipping apps and tools
- Oberlo is a plugin service that works with Shopify stores. You’ll browse the Oberlo directory (which includes suppliers verified by Oberlo) to find inventory you’d like to sell in your store. You’ll be able to see how many pageviews, sales, and star-rankings each item and seller has. Once you make a sale, you’ll use Oberlo to order the item to be shipped to your customer. Oberlo has a forever-free plan, though you’ll need to pay for a Shopify subscription, too. Oberlo has 4.7 out of 5 stars from 2,258 reviews in the Shopify app store.
- Spocket is a database app of dropship items that you can sort by country and simply upload into your Shopify store. Spocket makes it easy to find US and EU items that’ll ship within your country rather than from China, cutting down on slow ship speeds. The Basic plan (25 products with unlimited orders) is forever free, and upgrading to Pro is $39 / month for 250 products and branded invoicing. The Empire plan unlocks unlimited products for $99 / month. The app has 4.8 out of 5 stars from 1,008 reviews in the Shopify app store.
- Dropified is a Shopify app for populating your store with items and automate your orders on AliExpress, including customer shipping address. There’s no Dropified marketplace, but rather a browser plugin that’ll let you pull from anywhere on the web. You can set up margin parameters and rules for changing the price points in your store. There’s a free 14-day trial; after that it’s $47/month for the Builder plan. The app has 4.8 out of 5 stars from 98 reviews in the Shopify app store.
- Dropwow is like Oberlo or Spocket, but has more negative reviews. The tool claims to automate your orders and help you locate dropshippers located in the US and elsewhere. However, with only 3.8 out of 5 stars from 108 reviewers on the Shopify app store, and a monthly subscription of $29/month, we don’t recommend it.
Dropshipping databases and software solutions
- SaleHoo – A $67 yearly membership grants you access to this database of wholesalers and dropshippers. There are currently 8,000+ suppliers on the site, and they’re all screened by Salehoo before they’re added to the directory. There’s a 60-day free trial period, and the customer service gets high marks: 9.6 out of 10 with 239 reviews on TrustPilot.
- Doba – This 2 million product database doesn’t just bring a number of suppliers into one marketplace — you’ll also place your customer orders within Doda as well. That being said, it’s not cheap and we’ve read a number of negative reviews, many of which mention that the prices aren’t low enough to profit. Doba has a 14-day free trial, so you can log in and run the numbers to see if a membership (which ranges from $29–249/month) is right for you.
- Wholesale2B has a variety of plans: sell its products on eBay, Amazon, on a Wholesale2B site, or your own WooCommerce / Shopify / Magento / BigCommerce site. Any one of these options costs about $20–30/monthmonth. Handle the orders yourself by becoming a registered reseller with each supplier or pay Wholesale2B a 3% fee to handle that for you.
- Worldwide Brands – For $299, you can get a lifetime subscription to this database of wholesalers and dropshippers.
- Wholesale Central – This free directory lists suppliers you can work with individually to order products from. There’s nothing fancy about it — it’s like a phone book — but has useful information to use as you do your research.
- Sunrise Wholesale Merchandise – A $99 yearly fee gets you access to Sunrise’s selection of goods. It’s a bit smaller than other databases, but there the shipping times are pretty quick: typically 5–7 days. Packages arrive to your customers with a receipt from “Customer Service” that’s not branded.
- Megagoods – A California-based warehouse and will dropship your goods under your packaging and branding, typically in less time than it’d take to ship from an overseas supplier. Check the added fees to make sure that your margins are good.
- Inventory Source – An automation tool that allows you to either sync the suppliers products with your page (inventory automation) or to sync the entire customer purchase flow so that your orders are automatically placed with your supplier (full automation). Inventory automation is $50/month and full automation is $150/month.
- Dropship News – This free online directory of suppliers is worth sifting through. We found some great US-based suppliers. Most of each supplier’s dropshipping information is on their profile, which saves you some clicking around.
- National Dropshippers – This site is free for the first 7 days, but its products are hard to find and search for, and the returns and shipping policies aren’t favorable. You can give a try to see if there’s a product that’s only available here, but if you can find it elsewhere you’ll probably be better off going with the alternative.
- DropshipDirect.com – This site makes some enticing claims: 100,000 items in its inventory, a SaaS-approach to data, and quick shipping from its Michigan warehouses. However, the sign-up form is in private mode and the company seems to be on a year-long hiatus. We’ll keep an eye on Dropship Direct and report back.
- AliExpress is a Alibaba’s online retailer. It’s based in China, but doesn’t sell products to anyone in mainland China. The site has lots of user reviews and analytics that are super useful during the product research phase.
- DHgate – There are over a million Chinese suppliers on DHGate. Best practice for buying off DHgate: check user ratings and feedback. Just like you would when buying something off of eBay, be wary of anything that could be a knock-off or imitation, and be prepared for slow shipping and nuances like new-with-box items arriving with their boxes unassembled.
4 Steps to start your dropshipping company
1. Find items to sell
Find your niche.
There’s lots of chatter on the internet about finding your dropshipping niche, but this is just a trendy buzzword for product-market fit: are there people who want to buy your product? From you?
If not, you won’t have a successful business.
You’ll have the most success dropshipping a product if there’s an audience that wants to buy it and doesn’t have an easy way to access it. That’s where you come in.
Some ways to find your niche: brainstorm rabid fan groups or audiences with a common need or interest (dog lovers, anime fans, parents who love to dress up their kids in matching outfits, sailors, very tall people, people who love 90s throwback tees). These are purchase-ready populations looking to love and buy things that they’re interested in.
See what’s trending on Facebook.
Doing a quick search of a phrase like “Get yours here” or “Buy now” and look at the videos featuring items for sale that are getting traction. This can give you a sense of which products are interesting people on Facebook right now. Look for a high number of views in a short period of time, then search for the item at a dropship supplier like Oberlo or AliExpress. Consider the price-point of the item in the video and the assets you can create for it. Can you replicate — or improve on — the current trending video? If so, you may have an item worth dropshipping.
Don’t sell anything dangerous or copyrighted.
If you’re a beginner, don’t start with something that goes in or on a person’s body. If you do not know the quality and source of the ingredients, and something goes wrong, do you have coverage for that liability?
Also, if there’s a celebrity or character from a movie franchise on the item, it could get you in trouble. Steer clear of mice with big round ears.
Look at seller’s reviews and order a test product.
How long has the seller been selling? What feedback have they been getting. When you order a test product, does it meet your expectations? What do you need to tell your customers so they’ll be happy when they receive the product?
Consider dropshipping only some items.
Just because you’re dropshipping some things doesn’t mean you need to dropship everything. Perhaps it makes sense to use dropshipping for large, bulky, high-priced niche items.
Say, for example, you have an online store that sells nautical gear. You may want to personally store and ship some items, but dropship the anchors. For items like this, your customers may also be more accommodating to longer shipping times since it’s a large and more considered purchase. Same goes for home goods: perhaps you keep small items in stock, but dropship the couches. You can increase your inventory breadth very simply this way.
Go directly to a supplier and build a dropshipping relationship with them.
This is a killer plan: there’s guaranteed to be less competition. You’re basically creating a new audience for an under-marketed product that’s not getting seen by a ready-to-buy audience. If you use a database, every single other subscriber is using that same database.
2. Nail the basics
Invest in a good domain name.
Set up your website.
If you go with Shopify, you’ll be up in minutes. Lots of dropshippers recommend the Shopify Brooklyn theme with a good font choice. You can also use another ecommerce option. Here’s our review on the best ecommerce platforms, if you’re interested in exploring.
Get a professional logo.
You can get one for a reasonable price (and no design expertise) with 99Designs.
Use a professional email address.
It should be a sensible start (help@, support@) with your own domain name. We recommend getting G Suite for $5 a month per user. There’s nothing to trust about emailing a customer service that’s at yahoo.com or gmail.com.
Give your customer strong trust signals.
You can do this with high quality photos and unique item copy, a real and robust About Us page, and thoughtfully using things like discounted prices and pop-ups.
Ask yourself: Would I buy from this store? Would I feel comfortable suggesting it to a friend or family member? You’ll need some trust logos and some FAQs at minimum.
Set shipping time expectations.
Most dropshipped items aren’t going to get to the customer very quickly — and in world where Amazon Prime has set the standard at two days, that means dropshipments of 30 days feel extremely slow. If you don’t prepare your customers they’ll be very unhappy. We’ve seen very straightforward copy, like: All our items ship directly from our suppliers in China. Shipments are processed the day of your order and arrive in 25–30 days.
Make sure your orders go through.
Bundle credit card orders so your bank doesn’t cancel your numerous orders. Let your bank know what types of orders and in what quantities you’ll be placing, so they’re not flagged as fraudulent. There is no pain so rich as having to reorder orders you’ve placed. (You do have a business credit card, right?)
Prepare for returns and cancellations.
How will you deal with unhappy customers? What’s your return policy and how will you chargeback customer payments? Will returned items be shipped to you, or to your distributor? How will that work? Like with anything in business, it’s important to set it all up from day one like it’ll be a huge success.
Set aside money to pay taxes.
If you’re using Shopify as your payment gateway, once you get to a certain sales threshold, Shopify will automatically report your sales to the government. You’ll want to make sure you have money available to pay applicable taxes. We also recommend getting an accountant and a lawyer (we’ve heard good things about UpCounsel and LegalZoom) and setting up Quicken.
3. Differentiate yourself
Make your store listings and ads unique.
Remember, if you can quickly and easily set up a dropshipping order for a specific product, it’s likely another store will be able to do the same. You will need to find an edge: why would someone order from you, or find your store selling the product, and not your competitor?
Take your own pictures. Write your own copy. Shoot unique social videos. Really put thought into how to best convey the product and why a person would want it: What problems does it solve? Can it make them feel joy?
Import user reviews.
If you’re using AliExpress, you can import the user reviews. No one likes being the first to buy something.
Consider offering free shipping.
Do all orders have free shipping or only when a certain order spend is hit? What threshold or minimum spend works best?
Market your store.
Make sure people know about your store. This can be through word of mouth, social media ads, viral memes, influencer programs, SEO, a newsletter. You’re going to need visitors to make sales.
4. Iterate iterate iterate
Use ads to test and gather data.
We’re assuming that you’ll be buying ads. If you do, buy and use the data to test what’s working. What gets traction? Double down on it. What doesn’t? Trash it. This may lead you to changing your products, your ad style, your audience. Following the early traction means you head toward what’s working and away from what’s not.
Analyze your sales.
What’s selling well? What’s not selling at all? Is there any common theme in the items? Replicate what you can. Stop what’s not working.
Arbitrage – The simultaneous buying and selling of an item to take advantage of a difference in price for the same asset. Say there’s a board game for sale at Walmart for $20, but the lowest price on Amazon is $45. Arbitrage is listing the game for sale on Amazon and buying the Walmart game. For every sale you make on Amazon, you take advantage of a $25 price difference. If your arbitrage is online to online, with free shipping, the math suggests you could simply sell on one site, buy and ship from the other, and pocket all the profit. This does not take into account any hiccups: returns, merchandise not accurate, merchandise no longer in stock, price changes in either market, etc.
Dropshipping (DS) – The supply chain system in which a seller does not keep items in stock, but rather transfers orders directly to a manufacturer, supplier, or wholesaler who ships the item directly to the consumer.
Minimum Advertised Price (MAP) – Some sellers set a floor to how low you can advertise or display your product for sale. This is not the same as the price you can sell it for. So, the MAP price does not take into account coupon codes or sales, or other tricks like offering a gift card with a purchase, offering rebates, or doing things like showing an even lower price in the cart.
Dropshipping examples and press
You may have seen the posts we’ve seen — the ones about people starting dropshipping businesses and raking in the sales. We’re talking five-figures in a single day, six-figures every month. What is this magic sauce, we wonder.
The magic sauce is the same sauce as any other business: it’s a math equation based on margins. How big are your margins? How big is your customer base? What’s the conversion rate? How stiff is the competition?
Welcome to a little-known corner of the e-commerce world, where small entrepreneurs use social-media ads and hip virtual storefronts to entice people into buying products listed on online marketplaces such as Alibaba Group Holding Ltd.’s AliExpress.
The process often involves online storefronts transferring customer details to an AliExpress seller, which ships the goods directly to the customer; the storefront bills the customer. Called dropshipping, it is a twist on a fulfillment technique that major online retailers also use to send goods directly from their manufacturers to the customer.
The entrepreneur profits by charging a high markup, betting shoppers are unlikely to stumble upon the less-expensive goods on a marketplace site. AliExpress is the most popular such marketplace, but some entrepreneurs order from sellers on other marketplace sites like Amazon.
—“The Mystery of the $70 Hoodie That’s All Over Facebook,” Wall Street Journal
The mystery of the $70 hoodie is also not a mystery: it’s a one-time sale that’s not going to turn into repeat business. It’s a simple equation:
high price + low product quality + poor customer experience ? repeat business
Dropshipping seemed cool because it made starting an eCommerce seem easy: I didn’t need to buy products in advance; I didn’t need to have space to hold them, and it didn’t require extra time and effort to ship the orders myself. Dropshipping does have disadvantages, but it really appealed to me, so I continued my online search.
There are numerous ready-to-use eCommerce platforms like Shopify, BigCommerce or Squarespace. Most of them start at around $20 per month, which seemed like a good deal for a first-time entrepreneur like myself.
It took me two days to set up the store the way that I wanted it to look. Shopify is totally non-programmer friendly. All you need to do is open an account, select a look for your store, and that’s it – you’re ready to sell.
When I set up my store, I had no definite idea of what I should sell. I wasn’t sure if I should pick a product I was passionate about or just a random product I was able to find in dropshipping databases like WholesaleDirect.com or the like.
“This Guy Made $12K In One Month While Working Full-Time,” Huffington Post
“This guy” is Justin Wong, and he made his business work by studying Instagram marketing, set up affiliate partnerships with influencers, and matched his product with his marketing technique. And, he’s not confused about the pros and cons of that marketing strategy: when the posts age on a influencers feed, his sales go down.
My name is Jacky Chou. With my partner, Albert Liu (albeliu on Reddit), we launched a home decor dropshipping site that went from negative 3k to 250k a month in 8 months at 30-40% margins. We’re both first generation Asian-Canadians who moved from Vancouver to Berlin to work in marketing.
We started our dropshipping store as a ‘practice what you preach’ case study, as we’re both working as digital marketing consultants (Albert as a freelance Facebook consultant and I’m a founder of an SEO agency, Indexsy).
— “We made 250k USD last month with our dropshipping side hustle. Oberlo / Shopify reached out to us to do a success story. AMA!,” Reddit
- Buzzfeed News “Small American Businesses Are Struggling Against A Flood Of Chinese Fakes”
- Wall Street Journal “‘Drop Shipping’ Looks Set to Go Mainstream as More Retailers Get on Board”
- Racked “The Fake News of E-Commerce”
- Vox “Why an ad for bootleg Hallmark socks is one of the most ubiquitous of the holiday season”
- Inc. “Why Weebly’s CEO Is Saying No to the Hottest Trend in E-Commerce”
- Entrepreneur “Why It’s Nearly Impossible To Stop This Amazon and eBay Scheme”
- The Atlantic “The Strange Brands in Your Instagram Feed”
- Reply All “The World’s Most Expensive Free Watch”
- Inc. “How to Earn Money While You Sleep: A Step-By-Step Guide to Building a Drop-Ship Side Hustle”
- Vox “Here’s why Trump threatened to pull out of a 144-year-old postal treaty”
- Today.com “‘Drop-shippers’ reveal the hard work behind the legitimate work-from-home model”