How To Start A Dropshipping Business in The United State

In this post, we will discuss how to start dropshipping business in the US.

If you’ve thought about starting your eCommerce store, you may be wondering how you’ll get access to an inventory of products, or where you’ll store them.

Under the traditional business model, retailers are responsible for the fulfillment process from start to finish. That often means leasing Warehouse space for products, handling supply chain and inventory management, and managing shipping costs.

However, there is an alternative business model for fulfilling customer orders placed through an online store: dropshipping

Dropshipping is an online retail business model where the retailer does not need to maintain inventory of the items they are selling, you love selling but you are put off by the thought of maintaining and paying for a storefront, Warehouse and other overheads, dropshipping could be the solution for you.

In this article, we will talk about what dropshipping is, how it works, and how to go about it.

What is Dropshipping?

Dropshipping is an order fulfillment method where a business doesn’t keep the products it sells in stock. Instead, the seller purchases inventory as needed from a third party usually a wholesaler or a manufacturer to fulfill orders.

It is a business system that allows a company to sell products without ever maintaining an inventory of the product. The customer places an order, and then the company notifies the manufacturer or distributor of the products that an order has been dropped into a shipment for the consumer. The manufacturer or distributor sends the products directly to the consumer on behalf of the dropshipping company

Dropshipping is essentially a relationship between a customer-facing store and a supplier. Dropshipping is often seen as a no-hassle, get-rich-quick scheme but it’s not. Just like any other e-commerce, it takes dedication to get your start-up running and successful. Done well, drop shipping companies can become reliable and convenient partners to growing e-commerce businesses to expedite order fulfillment.

The order is simple: the consumer pays the drop shipper. The drop shipper pays the manufacturer or distributor to send the product to the customer. Essentially the drop shipper is a marketer

Because there is no inventory needed dropshipping is a cost-effective way for new business owners to sell products without a lot of overhead it also prevents getting stuck with inventory that can’t or won’t sell.

Is Dropshipping Lucrative?

You might be thinking that dropshipping has hit its peak, and that is not reasonable to start a drop-shipping business.

Drop shipping businesses are still thriving simply because they offer a lot of advantages that other businesses do not.

First off, it doesn’t get easier than setting up a dropshipping business. All you need is an online store and a reliable supplier. Secondly, you can easily scale a dropshipping business. Since you don’t have to buy products in your store without having to worry about inventory or fulfillment.

And because you’ll save money on not having to purchase anything in advance, you can put the money to good. You can invest in your marketing and advertising.

If you are looking for a business to start with little or no capital, then dropshipping is one.

What makes dropshipping especially great is that it is not limited to your geographical location. You can target any market you like and sell to it. But what’s also great is that in the last five years, the internet has become more accessible in developing regions by 15%.

Why should you start a dropshipping service in the US?

We all want to find the perfect business that can be profitable and enjoyable.

Perhaps starting a dropshipping store in the United States might be the “perfect” business for you

The United States is one of the greatest countries for dropshipping business because it has established an e-commerce industry and this is the largest country in the world.

And that is true, the US is indeed the largest consumer market and predictions are that China’s economy won’t overtake the US

So how does the US score here?

First of all, the instruction on shipping options in the US is excellent. The logistic system is well set up, and when using suitable shipping methods, delivery time shouldn’t be a problem for your dropshipping business.

Secondly, the US has a high GDP per capita of $63.544. to put that into perspective, Australia has a GDP per capita of $59.9k, and the UK has a GDP per capita of $40.9k.

So what about the population and social media users? As it appears, that’s nothing to worry about too. 82% of the u.s. population currently uses social media, and that number is growing each year.

Meanwhile, the population of the US reached 328.2 million in 2019, which should give you more than enough room to scale your business.

In the end, these reasons make the United States a great country to start a drop-shipping business in. The US even made it to the number one spot all the list of the best countries to target as a dropshipper.

A step-by-step Guide to starting a dropshipping service in the US

Choose a Business Concept

A business concept describes what you are selling and to whom. Because there are so many options with dropshipping, you want to start with a limited number of products that you feel will sell to a specific demographic.

For example, you might develop a business concept that says you’re going to sell graphic T-shirts to skateboarders. The T-shirts will have specific designs that appeal to this demographic and be of the quality and style that skateboarders wear.

The concept is the foundation for the products you sell, your website’s design, and your marketing, so spending some time on this is crucial. However, it is good to note that because there are limited costs to implementing a dropshipping product line, you can change things up if you feel that you made a mistake or your product passion changes.

Source Products

A business concept doesn’t guarantee that you’ll be able to get the products to serve your demographic. Take the time before you develop a website to research products. Look for multiple distributors that sell the same products to find the best wholesale price.

Some of the most popular marketplaces are:

• AliExpress
• SaleHoo
• Worldwide Brands
• Doba
• Mega good
• Wholesale Central

You might also search for print-on-demand apparel, home goods, or books. Print-on-demand apparel companies print a custom graphic onto various brands and styles of clothing, including T-shirts, socks, and jackets.

Choose a product that you get excited about, has a good margin for profit, and displays nicely in the images shown on the website. Many of these suppliers also provide statistics of popular items so that you can choose things that are more likely to sell because there is already a market for them.

Select Suppliers

Once you find the products you want to offer, it’s time to choose the supplier that will be the actual company to ship the products to your customers. There are a few things to consider with the supplier you choose:

• Quality: Choose a supplier that offers the quality you want your company to represent.
• Profitability: You should be able to make a reasonable profit on the product. Consider shipping and transaction costs in your calculation. Most dropshippers look to get 15% to 20% in profit margins. Of course, if you can generate higher profit margins, that’s great.
• Reliability: You want to choose a supplier that sends products in a timely fashion with reasonable shipping expenses and times. Many suppliers are overseas, and you’ll have to determine whether or not you want your customers waiting for products. You also need to have a supplier that keeps a product in stock since it is frustrating for you and your customer to have an order that is not in stock. The best way to check for reliability is to order a few products from the supplier and note the process.
• Return policy: When possible, find a supplier that offers a return policy. Many don’t, so you need to check on this before making any final decisions.

 

Build an Online Store

You’ll need to build an e-commerce store to sell your products. An e-commerce store is a site that is designed to help you display the products for sale in a pleasing way while possessing the shopping carts necessary to run the purchase transactions.

Building the store can be tricky for a newbie. The reason is there are a few moving parts.

To build a website you will need:

• A content management system (CMS), such as WordPress, Shopify, or Squarespace
• A domain name
• Web hosting (if using WordPress)
• Integrations with your chosen drop shippers
• A built-in payment gateway to accept online payments

 

You can also make use of e-commerce application platforms such as Alidropship or Shopify which makes ready-made e-commerce stores and additional tools that can be used to automate the dropshipping process.

Also Read: SHOPIFY REVIEW – Shopify Pricing and lot more

The best e-commerce websites automate the sale of the product with the order to the supplier. If this step is not automated, you’ll be manually entering orders every day, which can be cumbersome and lead to errors. Shopify is one of the leading choices for those building a dropshipping business. However, it’s not the only option available so it’s worth learning more about the best e-commerce platforms.

Additionally, you may also want to consider selling your products through other platforms, such as Etsy, Amazon, or even social media (i.e., Facebook or Instagram). Multi-channel selling helps your business gain exposure and drive more sales, so it’s generally advisable to do so. That is if you have the bandwidth to manage multiple selling channels.

Also Read: Alidropship Review 2023: Pricing, Features, Competitors, Pros/Cons

Register Your Business

You need to set up the company as a business, separating it from your assets. This means creating a name (usually the domain name you choose) and filing for an LLC or corporation with your secretary of state.

You’ll get a tax identification number (TIN) from the IRS after successfully submitting your online application. Use this TIN to open a bank account that is linked to your payment gateway. This bank account will take in all deposits and pay the company’s expenses, including web hosting and maintenance. It will also be the account that pays the supplier for the product when ordered.

You should also get a sales tax ID, or reseller’s permit, from the state tax office. Most states require you to pay sales tax on goods sold. You may also need to pay sales taxes in the states where you sell your products.

 

What you need to start a dropshipping business in the US

To start a dropshipping business, here are a few things you should put in mind;

Commit to starting a dropshipping business

As with any other business, dropshipping takes significant commitment and a long-term perspective. If you’re hoping for a six-figure income from six weeks of part-time work, you’re going to be sadly disappointed. By approaching your business with realistic expectations about the investment required and your profit potential, you’ll be much less likely to get discouraged and quit.

When starting a dropshipping business as a beginner, you’ll need to invest heavily using one of the following two currencies: time or money.

Investing time in your dropshipping business

Bootstrapping and investing sweat equity to build your business is our recommended approach, especially for first-time dropshipping entrepreneurs. We favor this approach over investing a large sum of money for numerous reasons:

You’ll learn how the business operates inside and out, which will be crucial for managing others as your business grows and scales.

That will also help you to intimately know your customers and market, allowing you to make better decisions.

It will also prevent you from spending large sums on vanity projects that aren’t critical to success.

You’ll develop several new skills that will make you a better entrepreneur.

Realistically, most people aren’t able to quit their job to spend six months ramping up their new online store. It may be a bit more challenging, but it’s possible to get started with dropshipping, even if you’re still working a 9-to-5 position. When you start to grow, you can transition into working full-time on your business.

If you have the option to work on your business full-time, that’s the best choice to improve your profit potential and chance of dropshipping success. Focusing all your efforts on marketing is especially helpful in the early days when building momentum is crucial.

That may seem like a lot of effort for a relatively small payoff, but keep these two things in mind:

Once your dropshipping business is up and running, maintaining it will likely take significantly less time than a 40-hour-per-week job. Much of your investment pays off in terms of the efficiency and scalability offered by the dropshipping model.

When you start a business, you’re creating more than just an income stream—you’re also building an asset you can sell in the future.

Investing money in your dropshipping business

It’s possible to create and grow a dropshipping business by investing a bunch of money, but we advise against it. We’ve tried both approaches to growing a business (bootstrapping it ourselves versus outsourcing the process) and have had the most success when we’ve been in the trenches doing most of the work.

In the early stages, it’s crucial to have someone who can deeply invest in the success of the business building it from the ground up. Without understanding how your business works at every level, you’ll be at the mercy of expensive programmers, developers, and marketers who will quickly eat up any profits you’re generating. You don’t need to do absolutely everything yourself, but we strongly recommend being the primary driving force at the outset of your venture.

You will, however, need a small cash cushion in the $1,000 range to get your business launched and operational. You’ll need this for minor operating expenses (such as web hosting and dropshipping suppliers) and to pay any incorporation fees, which we’ll discuss below.

Choose a dropshipping business idea

The second step in learning how to start a dropshipping business is performing the necessary market research. It’s the same as opening up a retail store and looking into the different locations, competitors, and trends. You want to investigate a niche you have an interest in. Thereafter, make decisions considering how profitable it can be. But the truth is, coming up with validated product ideas to sell is tricky. To help inspire your next dropshipping business idea, Shopify curates a list of trending products based on the top-selling product categories on the platform. By focusing on more niche and trending products, you can help get the attention of shoppers and gain traction without competing with larger, established businesses.

Niche products often have a more passionate customer base, which can make selling to specific crowds easier by raising awareness for your products. Fitness, fashion, beauty products, electronics, phone accessories, and yoga-related items may be a good entry point to start dropshipping with no money.

Some examples of a niche dropshipping store could be:

• Dog bow ties for dog lovers
• iPhone cases for iPhone owners
• Camping gear for campers
• Exercise equipment for fitness folks

You can also use the following tools to test out your dropshipping business ideas:

Google Trends can help you determine if a product is trending upward or downward, as well as the seasons they tend to trend in. Note that Google Trends doesn’t show search volume. So if you use it, be sure to cross-reference your data with a keyword tool like Keywords Everywhere to determine the product’s popularity in search.

Also Read: HOW TO CHOOSE THE PERFECT NICHE FOR YOUR ONLINE BUSINESS

 

FAQs About Dropshipping in the US

What is dropshipping?

Dropshipping is a business model that allows entrepreneurs to sell items without actually physically having them in the store inventory. An entirely different entity, called the dropshipping supplier is responsible for product storage and shipping. Once a customer purchases a dropshipping online store, the order is forwarded to the supplier for fulfillment and it’s on its way to the customer.

Who is a drop shipper?

A drop shipper is an online store owner that sells products without physically owning them. If you decide to open up a dropshipping store, you will be the so-called drop shipper. In other words, after an online shopper makes an order in your dropshipping store, the order will be forwarded to your dropshipping supplier. He, in turn, takes care of the packing and shipping of the package.

What is a dropshipping supplier?

A dropshipping supplier is a company that physically possesses the products that you as a drop shipper will be selling in your online store. In general, the dropshipping supplier is in charge of storing the inventory you showcase in your online shop. Additionally, the supplier is responsible for processing all orders and shipping them to your end customer.

How much of an investment is needed to start a dropshipping business?

Dropshipping is a business model that doesn’t require a big investment because of the lack of inventory management. However, you need a minor investment in terms of marketing and customer support.  This will boost your business’ traffic and increase your profits.

Can I manage my dropshipping business remotely?

The dropshipping model is a perfect match if you’re eager to be your boss and manage a business remotely. You can manage dropshipping companies from any location with only a laptop and an internet connection.

Is dropshipping legal?

Yes! Like any other form of business, dropshipping is a legal method of earning money. You are only selling items that aren’t physically present in your store.  It’s a legitimate business model that is covered by the current regulation in the business segment of any world legal system.

Should I have a business license to run a dropshipping business?

Although it is not always important, it’s preferable if some sort of licensing is present. For example, the most common entity chosen among dropshipping companies is the Limited Liability Company (LLC). The LLC is commonly registered as it protects the personal assets of the person that is starting the company. Thus,  separates them from the rest of the assets.

How and where can I find suppliers?

A great place to start looking for dropshipping suppliers is a dropshipping suppliers directory. They provide a wide range of suppliers from different industries. The directory vets these suppliers so you know you’re getting a collaborator you can count on. Additionally, you can use search engines to find suppliers according to your chosen niche.

Final thoughts on how to start a dropshipping business in the US

By now, you would have gotten a detailed guide on how to start a dropshipping business in the US. It is not just enough to start, ensure to start with a good first impression. The moment customers enjoy your services and process, they will leave good reviews for you. That will in turn attract other potential customers.

Therefore, if you are in the US and wondering what business to venture into, start a dropshipping business!