How to Start a Dropship Business

How to Start a Dropship Business thumbnail
You can sell a variety of products with a dropship business.

If you are thinking about starting a business but find yourself struggling to raise capital, secure a location and buy inventory, a dropship business may be the perfect model for you. With a dropship business, you have the ability to sell products without handling or physically stocking them. As you make sales, inventory is picked from a remote, central warehouse and shipped to customers. Starting such a business may take some research on your part.

Things You'll Need

  • Suitable business model
  • Acceptable commission agreement
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Instructions

    • 1

      Define your products. Make a list of the products you wish to market. You may be a musician with the desire to sell acoustic guitars. Oriental lamps may make your list. Or, you may wish to sell a variety of products. Your list can as long as you want at first.

    • 2

      Research product availability. Make a list of people you know in your industry of choice. For example, if you have experience in the food industry with delivering dropship freezer-wrapped salmon fillets to your customers, contact seafood suppliers in the industry and inquire about a dropship arrangement. Or search for wholesalers. There are scores of wholesalers out there looking for independent business owners to sell from their inventory (see Resources).

    • 3

      Refine your product list. Eliminate products from your list that cannot be delivered as part of a dropship business model. You may end up brokering products from several different wholesalers, depending on product availability. Choose companies with the most efficient shipping system and competitive pay scale.

    • 4

      Negotiate a deal. With each company you represent, negotiate an acceptable payment and service agreement. Generally, shipping fees and your cost for each item will be deducted from your selling price, representing your profit. This means you must have the power to mark up your items at will to cover your expenses and still put some money in your pocket. Some companies may simply pay you a commission, less shipping costs. Ask each company to provide you with a wholesale catalog and an independent contractor agreement detailing when you will be paid and by which method (Check, PayPal, bank wire).

    • 5

      Create a website. You will have the most success by building a website at which customers can browse and place orders (see Resources). Or your suppliers may have websites they are willing to share with you. With this type of arrangement, the company would set you up with a page on its site.

    • 6

      Market your business. Use sites such as Craigslist to direct people to your website. Sites like eBay are also great ways for dropshippers to get business. When a bidder wins an auction and pays you, you place an order with your wholesaler, which ships out the item. You may also distribute catalogs using direct mail. Regardless of how you market your products, prospects must be able to browse merchandise before they buy.

Tips & Warnings

  • Write a business plan. This will help you map out your operation and effectively market your products (see Resources).

  • Incorporate your business to file income taxes in the name of an official business. This will lessen your personal tax burdens (see Resources).

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Resources

  • Photo Credit www.bridgat.com

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