How to Make Money Dropshipping in 2024

Dropshipping is an emerging entrepreneurial trend gaining traction at astronomical rates. As of 2021, approximately 27% of online retailers had adopted a dropshipping fulfillment model, a number that is only expected to rise in the coming months and years. However, like any online business, there is much to learn and calibrate before entrepreneurs can start making money dropshipping, especially if they aim for long-term profitability and success with an online dropshipping business. Be wary of business blogs and industry influencers who claim dropshipping is an opportunity to “get rich quick” without experience or hard work. This simply is not the case. It can, however, be a lucrative business model for those who are willing to do their research, study the mistakes and successes of their competitors, and commit to continuous improvement of their dropshipping stores.

If this sounds like you, you have come to the right place. We will be breaking down everything entrepreneurs need to know about starting a dropshipping business and setting their venture up for future success.

First, up, what is dropshipping, exactly?

The Definition

Dropshipping is a method of fulfilling online retail orders that eliminates the need to maintain inventory. The business owner relies on a third-party vendor to fulfill and ship orders to customers on an as-needed basis, completely bypassing the responsibility of sourcing, storing, packaging, or transporting goods or products.

How Do Dropshippers Make Money?

Primarily, you make money dropshipping by charging the end consumer more for a particular product than your wholesaler charges to make and ship it. Many wholesalers or manufacturers will also provide a discount if you meet a specific number of orders per month, providing an opportunity to further increase your profit.

Example: Let us say you have decided to open a dropshipping business that sells pet toys and accessories. Your profit margins are 30 percent and you get an additional 10% discount if you bring in $10,000 worth of orders per month. If you sold $18,000 worth of product in a given month, you would profit $54,000 (30 percent of $18,000) and you would be eligible for the additional 10 percent discount, bringing your total profits to $7,200. So, does dropshipping make money? The answer, as you can see, is a resounding yes!

How to Make Money from Dropshipping
Tips for Starting Your Dropshipping Business

Now that you understand the business model, it is time to carefully consider the process of opening a dropshipping business. This is important because there is a lot that goes into launching an online store and operating a dropshipping business full-time. Below is a general overview of the various stages of launching a dropshipping business. The order of these steps may vary, but each is a requirement for success when deciding to start your own store.

Step 1
Research Products

The profitability of your dropshipping business is largely dependent upon the products you decide to sell online. This is partly because certain items are more in-demand than others are, but also because profit margins vary from product to product. Electronics and tech accessories like wireless cell phone chargers, gaming headsets, and security cameras, for example, are some of the best-selling products and often have considerable profit margins. However, on the other side, you don’t want to choose dropshipping products that consumers can find at most major retailers, as they’ll likely decide to avoid shipping fees and purchase the item in person. Speaking of shipping fees, you will also want to choose dropshipping products that are not too heavy, since bigger items will be far more expensive to ship and can quickly eat away at your profit margins.

Use these dropshipping product research tools to conduct thorough market research before importing products to your store. We recommend that all dropshipping entrepreneurs keep the three S’s in mind when making a final decision on which winning products to sell:

1. Size: If you can find items that fit inside a padded envelope (t-shirts, books, small kitchen utensils, jewelry, pet supplies, etc.), you’ll receive the lowest shipping rates, which is why many individuals interested in making money dropshipping choose to go with smaller products. However, do not feel like your options are limited it is possible to run a profitable dropshipping business with larger-scale items. You will just need to thoroughly research potential carriers, seek out discounted shipping rates or special promotions, and find the solution that best aligns with your business needs.
2. Saturation: It is impossible to answer the question “Can you make money dropshipping?” without carefully considering how saturated the market is for a particular product. Ideally, you will want to select items that are not readily available to your target market or being promoted by major competitors.
3. Safety: Many manufacturers are located overseas where product and toy safety regulations may differ from those in the United States. For this reason, it is critical to familiarize yourself with all safety standards and choose products that will not pose any risks or potential issues. Children’s toys with small components, bicycle helmets, and medical devices are a few examples of dropshipping products that could be safety hazards. Remember, dropshipping entrepreneurs are liable for their products, not the manufacturer or wholesaler, so being diligent in this regard should always be a top priority.

Step 2
Choose a Supplier

Working with the right supplier truly makes all the difference when it comes to making money dropshipping. A difficult supplier will not only negatively influence your daily operations, they will also make the experience your customers have when buying from you less enjoyable and that is never good for business. Look for a supplier with a proven record of accomplishment of maintaining positive relationships with their buyers. Be sure to ask about their minimum order size and any fees or additional costs prior to agreeing to do business. Finally yet importantly, ask as many questions as you need to feel confident it is far better to be proactive than to be caught off guard when customers are depending on you. For storeowners with a Shopify store, you can use a variety of third-party tools via the Shopify app store to import trending products into your store.

Step 3
Set Up Your Dropshipping Store

A well-designed and functional website is the cornerstone of any successful dropshipping business. Customers will ultimately make the decision of whether to purchase or not based on the visual appeal and navigational ease of your site. If they encounter technical issues along their online shopping journey, they will likely leave and seek out a competitor, so investing in your website upfront is a wise decision. The easier your online store is to navigate, the better your website conversion rate will typically be. Platforms like Shopify, Wix, and Squarespace all make it easy to set up and manage an ecommerce site. They each offer their own unique advantages, so you will just need to do a little digging to determine which option best suits your needs. We definitely recommend considering a website builder or service that allows you to add unlimited products, though, and prioritizing advanced built-in reporting, as not all platforms offer these features. If you are looking to save time and have a Shopify dropshipping store built, hiring services like Dropship Hub will take it to the next level by designing your professional logo, adding products, setting up the best Shopify apps, and setting up your entire turnkey dropshipping store. If you are starting from scratch, Dropship Hub will take care of everything from start to finish.

Step 4
Secure Your Sales Tax ID

Your business is not legally valid without a federal or state sales tax number. Without one, you cannot file taxes, open a business bank account, or hire others to work for your company. Fortunately, you can apply for a sales tax ID online, so this step is relatively quick and painless.

Step 5
Strategically Acquire Customers

This is where learning how to make money dropshipping becomes more complex. Developing a strategy to attract customers is never a simple task, but it is even more challenging for ecommerce websites due to the high level of competition. Social media advertising, SEO, referral programs, and giveaway contests are examples of digital marketing channels that can be utilized to attract new customers and build a loyal fan base. Only you can determine which methods will work best for your business, so you will need to meticulously research your options and build your strategy based on the data you gather.

Common Pitfalls to Making Money Dropshipping

Those who want to know how to make money dropshipping in 2022 and beyond need to be aware of the most common setbacks drop shippers encounter. Being aware of these setbacks ahead of time is the best way to spot them before they occur and (hopefully) avoid them in the process of establishing your own business. These common pitfalls include:

1. Being Overly Dependent on Vendors

Dropshipping entrepreneurs must remember that if there is an issue with a product or its delivery, the customer will associate that issue with their brand, not the wholesaler or manufacturer, which is why having a plan in place to deal with subpar vendors, is essential. We recommend putting a clause in all vendor contracts that protects your business in the event a vendor does not fulfill their obligations or causes issues, which affect the viability of your business. We also advise drop shippers to establish strong relationships with backup vendors who can step in and fulfill orders should their first choice fall through.

2. Dropping the Ball on Branding

Did you know that businesses who consistently present a strong visual brand earn 33 percent more, on average? Branding is an essential part of distinguishing your online store from competitors and making it memorable to your ideal customers. It also builds trust with your target audience, which is a major factor in most buying decisions. Let us say you have decided to sell athletic apparel and your top competitor has a compelling visual brand (branded logo, imagery, color palette, etc.). You will need to consider how you can establish a visual identity that is both captivating and distinctive from other brands. You can leave it in the hands of the experts with dropshipping stores for sale with DropShip Hub.

3. Poor Product Quality

This is one of the deadliest dropshipping mistakes. Customers rarely come back and make a second purchase if their first order failed to meet their standards or expectations. In addition, in today’s digital world, word travels fast negative online reviews and social media comments spread like wildfire, threatening the sustainability of your business. Never, ever cheap out when it comes to product quality. It is far wiser to invest in higher quality products from the beginning, as you will recoup the cost with longer customer lifecycles and repeat purchases. We recommend asking potential dropshipping suppliers about their product testing and quality control processes prior to formalizing a business agreement.

You can ask questions like:

• What are your quality standards for (specific product)?
• How many products do you test from each batch?
• What is your process for addressing defects or potential issues?
• Do you reject batches if a defect is identified?
• What is your process for preventing packaging issues?
• Are you willing to work with a third-party quality control inspector?

Remember, the more proactive you are in clarifying quality control standards and practices, the less risk you will need to worry about in the future.

Is Dropshipping Worth It?

Now that we have answered the provocative question of “How do you make money dropshipping?” there’s just one question left to ask: “Is dropshipping actually worth it?” Our answer? Absolutely! If you are willing to put in the work. Here is why we think so:

The Online Retail Industry is Thriving

E-commerce accounted for 18% of global retail sales in 2020 and that number will undoubtedly rise in the years to come as more and more businesses adjust to a post-pandemic future. In fact, it is predicted that ecommerce sales will account for 21.8% of retail sales worldwide by 2024. Whichever way you look at it, the future of ecommerce is bright and it makes sense for emerging entrepreneurs to consider capitalizing on an industry with so much potential for return on investment.

Suppliers Want to Work With Dropshipping Entrepreneurs

The dropshipping model does not just benefit entrepreneurs it also benefits manufacturers and wholesalers, as it provides them with a more steady and reliable source of income. To be more precise, top dropshipping suppliers earn 18.33 percent more profit if they sell products to drop shippers as opposed to shipping directly to consumers. Knowing the right suppliers are eager to work with ecommerce entrepreneurs adds another layer of appeal to the dropshipping business model. The mutually beneficial arrangement motivates both parties, making it easier to establish working relationships and business agreements that work on both ends.

There is Fewer Logistical Headaches to Deal With

Most entrepreneurs are dead set on shaping their own destiny and building their own empires. In these cases, it is less about whether or not they will build a business, and more about what kind of business they will build. When you compare a dropshipping business model with a more traditional model, there are plenty of advantages, but perhaps the most compelling is how simplified operational logistics are for drop shippers. There is absolutely no need to worry about designing products, sourcing materials, investing in manufacturing equipment, overseeing production, storing inventory, packaging, or shipping items, and a host of other responsibilities that come with a typical ecommerce fulfillment model. This in itself is an extremely attractive advantage for most entrepreneurs, but even more so, for new entrepreneurs who do not have either the initial capital to purchase inventory upfront or who would prefer to wet their feet before diving into more demanding business operations. As you can see, many aspects of dropshipping make it a worthwhile endeavor. The key is to remember that a dropshipping business is still a business, and the most successful storeowners are those who are resilient, determined, and capable of overcoming the obstacles that will inevitably come their way. Dropshipping should not be viewed as an “easy way” to make money. It should be viewed as an alternative approach to traditional business, which requires an equal amount of dedication and persistence.

We understand that making money dropshipping is all about the online customer experience, so our conversion optimization experts will fine-tune your website, adding all the necessary features and components you will need to maintain a competitive edge and turn those visitors into paying patrons. We have 10+ conversion optimization apps that integrate seamlessly with our prebuilt dropship websites, giving you the best available performance without exception.