If you’ve spent any time browsing online about how to make money online you’ve likely seen drop-shipping mentioned all over the place. In large part, that’s because technology has gotten to the point where just about anyone can create a profitable dropshipping business. Platforms like Shopify and BigCommerce have taken a lot of the pain out of sourcing and selling products online.
This guide will walk you through all you need to create your own dropshipping business in Canada.
What is Dropshipping?
Dropshipping refers to a business relationship where the entity that made the sale has another party actually ship the product to the end consumer. At the most basic level, you just need to make the sale and the dropshipper will send the product directly to the consumer.
How Does Dropshipping Work?
While you can find your own wholesalers and fulfillment providers. But for those just starting out the best way to get started is to use Shopify or BigCommerce, who are the main players in the drop-shipping space. You’ll need to create an account with them and then add an additional app to be able to browse products and offer them for sale.
Dropshipping Pros & Cons
Pros of Dropshipping
Cons of Dropshipping
Ideas for Your Dropshipping Business
There is a world of opportunity when starting a drop-shipping business, but you need to start someplace! The key is to find a niche, a subject or industry you’ll focus on with a specific target audience. You’ll need to attract customers to your site and the best way to do that is to show people things they are interested in.
Here are some ideas for a drop-shipping business:
To get more ideas for your dropshipping business, look at what’s popular online, and follow trends. Here are some places to help you see online trends and find product ideas for your business.
For more ideas on a successful business take a look at the case studies toward the end of this article.
Creating Your Dropshipping Business Plan
The first thing you need to do if you are serious about creating a profitable drop-shipping business is to think it through from beginning to end. It can be more exciting to jump in and start creating your site and promoting your content, but spending the time on thinking through the ins and outs of your business plan will keep you grounded and give you a clearer view of what you need to accomplish to make your website a success.
Who are your customers? How will you get customers? How much will you spend to gain a customer? What will you sell? How much will you charge? What is your profit margin? All these questions and more need to be thoroughly explored if you want to give your drop-shipping business the best chance to succeed.
Find your niche
Finding the right niche is critical to the success of your business. A niche refers to the subject or industry you are going to target with your website. Examples of niches include children’s toys or books about marketing. One of the primary benefits of a targeted niche is that it makes it much easier to find and market to potential customers. Speaking of customers...
Who is your customer?
You’ll need to have a solid idea of who your potential customers are. One way marketers develop their marketing plan is by creating buyer personas, usually between three and five distinct audience profiles. Think through potential customers and answer questions like, who are they (age, sex, location), what is their profession, what are their challenges, what do they want.
Having a solid idea of who your ideal customers are will help you as you refine the look of your site and your marketing material. A young female college student or a middle-aged male teacher might both be interested in buying a daily planner, but how you present it will affect how many people actually make the purchase.
How will you reach customers?
Profitably and reliably acquiring customers is likely the biggest challenge for any business. The online world is a big one, with distractions at every turn. How are you going to make potential customers know you exist? How will you stand out from all the noise online?
What will you sell and how will you sell it?
We’ll talk more about finding products when we talk about setting up your shop. But you’ll need to have an idea of what you are selling and how you will sell it. Are you selling physical or digital goods? Are you selling directly in your Shopify or BigCommerce store. Will you sell on social media?
Private and White label products
Well talk about finding and working with products shortly but at this point you should understand two distinct types of product-sourcing options, private vs white label products. White label products are generic, anyone with a drop-shipping app can sell the same product, and you can sell one product at a time. Private label products are branded with your business. Except for print-on-demand products (we’ll talk about them shortly), you’ll usually have to buy a bulk order when selling private label products.
How to Set Up a Dropshipping Business
Choose a platform
To get started with dropshipping, your best bet is to use either Shopify or BigCommerce to manage your site. A website is included with their $29 plan.
Use a custom domain
When you set up your account you’ll get a functioning website right away. But it will be on a subdomain like mystore.shopify.com or mystore. BigCommerce.com. If you want your own domain, like mystore.com, you’ll need to purchase the domain. You can buy the domain right from Shopify or BigCommerce, transfer an existing domain to them, or have your registrar point their servers.
Look and feel of your website
You'll be able to edit how your website looks. The "theme" is a style that determines an overall tone, you can choose from a few themes, and there are premium themes available as well. You'll be able to customize your colors, header and sidebars.
Your website content
You'll want to at the very least design your home and about page. Customers are careful about where they spend their money. By having a professional look and a story about your store you help establish credibility, which should translate to more purchases. You'll get a product page with all your offerings, but you'll also want to create pages that display like products together.
As you add products to your store, the platforms will create product pages for them automatically.
With your website up and running you'll need to find products to offer…
Finding products for your dropshipping store
You'll need to find a dropshipping app to be able to source products for dropshipping. Shopify and BigCommerce both have an app store where you can find third-party apps that connect to your store. These apps allow you to browse for the products and then add them directly to your store.
As you find products you like you can add them to your store.
These apps will present you with a marketplace that looks similar to Amazon or Ebay. When you find a product, you'll be able to see the supplier.
As you find products you like, you can add them to your list in the dropshipping app. To get them into your store you'll need to import them from the app to your store.
Alibaba and AliExpress
When dealing with the dropshipping world, it won’t take long for you to came across Alibaba and its subsidiary, AliExpress. Based in China, Alibaba is among the is one of the biggest players in the online world with US$72 billion in revenue in 2020 according to Wikipedia.
Both Alibaba.com and AliExpress.com are online marketplaces similar to Amazon, and both sites share much of the same inventory. Most of the products were manufactured in China and are available at price points much lower than you’ll see in stores.
The key difference is that Alibaba.com is a business to the business platform where resellers can find a product to sell in bulk. Because of bulk order requirements, Alibaba isn’t a good choice when you are getting started with dropshipping.
AliExpress is more similar to Amazon in that it is aimed at end consumers rather than businesses. Because you can buy single products as opposed to bulk, prices will be higher an AlieExpress. If you choose to sell products from AlieExpress, you’re basically buying the product from them, marking it up, and selling it to an audience unfamiliar with the website. A huge percent of all dropshipping products are purchased through AliExpress.
Working with suppliers
It's important to work with reputable suppliers. You are depending on them to get the correct product to the consumer as quickly as possible. A bad customer experience is your responsibility, and you will need to deal with the customer. By doing your best to vet your suppliers and make sure they are reputable, you are giving yourself a good chance to meet customer expectations.
When doing business with a supplier, keep in mind things like returns, fulfillment time, customer support, insurance, fraud protection. Also, take a look and find reviews or another way to get references.
Importing Products to your store
As you add products to the dropshipping app, you can and should edit the descriptions provided for the products. You can also do it later right in our main store admin. If you want to stand out, it’s important to have unique descriptions. Avoid importing the description that comes with the product. Your job is to sell the product, suppliers just get them. If they could sell the products themselves they would. You need to know your market and how to sell to prospective customers.
What problem is the product solving? How will it make their life better?
Once you have your products in the app, import them into your store.
Pricing your items
Your pricing strategy will play a big role in the success of your business. When you browse products you’ll see what the supplier will charge you. You’ll be able to mark up that price on your site. You can set a fixed dollar amount to be added to your products, or a percentage markup.
The profit you make per lase is the difference between what the supplier charges you and what you charge your customer. You can set the markup to apply to all the products you import, and also set the mark up for each specific product.
You can also set up more complex pricing rules based on the price-point. For items less than $10 add $4, products between $10-$50 add 30%, and for $50 and up and 20%.
Your job is to set the price point at a level here enough people are buying to meet your financial goals.
High vs Low Cost
There are trade-offs to choosing a high or low price-point and as you work through what products to offer, you should understand the trade-offs of the price point.
While expensive items will come with a bigger per transaction payout for you, as the price goes up you’ll have a harder and harder time getting someone to purchase.
Expensive items usually have a longer purchasing cycle, meaning that people take longer to convert. Nurturing your leads usually comes into play much sooner when you are dealing with a higher price point.
Inexpensive items on the other hand will usually have a higher conversion rate but a smaller profit for you. With a low price point, you are dealing with impulse buys that people don’t always give much thought to.
There’s no right answer, but the price of what you sell has a big impact on your web design, marketing language, customer service, and more. You have to find the right balance. You could find cheap product and mark it up by $100, but people aren’t stupid.
What matters is how many sales you are making and much profit you are making on each sale.
Dealing with shipping your products can be one of the biggest challenges for dropshippers. Because many of the products are coming from China, there could be significant delays to getting the product in the hands of your customer. Shipping delays can cause customer service issues.
Additionally, figuring out the cost of shipping and what to charge your customers can be challenging. You want to make sure you are not losing money on shipping, that you aren't charging too much and scaring would-be purchasers away, and also getting the item to your customer in a timely fashion.
It's important that you set expectations on delivery times with your customers to avoid customer service issues.
One tactic that works in some niches is to offer “free” shipping. Toke the price of shipping and add it to the final price the user sees, and then set shipping to “free.” Everyone loves something for free so being able to market free shipping gives you something to help differentiate yourself. Dropshipping app Oberlo has more on the free plus shipping model.
If you are looking for some inspiration on starting a dropshipping business, it helps to find stories of entrepreneurs that have made drop-shipping work for them.
Buying a website for dropshipping
While building your own website is something you can do, many times it might make more sense to buy an established website. There are hundreds of existing sites with profitable businesses available for purchase from a variety of sites, many of them drop-shipping businesses.
Many of the websites will come with email lists and other assets that will let you start making money almost immediately. But make sure you do your research when buying the site. The platforms will include some information about the site, including traffic numbers, but it’s vital that you confirm those numbers.
Sites where you can find existing businesses for sale include:
After reading this guide, you should have a thorough understanding of how to create a profitable dropshipping business. It’s not the set it and forget it system it’s often portrayed as online, but launching a sustainable and profitable drop-shipping website is a realistic goal for anyone willing to put in the work.
Maurice (Moe) Muise learned the ins-and-outs of government while an employee of the Government of Canada in Ottawa for 10 years. His current focus is helping small businesses in Ontario to identify and maximize government grants to grow their business.
Click here to learn more about Moe’s background and how he can help your business.