A few years ago, e-commerce was revolutionized, dropshipping was born and turned the industry upside down. Above all, dropshipping has helped Shopify scale their business, so Shopify and dropshipping are often associated. In this article, you will learn what dropshipping is and how you can set up such a business with Shopify.
What is dropshipping?
Dropshipping describes a special form of online trading in which no own warehouse is required. Instead, the products are shipped directly from the supplier to the end customer upon purchase. This is why dropshipping is so popular, because the initial costs can be very low, which gives many people the opportunity to get started with this business model.
With dropshipping, the focus is on the product, because ultimately the product determines the target group and therefore which marketing measures lead to success. A large part of success in dropshipping depends on whether you can recognize what makes a good product.
The advantages of Shopify Dropshipping?
Dropshipping with Shopify has several advantages that are the reason why this business structure has made such big waves in recent years. It is important to note that the "gold rush phase" is now over. When dropshipping was new, few suppliers encountered many curious customers with little skepticism. It was easier to turn over large amounts of money. So it was only a matter of time before more and more companies jumped on the dropshipping bandwagon and the market became oversaturated over the last few years. In addition, customer mistrust has grown, as many products were of inadequate quality.
But dropshipping has some undeniable advantages, especially in conjunction with Shopify, and with the right approach, a successful business can still be built on it.
Low initial costs
The capital required to start an online store with dropshipping is extremely low compared to a conventional online store or physical store. By eliminating storage costs and inventory, most initial costs can be avoided.
Minimal operating costs
As no physical inventory needs to be stored, there are no costs for warehousing, insurance and logistics. This allows you to concentrate on building and marketing your business.
Variety in the product range
With dropshipping, a wide range of products can be offered without having to focus on a specific niche product. This enables flexible adjustments to the range and the ability to react to trends
Low risk for unsold inventory
As dropshippers tend to act as intermediaries and only buy products if they have already received orders, the risk of unsold inventory is minimized. This is a major advantage, especially for seasonal or trend products.
Time saving
Stock management can take up a lot of time. With dropshipping, this activity is largely eliminated, leaving more time for brand building, marketing and customer service. While the supplier takes care of stock levels and shipping.
Flexibility and scalability
As there is no need to invest in physical infrastructure, the business can be scaled more easily and respond flexibly to changes in demand.
Global reach
Dropshipping makes it possible to offer products worldwide without having to worry about international shipping and stock levels. This can significantly increase a company's reach.
Easy to start
The low initial costs and minimal operating costs make it comparatively easy to get started with Shopify Dropshipping. But it's not just the low costs that are decisive, there are already many tools and services that have established themselves over the years and make starting with dropshipping even easier. That's why many dropshippers rely on Shopify, because the store system offers many advantages that are crucial for a dropshipping business.
Possible disadvantages of dropshipping with Shopify
Of course, dropshipping also has its downsides and it's important to know both sides of the coin before you venture into selling with dropshipping. So here is an overview:
Low profit margins
Although the initial costs are low, products without volume discounts that are shipped individually across continents cost correspondingly more. This reduces the profit margin, which is why many dropshipping companies rely on bulk.
Dependence on suppliers
Supplier reliability can be a problem. If suppliers have problems with inventory availability or shipping, this can lead to dissatisfied customers. That's why it's important to identify a trustworthy supplier and, ideally, build a good relationship.
Limited quality control
Quality control is only possible to a limited extent; random sample products can be ordered, but the quality can vary. Here too, it is important to find the right supplier. After all, a poor-quality product or supply bottlenecks can damage the brand's reputation.
Intense competition
Due to the low entry barriers for dropshipping, there is often intense competition. The same products can be offered by different retailers, which makes it difficult to differentiate yourself.
Responsibility for customer service
Although you are not directly responsible for shipping, you still have to take care of customer service. In the event of unreliable deliveries, faulty products or long shipping times, this can quickly become a time-consuming and tedious task.
Fluctuation in product availability
Dropshipping retailers are dependent on the availability of products from their suppliers. If a product is suddenly unavailable, this can lead to inconvenience for customers.
Currency and time zone differences
If suppliers are based in different countries, currency and time zone differences can lead to logistical challenges.
Return problems
Returns and refunds can be more complex as products often come from different suppliers and have to be shipped across continents. This requires effective communication and coordination.
Brand building is difficult
As products from another manufacturer are sold, it can be difficult to build up your own brand. To do this, you have to negotiate with the supplier about packaging, the placement of your logo and any exclusive deals. This can be difficult or even impossible, especially at the beginning.
Conclusion on dropshipping with Shopify
Anyone who sees Shopify dropshipping as a way to get rich quick will quickly give up. Fortunately, the days when retailers made millions selling plastic scrap from China are over. If you want to be successful with dropshipping these days, you need to understand one thing above all else. "Which product does my target group want?" If you have the right instinct for a niche product, you still have the chance to create a successful business with dropshipping and can slowly develop into a well-known brand.
The right attitude and expectations are important at the beginning. If you expect too much, you will be disappointed and give up early. In the beginning, the focus should be on acquiring the right skillset and not on making a quick buck. Dropshipping can also be started alongside a full-time job and at a certain point can replace an employment relationship. Jumping straight in at the deep end and quitting your job can also work, but it is extremely risky. A mistake here can be life-threatening and is therefore less advisable.
It is also important to find the right balance between theoretical knowledge and practical experience. At a certain point, it no longer helps to acquire further knowledge about dropshipping, it's time to get started. Similarly, too little research can lead to gross mistakes being made that prevent progress. A balance is important here.
In particular, I would see dropshipping more as a stepping stone to gaining a foothold in e-commerce. The concept is ideal for testing a market and gaining experience. However, the profit margins are rather low, as many steps of the sales process are outsourced. I therefore recommend investing more in brand building after the proof of concept and possibly even building up your own stocks. However, this is not possible with fast-moving products.
That's why my guide is aimed more at those who want to build and scale a sustainable e-commerce business step by step with Shopify Dropshipping.
Building a dropshipping business with Shopify involves the following steps:
Choose a product
Research the competition
Find suppliers
Founding a company
Create an online store
Marketing
Learning and scaling
How do I find a good product for dropshipping with Shopify?
There are two approaches here, each with advantages and disadvantages. Ideally, you already have a product in mind that you want to sell and want to slowly build a well-known brand for precisely this niche. Alternatively, if you don't care what you sell and are primarily interested in improving your financial situation, you can make targeted use of trends and react flexibly thanks to the advantages of dropshipping. Whatever you decide, it's important that you put your product through its paces and this is how you do it:
Niche research: Identify niche markets that arouse your interest or in which you have experience. This could make it easier to select and market the product. It is important that the niche itself still has sufficient demand.
Trend analysis: Use tools such as Google Trends to find out which products or topics are currently trending. Make sure that these are not just short-term trends.
Competitive analysis: Examine the competition to determine which products are performing well. Analyze other Shopify stores, Amazon sellers and social media to identify trends and popular products.
Check product demand: Use tools like Google Keyword Planner to analyze the search volume for potential products. A higher search volume could indicate a stronger demand.
Problem solving: Look at products that solve specific problems for your target group. Products that offer a solution to a common problem often have a higher chance of success.
Consider seasonality: Consider seasonality, especially when it comes to certain products. Some items may be more popular at certain times of the year.
Check suppliers and shipping: Make sure there are reliable suppliers who can deliver the product promptly. Long delivery times could put off potential customers.
Pricing strategy: Analyze the prices of similar products on the market. Make sure that your product is competitive, taking quality and added value into account.
Read product reviews: Check product reviews on platforms like Amazon to gain insights into customer satisfaction and possible improvements.
Legal regulations: Make sure that your product complies with legal requirements and does not cause any legal problems.
Secure payment options: Check if it's a product that customers are willing to buy online. Products with a higher trust factor can be easier to sell.
If you have considered all these points and have found a product that is promising, then it's time for step 2.
Who is my competition?
Although you have already analyzed the competition when selecting your product to determine whether there is a discrepancy between supply and demand, this time you go one step further.
A look at your competitors will help you to understand what works and how you can convince potential customers of your product. This important prior knowledge will help you to address the needs of your target group as precisely as possible at the beginning. Later on, you can build on the experience you have gained and optimize your store even further.
First you should track down up to five competitors, then you can analyze what sets them apart and how you can create a better offer for prospects.
Google search as the first port of call
Enter your product name in the Google search and you will immediately be bombarded with offers. It is important to differentiate between organic results and paid ads. I recommend using organic searches to determine the competition, as these are usually the top dogs in the niche. However, it's also worth taking a look at the ads, as you're more likely to come across Shopify dropshipping stores that may even sell the same product. You can recognize ads by the "Sponsored" tag of the respective result.
Then familiarize yourself with the competitors and their online store, make a list of things that stand out positively about each competitor and try to define their USP (Unique Selling Point).
Then think about what you can do better than your competitors. You can also combine the strengths of your competitors to get the best out of your store. If you plan to sell your product in the long term, you should also think about a USP. If you succeed in doing this, the chances are good that you have actually discovered a gap in the market.
Social media analysis
Next, you should take a look at your competitors' social media ads. The best way to do this is to use a new profile and interact with content in your niche on TikTok and Facebook. Now it shouldn't be long before you start seeing ads about the topic. Take a close look at these ads and add the learnings to your list. You can also add new competitors to your list if you are particularly impressed by their ads.
Find out how your competitors communicate with their customers, analyze their feed design and check engagement on existing content. Use this information to further differentiate your brand and improve your social media presence.
Analysis tools
If you have an analysis tool such as Ahrefs or Sistrix at your disposal, you can also extract interesting data here. To plan for the long term, it can be helpful to take a look at SEO visibility. This tells you how difficult it will be to really build up organic traffic in the long term. Ahrefs Domain Raiting is particularly interesting here. This tells you how much authority your competitors have already built up.
The visibility index from Sistrix can also give you important insights. For example, you can see from the course of the visibility curve whether a steady improvement in visibility has been achieved, which usually indicates regular efforts in search engine optimization.
Now you should have collected enough data about your competitors, use your list to combine the findings and develop your strategy.
Find a reliable supplier for dropshipping
The supplier responsible for the product and delivery is at least as important as the product. Because if the supplier is unreliable, it creates a lot of work for you and can damage your company in the long term. That's why you should take a closer look here too. Here are the most important points you need to consider:
Supplier directories: Use supplier directories such as Alibaba, Oberlo, SaleHoo or other platforms to create a list of potential suppliers.
Check reviews and experiences: Read reviews and experiences of other retailers who have already worked with the potential suppliers. This can give you an insight into the reliability and quality of the suppliers. Take a closer look at the negative reviews here.
Communication and professionalism: Contact potential suppliers and assess their communication skills and professionalism. A reliable supplier should be able to respond quickly to inquiries and provide clear information. Ideally, you should also already present yourself as a professional trader.
Product quality: Order sample products to check the quality. This allows you to see the actual product quality and make sure it meets your standards. You should order several samples with different accounts to test continuity.
Delivery times: Ask about average delivery times to make sure they match your customers' expectations. Fast delivery times are an important factor in e-commerce.
Shipping costs and options: Clarify shipping costs and options. Transparency regarding shipping costs is important to avoid unexpected costs.
Scalability: Make sure the supplier is able to keep up with the growth of your business. You want to make sure that the supplier is able to process larger orders efficiently.
Legal aspects: Clarify legal aspects such as customs formalities and product regulations to ensure that you comply with all necessary regulations.
Price negotiations: Negotiate prices and conditions with potential suppliers. Don't forget to talk about possible discounts for larger order quantities. But also be aware that you may not have the confidence to secure large discounts at the beginning.
Flexibility: Find out how flexible the supplier is when it comes to adapting products, packaging or other requirements. This is particularly important for the future if you want to set your brand apart from others.
It's important to take the time to choose the right supplier, as this can have a significant impact on customer satisfaction and the success of your dropshipping business.
Founding a company with the right legal form
Since dropshipping with Shopify is a commercial activity, you need to set up a company for it. There are two main types of company that come into question here. A sole proprietorship or a GmbH. If you are starting from scratch, the simplest solution is to set up a small business. A small business is a special form of sole proprietorship and is aimed at people who are just starting out in entrepreneurship. Please note, however, that as a small business you are liable with your private assets.
Create a dropshipping online store with Shopify
Shopify is particularly suitable for dropshipping. The store system makes it quick and easy to set up an online store. You don't need any programming knowledge or your own hosting. It couldn't be simpler.
I have already explained in detail how to create a Shopify Shop in my Shopify beginner's guide. There I go into every step in detail.
The first step is to get your store up and running. After that, you will have to keep making small changes until you are profitable. Nevertheless, you should try to incorporate your previously collected data into the creation of your brand and your Shopify store.
You also need to be aware of the Shopify costs. Shopify has 3 subscription models, the Basic Plan costs €27 per month with annual payment. This is the most recommended plan to start with. If your company grows into a heavyweight over the years, Shopify Plus is the right plan for you.
The right Shopify theme is just as important. If you don't want to spend any money on this, I recommend Fashe. If you have budgeted for the design, then it's best to read our test of the best Shopify themes.
You can implement everything else over time, depending on your needs. The great thing about dropshipping with Shopify is that you can customize your store with apps and tools to suit your needs.
As soon as the store goes live, you have to draw the attention of customers willing to pay to your product.
Marketing, the be-all and end-all for Shopify dropshipping
One reason why Shopify Dropshipping was so lucrative in the beginning was the low advertising costs on Facebook and Instagram. In the meantime, however, advertising costs have risen noticeably, which affects profitability and emphasizes the need for optimization. Two advertising methods are particularly suitable for dropshipping. One is social media ads, the other is PPC ads, but influencer marketing can also make potential customers aware of your brand.
Social Media Ads
Social media ads are still an effective way to increase the visibility of your Shopify dropshipping business and reach potential customers. Here are some important steps and considerations for using social media ads:
Choose the right platform: Identify your target audience and choose the social platforms that are most relevant to your niche. Facebook and Instagram are often popular options, but depending on the product, platforms such as Pinterest or TikTok can also be considered.
Create appealing ads: Design is key. Make sure your ads are visually appealing and clearly communicate the benefits of your products. Use high-quality images or videos that spark interest.
Target group-specific targeting: Use the platform's extensive targeting options to direct your ads specifically to your target group. This can be based on demographics, interests, behavior and other criteria.
Carry out A/B tests: Test different ad variations to find out which works best. This can include the image selection, the ad text or the call-to-action. A/B tests help to optimize performance.
Budgeting and bidding strategies: Set clear budgets for your campaigns and use effective bidding strategies. This may mean focusing on cost-per-click (CPC) or cost-per-mille (CPM), depending on your goals.
Use retargeting: Implement retargeting strategies to retarget visitors who have already visited your website. This can be done through targeted ads for abandoned shopping carts or similar products.
Measurement and analysis: Use the platform's analysis tools to monitor the performance of your ads. Pay attention to key figures such as click rate, conversion rate and return on ad spend (ROAS).
Adaptation and optimization: Based on the analysis results, continuously optimize your ads and campaigns. Adjust your strategy to react to changes in the market or in the behavior of your target group.
Consistency in brand presentation: Make sure that the presentation of your brand is consistent. This includes the logo, color palette and tone of voice. A consistent brand presentation contributes to recognition.
Encourage engagement: Use functions such as surveys, competitions or story interactions to promote the engagement of your target group. Active interactions can improve the reach of your ads.
Evaluate the customer experience: Make sure that customers have a positive experience on your website after clicking on the ad. A user-friendly website and clear call-to-action elements are crucial.
Adapt to current trends: Stay up to date with current social media trends and adapt your strategy accordingly. Platforms are constantly changing, and understanding current trends can impact the success of your ads.
Community building: Use social media not only for advertisements, but also to build a community around your brand. Actively engage with your target group and promote exchange.
Social media ads can be a powerful tool for the success of your Shopify dropshipping business if used strategically and purposefully. Here you need to continuously experiment, analyze and optimize to get the most out of your advertising budget.
PPC ads on Google for Shopify Dropshipping
In addition to social media ads, PPC (pay-per-click) ads on Google also play a crucial role in the successful operation of a Shopify dropshipping business. Google Ads makes it possible to advertise for relevant keywords and present your products to a broad target group. Here are important steps and considerations for using PPC ads on Google:
Keyword research: Conduct thorough keyword research to identify relevant terms for your products. Use tools such as the Google Keyword Planner to analyze search volume and competition intensity.
Create targeted ads: Your ads should be precise and appealing. Use relevant keywords in the ad text and emphasize the USP of your products. Use clear call-to-action elements to encourage clicks.
Target group-specific targeting: Use the targeting options of Google Ads to direct your ads specifically to your target group. You can take factors such as location, demographic characteristics and interests into account.
Landing page optimization: Make sure that the Shopify landing pageto which your ads link offers an optimal user experience. The page should contain relevant information and provide a clear path to purchase or contact.
Budgeting and bidding strategies: Set clear budgets for your Google Ads campaigns and select the appropriate bidding strategy. You can choose between different options such as cost-per-click (CPC) or conversion optimization, depending on your goals. Start with a small budget and slowly increase the budgets of profitable campaigns
Carry out A/B tests: Test different ad variations to find out which one achieves the best results. Experiment with different ad texts, headlines and images to optimize performance.
Implement remarketing: Use remarketing strategies to retarget visitors who have already visited your website. This can help to retain potential customers and increase brand recognition.
Measurement and analysis: Use the Google Ads analysis tools to monitor the performance of your ads. Consider important key figures such as click-through rate, conversion rate and return on investment (ROI).
Adjustment and optimization: Based on the analysis results, continuously optimize your Google Ads campaigns. Adjust your keywords, ads and bids to increase efficiency.
Include mobile users: Since many users use Google on mobile devices, make sure your ads are optimized for mobile devices. This also includes optimizing the mobile landing page.
Use negative keywords: Implement negative keywords to exclude irrelevant search queries and minimize wastage. This helps to ensure that your ads are only displayed to users who are really interested.
Integrate customer reviews: Integrate customer reviews or testimonials into your ads to build trust. Positive experiences from other customers can strengthen the credibility of your brand.
The combination of social media ads and PPC ads on Google offers a holistic marketing strategy for your Shopify dropshipping business. Through continuous monitoring, adjustment and optimization, you can ensure that your ads are effective and bring the desired success.
Influencer marketing for Shopify dropshipping
In addition to social media ads and PPC ads on Google, influencer marketing can make a significant contribution to the growth of your Shopify dropshipping business. By working with influencers, you can build an authentic reach and introduce your products to a broad and engaged audience. Here are some key aspects of successful influencer marketing:
Identify relevant influencers: Search for influencers whose audience relates to your products. Platforms such as Instagram, YouTube and TikTok offer a wealth of influencers in different niches. Make sure the influencer's values align with your brand.
Relevance over reach: Prioritize the influencer's relevance over the sheer number of followers. A smaller, engaged follower base can often be more effective than a large but untargeted reach. Consider the interests and demographics of followers.
Draw up cooperation agreements: Draw up clear agreements and conditions for the collaboration. This should include details on products, compensation, publication plans and other relevant aspects. Also clarify how authentic reviews and experiences of the influencer are to be integrated.
Emphasize authenticity: Emphasize the authenticity of your brand and products. Influencer marketing works best when the presentation of your products is a natural part of the influencer's content. Authentic recommendations have a higher credibility.
Encourage creative collaboration: Encourage influencers to be creative and bring their own perspective to the collaboration. This can take the form of unboxings, tutorials or storytelling. The variety of content presented adds to the appeal.
Use tracking and analysis: Implement tracking methods to analyze the performance of influencer campaigns. Track clicks, conversions and other relevant metrics to evaluate the return on investment (ROI). This helps to better shape future collaborations.
Build long-term relationships: Strive for long-term relationships with influencers. Continuous collaboration makes it possible to build a lasting presence on influencers' social platforms.
Use micro-influencers: Consider working with micro-influencers. These often have an engaged and loyal following, and the cost of collaboration is usually lower. Micro-influencers can be particularly effective in niche markets. I would focus on micro-influencers, especially at the beginning.
Promote UGC (user-generated content): Encourage influencers and their followers to create user-generated content. This can further increase the visibility of your brand and show authentic experiences of other customers. To do this, you usually need to create an incentive such as a competition.
Ensure compliance with the guidelines: Make sure that influencers comply with the FTC guidelines for advertising and transparency. Clarify this before the collaboration and ensure that all requirements are met.
Influencer marketing offers the opportunity to build a personal connection with potential customers and strengthen trust in your brand. But by handpicking micro-influencers that are highly relevant in your niche, the ROAS can be positive right from the start. Through careful selection, clear agreements and an emphasis on authenticity, you can effectively integrate this marketing strategy into your overall Shopify dropshipping concept.
Learning what works and scaling
As you can see, to become a successful Shopify dropshipping entrepreneur, you need to master a number of disciplines. Aspects such as conversion optimization, Google Ads or social media ads are entire professional fields that require a lot of experience and know-how. Nevertheless, it is important to have touched all processes yourself to get an overview.
Then you have to learn what worked and what didn't and continue to optimize. Learning is the main keyword. It can take a while to get your dropshipping store in the green and there are many components that can cause you to fail. You may have to rework your product, your niche, your supplier, your Shopify design or your marketing strategy several times until you find the right recipe. The important thing is that you learn from your mistakes and get one step closer to your goal of a successful Shopify dropshipping business.
As a Shopify agency, we can help you with processes such as branding, conversion optimization and marketing. With us as your partner, you benefit from experts who specialize in one aspect of e-commerce. Contact us at any time for a non-binding consultation.
Luke Schmidt
Senior SEO Consultant
As an SEO expert and content marketing manager, Lukas successfully increases the visibility of our clients in Google. He shares his in-depth knowledge of online marketing, SEO, e-commerce and Shopify on the Golden Web Age blog.
