Shopify Dropshipping – How to Make Your Online Shop a Success

A few years ago, e-commerce underwent a revolution; dropshipping was born and turned the industry on its head. Above all, dropshipping has helped Shopify to scale its business, which is why Shopify and dropshipping are often mentioned in the same breath. In this article, you’ll find out what dropshipping is and how you can set up a dropshipping business using Shopify.

What is dropshipping?

Dropshipping is a specific form of online retail that does not require the business to hold its own stock. Instead, when a purchase is made, the products are dispatched directly from the supplier to the end customer. This is why dropshipping is so popular: the start-up costs can be very low, which gives many people the opportunity to get started with this business model.

In dropshipping, the focus is on the product, because ultimately it is the product that determines who the target audience is and, consequently, which marketing strategies will lead to success. A large part of success in dropshipping depends on whether you can recognise what makes a good product.

What are the benefits of Shopify dropshipping?

Dropshipping with Shopify has a number of advantages, which is why this business model has caused such a stir in recent years. It is important to note, however, that the ‘gold rush phase’ is now over. When dropshipping was new, a small number of suppliers encountered many curious customers with little scepticism. It was easier to generate high turnover. So it was only a matter of time before more and more businesses jumped on the dropshipping bandwagon, leading to the market becoming oversaturated over the last few years. Furthermore, customer mistrust has grown, as many products were of poor quality.

However, dropshipping – particularly when combined with Shopify – has a number of undeniable advantages, and with the right approach, it is still possible to build a successful business on this model.

Low initial costs

The capital required to set up an online shop using dropshipping is extremely low compared with a traditional online shop or a high-street shop. As there are no warehousing costs or stock to manage, most of the initial costs can be avoided.

Minimal running costs

As there is no need to store physical stock, there are no costs associated with warehousing, insurance or logistics. This makes it possible to focus on building and marketing the business.

A diverse product range

With dropshipping, a wide range of products can be offered without having to specialise in a particular niche product. This allows for flexible adjustments to the product range and the ability to respond to trends

Low risk associated with unsold stock

As dropshippers tend to act as intermediaries and only purchase products once they have already received orders, the risk of unsold stock is minimised. This is a major advantage, particularly when it comes to seasonal or trendy products.

Time saved

Inventory management can be very time-consuming. With dropshipping, this task is largely eliminated, leaving you with more time to focus on building your brand, marketing and customer service, whilst the supplier takes care of stock levels and dispatch.

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 or stock levels. This can significantly expand a business’s reach.

Easy to get started

Thanks to the low start-up costs and minimal running costs, it’s relatively easy to get started with dropshipping on Shopify. But it’s not just the low costs that are a key factor; there are already many tools and services that have become well-established over the years and make getting started with dropshipping even easier. That’s why many dropshippers rely on Shopify, as the shop platform offers many advantages that are crucial for a dropshipping business.

Potential drawbacks of dropshipping with Shopify

Of course, dropshipping also has its downsides, and it’s important to understand both sides of the coin before you venture into dropshipping. So here’s an overview:

Low profit margins

Whilst the initial costs are low, products sold without a volume discount and shipped individually across continents cost correspondingly more. This reduces the profit margin, which is why many dropshipping businesses rely on volume.

Dependence on suppliers

Supplier reliability can be an issue. If suppliers experience problems with stock availability or dispatch, this can lead to dissatisfied customers. That is why it is important to identify a trustworthy supplier and, ideally, build a good relationship with them.

Limited quality control

Quality control is only possible to a limited extent; whilst sample products can be ordered on a random basis, the quality may 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.

Fierce competition

Because the barriers to entry for dropshipping are low, there is often fierce competition. The same products may be offered by different retailers, making it difficult to stand out from the crowd.

Responsibility for customer service

Although you aren’t directly responsible for dispatch, you still have to handle customer service. If suppliers are unreliable, products are faulty or delivery times are long, this can quickly become a time-consuming and tedious task.

Fluctuations in product availability

Dropshipping retailers are dependent on product availability from their suppliers. If a product suddenly becomes unavailable, this can cause inconvenience for customers.

Currency and time zone differences

If suppliers are based in different countries, differences in currency and time zones can lead to logistical challenges.

Returns issues

Returns and refunds can be more complex, as products often come from different suppliers and have to be dispatched across continents. This requires effective communication and coordination.

Brand building is difficult

As you are selling products from another manufacturer, it can be difficult to build your own brand. To do this, you’ll need to negotiate with the supplier regarding packaging, the placement of your logo and any exclusive deals. This can be difficult, if not impossible, particularly at the start.

Conclusion on dropshipping with Shopify

Anyone who sees Shopify dropshipping as a get-rich-quick scheme will soon give up. Thankfully, the days when retailers made millions selling rubbish plastic from China are over. Anyone who wants to succeed with dropshipping these days needs to understand one thing above all else. “What product does my target audience want?” Anyone with a keen eye for a niche product still has the chance to build a successful business through dropshipping and can gradually develop into a well-known brand.

How does dropshipping work with Shopify?

At the outset, having the right mindset and expectations is crucial. Anyone who expects too much will be disappointed and give up early on. Initially, the focus should be on acquiring the right skill set, rather than making a quick buck. This means you can start dropshipping alongside a full-time job and, at a certain point, let it replace your salaried position. Jumping in at the deep end and quitting your job straight away can work too, but it’s extremely risky. A single mistake here could threaten your livelihood and is therefore not advisable.

It is also important to strike the right balance between theoretical knowledge and practical experience. At a certain point, acquiring further knowledge about dropshipping no longer helps; it is time to get started. Similarly, not doing enough research can lead to serious mistakes that hinder progress. It is important to strike a balance 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, profit margins tend to be quite low, as many stages of the sales process are outsourced. I would therefore recommend investing more in brand building once you’ve established a proof of concept, and perhaps even building up your own stock. That said, this isn’t feasible 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 using Shopify dropshipping.

Setting up a dropshipping business with Shopify involves the following steps:

• Choose a product
• Research the competition
• Find suppliers
• Setting up a business
• Set up an online shop
• Marketing
• Learning and Scaling

How do I find a good product for dropshipping with Shopify?

There are two approaches here, each with its own advantages and disadvantages. Ideally, you already have a product in mind that you want to sell, and you want to gradually build it into a well-known brand for that specific niche. Or, if you don’t mind what you sell and your main aim is to improve your financial situation, you can capitalise on trends and react flexibly thanks to the benefits of dropshipping. Whichever way you decide to go, it’s important that you put your product through its paces, and here’s how:

• Niche research: Identify niche markets that spark your interest or in which you have experience. This could make it easier to select and market the product. It is important, however, 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 they aren’t just short-term trends.

• Competitor analysis: Research the competition to find out which products are performing well. Analyse other Shopify shops, Amazon sellers and social media to identify trends and popular products.

• Check product demand: Use tools such as Google Keyword Planner to analyse the search volume for potential products. A higher search volume could indicate stronger demand.

• Problem-solving: Look for products that solve specific problems for your target audience. Products that offer a solution to a common problem often have a greater chance of success.

• Bear seasonality in mind: Take seasonality into account, particularly when it comes to certain products. Some items may be more popular at certain times of the year.

• Check suppliers and delivery: Make sure there are reliable suppliers who can deliver the product promptly. Long delivery times could put potential customers off.

• Pricing strategy: Analyse the prices of similar products on the market. Ensure that your product is competitively priced, taking into account its quality and added value.

• Read product reviews: Check product reviews on platforms such as Amazon to gain an insight into customer satisfaction and identify areas for improvement.

• Legal requirements: Ensure that your product complies with legal requirements and does not cause any legal problems.

• Secure payment options: Check whether this is a product that customers are willing to buy online. Products that inspire greater confidence may be easier to sell.

Once you’ve taken all these points into account and found a product that looks promising, it’s time for step 2.

Who are my competitors?

Although you have already analysed the competition when selecting your product to determine whether there is a discrepancy between supply and demand, this time you are going one step further.

Taking a look at your competitors will help you understand what works and how you can convince potential customers of your product’s merits. This important background knowledge will help you address the needs of your target audience as accurately as possible right from the start. Later on, you can build on the experience you’ve gained yourself and optimise your shop even further.

First, you should identify up to five competitors; then you can analyse what sets them apart and how you can create a better offer for potential customers.

Google Search as the first port of call

Type your product name into Google Search, and you’ll immediately be inundated with results. It’s important to distinguish between organic results and paid adverts. I recommend identifying the competition via organic search results, as these are usually the market leaders in the niche. However, it’s also worth taking a look at the adverts; here, you’re more likely to come across Shopify dropshipping shops that may even be selling the very same product. You can recognise adverts by the ‘Sponsored’ label on the relevant result.

Next, familiarise yourself with your competitors and their online shops; ideally, make a list of the positive aspects you notice about each competitor and try to define their USP (Unique Selling Point).

Next, think about what you can do better than your competitors. You can also combine your competitors’ strengths to get the most out of your shop. If you plan to sell your product in the long term, you should also think about a USP; if you manage to do this, there’s a good chance you’ve actually identified a gap in the market.

Social Media Analysis

Next, you should take a look at your competitors’ social media adverts. The best way to do this is to create a new profile and engage with content in your niche on TikTok and Facebook. It shouldn’t be long before you start seeing adverts on that topic. Take a close look at these adverts and incorporate what you’ve learnt into your list. You can also add new competitors to your list if their adverts have particularly impressed you.

Find out how your competitors communicate with their customers, analyse the design of their feeds and assess the engagement levels on their existing content. Use this information to further set your brand apart and improve your social media presence.

Analysis tools

If you have access to an analytics tool such as Ahrefs or Sistrix, you can also extract useful data from these. 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 build up genuine organic traffic in the long run. The Ahrefs Domain Rating is particularly useful here. It tells you how much authority your competitors have already built up.

Sistrix’s visibility index can also provide you with important insights. For example, by looking at the trend in the visibility curve, you can see whether there has been a steady improvement in visibility, which usually indicates a consistent effort in search engine optimisation.

By now, you should have gathered enough information about your competitors; use your list to bring all these insights together and develop your strategy based on them.

Finding a reliable supplier for dropshipping

Just as important as the product itself is the supplier responsible for the product and its delivery. After all, if the supplier is unreliable, it creates a lot of extra work for you and can cause long-term damage to your business. That’s why you should take a closer look at this aspect too. Here are the key points you need to bear in mind:

• Supplier directories: Use supplier directories such as Alibaba, Oberlo, SaleHoo or other platforms to compile a list of potential suppliers.

• Checking reviews and feedback: Read reviews and feedback from other traders who have already worked with the potential suppliers. This can give you an insight into the suppliers’ reliability and quality. 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 promptly to enquiries and provide clear information. It is best if you also 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 ensure that it meets your standards. You should order several samples using different accounts to test consistency.

• Delivery times: Ask about average delivery times to ensure they meet your customers’ expectations; carry out tests to verify this as well. Fast delivery times are a key factor in e-commerce.

• Delivery charges and options: Clarify the delivery charges and options. Transparency regarding delivery charges is important to avoid unexpected costs.

• Scalability: Make sure the supplier is able to keep pace with the growth of your business. You want to ensure that the supplier is able to process larger orders efficiently.

• Legal considerations: Clarify legal matters such as customs formalities and product regulations to ensure that you comply with all the necessary requirements.

• Price negotiations: Negotiate prices and terms with potential suppliers. Don’t forget to discuss possible discounts for larger order quantities. However, bear in mind that you may not yet have built up enough trust to secure significant discounts at the outset.

• Flexibility: Find out how flexible the supplier is when it comes to making adjustments to products, packaging or other requirements. This is particularly important for the future if you want your brand to stand out from the rest.

It is 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.

Setting up a business with the right legal form

As dropshipping with Shopify is a commercial activity, you’ll need to set up a business. There are two main types of business structure to consider here. A sole trader or a limited liability company (GmbH). If you’re starting from scratch, the simplest solution is to set up a small business. A small business is a special form of sole trader and is aimed at people who are just starting out in business. Bear in mind, however, that as a small business, you are personally liable with your private assets.

Set up a dropshipping online shop with Shopify

Shopify is particularly well-suited to dropshipping. The shop platform makes it quick and easy to set up an online shop. You don’t need any programming skills or your own hosting. It couldn’t be simpler.

I’ve already explained in detail how to set up a Shopify shop in my Shopify Beginner’s Guide. In it, I go through each step in detail.

The first step is to get your shop up and running. After that, you’ll need to keep making small adjustments until you’re turning a profit. Nevertheless, you should try to incorporate the data you’ve gathered so far into the development of your brand and your Shopify shop.

You also need to be aware of the costs involved with Shopify. Shopify offers three subscription plans; the Basic Plan costs €27 per month when paid annually. This is the most recommended option for getting started. Should your business grow into a major player over the years, Shopify Plus now offers the right plan for that too.

Choosing the right Shopify theme is just as important. If you don’t want to spend any money on this, I’d recommend Fashe; if you’ve set aside a budget for the design, then it’s best to read our review of the best Shopify themes.

You can implement everything else as and when you need to. That’s the great thing about dropshipping with Shopify – you can customise your shop to suit your needs using apps and tools.

As soon as the shop goes live, you’ll need to draw the attention of customers willing to pay to your product.

Marketing: the be-all and end-all of Shopify dropshipping

One reason why Shopify dropshipping was so lucrative at the start was the low advertising costs on Facebook and Instagram. However, advertising costs have now risen significantly, which is affecting profitability and highlighting the need for optimisation. Two advertising methods are particularly well-suited to dropshipping. Firstly, social media ads; secondly, PPC ads; but influencer marketing can also draw potential customers’ attention to your brand.

Social Media Ads

Social media adverts remain an effective way to boost the visibility of your Shopify dropshipping business and reach potential customers. Here are some key steps and considerations for using social media adverts:

1. Choose the right platform: Identify your target audience and select the social media platforms that are most relevant to your niche. Facebook and Instagram are often popular choices, but depending on your product, platforms such as Pinterest or TikTok may also be worth considering.
2. Create eye-catching adverts: Design is key. Make sure your adverts are visually appealing and clearly communicate the benefits of your products. Use high-quality images or videos that capture people’s interest.

3. Targeting specific audiences: Use the platform’s extensive targeting options to tailor your adverts to your target audience. This can be done based on demographics, interests, behaviour and other criteria.

4. Carry out A/B tests: Test different ad variations to find out which one works best. This may include the choice of images, the ad copy or the call to action. A/B tests help to optimise performance.

5. 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 objectives.

6. Using retargeting: Implement retargeting strategies to re-engage visitors who have already visited your website. This can be done through targeted adverts for abandoned shopping baskets or similar products.

7. Measurement and analysis: Use the platform’s analytics tools to monitor the performance of your adverts. Keep an eye on metrics such as click-through rate, conversion rate and return on ad spend (ROAS).

8. Adjustment and optimisation: Based on the results of your analysis, continuously optimise your adverts and campaigns. Adjust your strategy to respond to changes in the market or in your target audience’s behaviour.

9. Consistency in brand presentation: Ensure that your brand presentation is consistent. This includes the logo, colour scheme and tone of voice. A consistent brand presentation helps build brand recognition.

10. Boost engagement: Use features such as polls, competitions or story interactions to boost engagement amongst your target audience. Active interactions can improve the reach of your adverts.

11. Evaluating the customer experience: Ensure that customers have a positive experience on your website after clicking on the advert. A user-friendly website and clear calls to action are crucial.

12. Keeping up with the latest trends: Stay up to date with the latest social media trends and adapt your strategy accordingly. Platforms are constantly changing, and understanding the latest trends can influence the success of your adverts.

13. Community building: Don’t just use social media for adverts – use it to build a community around your brand. Engage actively with your target audience and encourage interaction.

Social media adverts can be a powerful tool for the success of your Shopify dropshipping business if used strategically and in a targeted manner. You’ll need to continuously experiment, analyse and optimise to get the most out of your advertising budget.

PPC adverts on Google for Shopify dropshipping

As well as social media adverts, PPC (pay-per-click) adverts on Google also play a crucial role in the successful operation of a Shopify dropshipping business. Google Ads allows you to target relevant keywords and showcase your products to a wide audience. Here are some key steps and considerations for using PPC adverts on Google:

1. Keyword research: Carry out thorough keyword research to identify relevant terms for your products. Use tools such as Google Keyword Planner to analyse search volume and competition levels.

2. Create targeted adverts: Your adverts should be precise and appealing. Use relevant keywords in the ad copy and highlight your products’ unique selling points. Use clear calls to action to encourage clicks.

3. Target audience-specific targeting: Use the targeting options in Google Ads to tailor your adverts to your target audience. You can take factors such as location, demographic characteristics and interests into account.

4. Landing Page Optimisation: Ensure that the Shopify landing page your adverts link to provides an optimal user experience. The page should contain relevant information and clearly show the path to making a purchase or getting in touch.

5. Budgeting and bidding strategies: Set clear budgets for your Google Ads campaigns and choose the appropriate bidding strategy. You can choose between various options, such as cost-per-click (CPC) or conversion optimisation, depending on your objectives. Start with a small budget and gradually increase the budgets for profitable campaigns

6. Carry out A/B tests: Test different ad variations to find out which ones deliver the best results. Experiment with different ad copy, headlines and images to optimise performance.

7. Implement remarketing: Use remarketing strategies to re-engage visitors who have already visited your website. This can help to further retain potential customers and increase brand recognition.

8. Measurement and analysis: Use the Google Ads analytics tools to monitor the performance of your adverts. Take key metrics such as click-through rate, conversion rate and return on investment (ROI) into account.

9. Adjustment and optimisation: Based on the analysis results, continuously optimise your Google Ads campaigns. Adjust your keywords, adverts and bids to improve efficiency.

10. Include mobile users: As many users access Google on mobile devices, ensure that your adverts are optimised for mobile devices. This also includes optimising the mobile landing page.

11. Use negative keywords: Implement negative keywords to exclude irrelevant search queries and minimise wastage. This helps ensure that your adverts are only shown to users who are genuinely interested.

12. Include customer reviews: Incorporate customer reviews or testimonials into your adverts to build trust. Positive experiences shared by other customers can boost your brand’s credibility.

Combining social media adverts with PPC adverts on Google provides a comprehensive marketing strategy for your Shopify dropshipping business. By continuously monitoring, adjusting and optimising your adverts, you can ensure that they are effective and deliver the desired results.

Influencer marketing for Shopify dropshipping

As well as social media ads and PPC adverts on Google, influencer marketing can make a significant contribution to the growth of your Shopify dropshipping business. By collaborating with influencers, you can build authentic reach and showcase your products to a broad and engaged audience. Here are some key aspects of successful influencer marketing:

1. Identifying relevant influencers: Look for influencers whose audience is connected to your products. Platforms such as Instagram, YouTube and TikTok offer a wealth of influencers across various niches. Make sure the influencer’s values align with your brand.

2. Relevance over reach: Prioritise the influencer’s relevance over the sheer number of followers. A smaller, engaged following can often be more effective than a large but untargeted reach. Take into account the interests and demographics of the followers.

3. Draw up collaboration agreements: Draw up clear agreements and terms for the collaboration. These should include details on products, remuneration, publication schedules and other relevant aspects. Also clarify how the influencer’s genuine reviews and experiences are to be incorporated.

4. Emphasise authenticity: Highlight the authenticity of your brand and products. Influencer marketing works best when the promotion of your products is a natural part of the influencer’s content. Authentic recommendations carry greater credibility.

5. Encouraging creative collaboration: Encourage influencers to be creative and to bring their own perspective to the collaboration. This can take the form of unboxing videos, tutorials or storytelling. The variety of content presented helps to make the campaign more appealing.

6. Using tracking and analysis: Implement tracking methods to analyse the performance of influencer campaigns. Track clicks, conversions and other relevant metrics to assess the return on investment (ROI). This will help you to better structure future collaborations.

7. Building long-term relationships: Aim to build long-term relationships with influencers. Ongoing collaboration enables you to establish a lasting presence on the influencers’ social media platforms.

8. Make use of micro-influencers: Consider collaborating with micro-influencers. They often have an engaged and loyal following, and the cost of working with them is usually lower. Micro-influencers can be particularly effective in niche markets. I’d focus on micro-influencers, especially when you’re just starting out.

9. Promote UGC (user-generated content): Encourage influencers and their followers to create user-generated content. This can further boost your brand’s visibility and showcase authentic experiences from other customers. To do this, you’ll usually need to offer an incentive, such as a competition.

10. Ensure compliance with the guidelines: Make sure that influencers comply with the FTC’s guidelines on advertising and transparency. Clarify this before you start working together 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. However, by working with hand-picked micro-influencers who are highly relevant to your niche, you can achieve a positive ROAS right from the start. Through careful selection, clear agreements and a focus on authenticity, you can effectively integrate this marketing strategy into your overall Shopify dropshipping strategy.

Learn what works and scale it up

As you can see, to become a successful Shopify dropshipping entrepreneur, you need to master a number of disciplines. Areas such as conversion optimisation, Google Ads and social media advertising are entire fields of work that require a great deal of experience and expertise. Nevertheless, it is important to have had a go at all the processes yourself at least once, to get an overview.

After that, you need to learn what has worked and what hasn’t, and keep optimising. Learning is the key. It may take a while before your dropshipping shop turns a profit, and there are many areas where things can go wrong. You may need to tweak your product, your niche, your supplier, your Shopify design or your marketing strategy several times before you find the right formula. The important thing is to learn from the mistakes you’ve made, so that you’re always one step closer to your goal of running a successful Shopify dropshipping business.

As a Shopify agency, we can support you with processes such as brand building, conversion optimisation and marketing. With us as your partner, you’ll benefit from experts who specialise in specific aspects of e-commerce. Feel free to contact us at any time for a no-obligation consultation.