How to Start Dropshipping: The Real Steps and Costs

In short: To start dropshipping, choose a product with room for margin, order samples from suppliers, set up a store and work out your break-even advertising cost before spending. The supplier ships directly to customers, yet legally you remain the seller. You are responsible for delivery promises, refunds and complaints, and profit depends mainly on the cost of acquiring customers.

Dropshipping removes one big risk, buying stock that may never sell. It doesn’t remove the others. You still need traffic, a margin and satisfied customers, and you hand control of quality and delivery to someone else. Our separate article asks whether dropshipping is worth it. This one assumes you’ve decided to test it.

Step 1: Choose a product you can actually sell

Be wary of lists of “winning products.” When a product appears on such a list, thousands of other people have seen it too. Look for these qualities:

• Price high enough to fund advertising. A $12 item rarely leaves enough after product, shipping, payment fees and ads.
• Low return risk. Clothing with difficult sizing and fragile goods are prone to returns. Returns from customers are particularly awkward when a product came from overseas.
• Not easily found on a large marketplace. Buyers can search the same item on Amazon or AliExpress in seconds. Your store needs a reason to exist, such as a specific audience, a bundle, better information or better service.
• No safety or regulatory complications. Avoid products for children, electrical goods, supplements and cosmetics until you understand the rules. You may carry liability for what you sell.

A niche helps. A store for one hobby can build content and trust that a general store of unrelated gadgets never will.

Step 2: Test suppliers by ordering

Never choose a supplier using only its listings. Order samples from at least two or three, shipped to your own address, then look at:

• How long delivery actually takes, compared with the promise
• The product’s quality and whether it matches the photos
• Packaging, including any supplier branding or price labels
• How quickly and clearly the supplier replies
• What happens when something goes wrong, including their process for damaged goods and returns

Delivery time from overseas has been a frequent source of complaints. US-based suppliers typically cost more and ship faster, a trade-off that often pays for itself in fewer refunds. Ask about stock levels, too. A product going out of stock after you have taken payment is your problem, not your supplier’s.

Step 3: Set up the store and accounts

A hosted store is the usual starting point. As one example, NerdWallet lists Shopify’s Basic plan at $39 a month, or $29 billed annually, with online card rates of 2.9% plus 30 cents. Add apps, a domain name and possibly a theme, and check current prices, as these change.

These ranges are our estimates and not survey data. Real spending depends on your product and on how many tests you need, so treat the test budget as money you can afford to lose.

Business setup matters too. Depending on where you live, you may need a business registration, and you should find out about sales tax on your US sales or VAT on sales to Europe. Some suppliers ask for a resale certificate. An accountant can tell you what applies.

Step 4: Do the arithmetic before you advertise

Here is a simple worked example with assumed figures, using the Shopify card rate above:

Now look at the advertising. If each click costs $0.70 and 2% of visitors buy, an order costs $35 to win, and you lose about $13.50 on each sale. To make money with those figures, you would need a better conversion rate, cheaper traffic, a higher price or repeat purchases. Accounting firm Crunch puts it plainly in its guide, noting that a “£30 profit” on a £40 sale can shrink to £5 to £12 after ads, fees, refunds and store costs.

Run these numbers with real supplier prices before launching. It takes a few minutes and can save a lot of money.

Step 5: Know your duties as the seller

In the US, the FTC’s Mail, Internet, or Telephone Order Merchandise Rule applies to online sales, and its business guide is explicit: using a drop-shipper doesn’t excuse you. The seller is responsible. In summary:

• You need a reasonable basis for any shipping time you state.
• With no stated time, you must reasonably expect to ship within 30 days.
• If you can’t ship on time, you must notify the customer and offer the option to cancel for a full refund.
• Refunds must generally be made promptly, usually within seven working days for most payment methods.
• You can’t substitute store credit for a required refund.

Honest advertising is your responsibility as well. Don’t use fake reviews, invented discounts or false countdown timers. Don’t copy supplier product claims without checking them. Other countries have their own consumer laws, many with strong cancellation rights for online purchases.

Step 6: Launch small and watch the right numbers

Start with one product and a small daily ad budget. Track contribution profit, which is revenue less product, shipping, fees, ads and refunds. A large revenue screenshot tells you very little without those costs. Crunch’s warning is worth keeping in mind: a store doing £30,000 in sales may keep only a fraction of it.

Also track refund rate, delivery time, complaints and any chargebacks. If you can’t reach break-even after a planned test budget, change the offer or the product once, based on what you’ve learned, then reassess. Be wary of hopping between products endlessly, since you learn little from each one. Set a limit on total spending before you start.

Successful stores often grow out of pure dropshipping. They hold stock of their best sellers, develop a private label or find local suppliers, which gives more control over quality and margin. If you’d prefer to sell your own designs, compare print on demand vs dropshipping. Other routes are set out in how to start an ecommerce business and in our main guide to starting an online business.