How to start dropshipping business in Australia? #1 guide

A beginner can start dropshipping by selecting a niche, finding reliable suppliers, setting up an eCommerce store using platforms like Shopify or WooCommerce, and marketing their products via social media or ads.

It requires careful planning and considerations like identifying market gaps in a niche, sourcing trusted suppliers, conducting cost and profit analysis, creating effective marketing strategies, and more.

Let’s start with a positive statement: Dropshipping still works beautifullyYou will also learn some key data & statistics about the dropshipping business model that are very compelling.

How to start dropshipping business in Australia?

Your question of how to start dropshipping in Australia or anywhere else in the world should be answered here.

Let’s get started.

Table of contents:

  1. What is dropshipping and its impact?
  2. Find a niche
  3. Understanding competition
  4. Dropshipping profitability analysis
  5. Find a supplier
  6. Registering the business
  7. Selling on own eCommerce website vs marketplaces
  8. Best eCommerce & marketplace platforms for dropshipping
  9. Customer service impact on dropshipping
  10. FAQs

What is dropshipping and its impact?

A dropshipping business is an online selling model where you do not need to have stock in hand, instead, you have a supplier who can directly deliver to your customers. The dropshipping business model has become very popular in Australia in recent years.

Dropshipping key Data, Statistics & Impact

If you want to understand the impact of dropshipping then get inspired by the following numbers:

  • Over 27% of online retailers now use drop shipping as their main order fulfilment method: StatsUp.
  • 2021 and 2026 dropshipping market size forecast – US $476.1 billion: Statista.

Now, that you know the impact dropshipping has, let’s go through the steps to starting a successful dropshipping business.

Find a niche

The first step is to starting a dropshipping business is to find the niche in which you would like to start your business in.

The first step to starting a dropshipping business is to find a niche that aligns with your interests, skills, and market demands. A niche defines the products or categories you will focus on to build the business around it.

How to find a profitable dropshipping niche?

You need to invest time to do research and analysis to find a niche that may be profitable, here are some strategies that you can apply:

  • Research Trending Products: Use tools like Google Trends, and read dropshipping niche-related blogs, product reports, or social media platforms to identify products that are currently in demand. Look for items with a decent search volume, popularity and competition.
  • Find A Gap: While researching you may realise gaps in the market like not enough retailers, items too expensive, quality issues etc. If you identify the problem and solve it better than others then chances of success are higher.
  • Evaluate Competition: Avoid markets that are oversaturated. Various tools can be used to do this, see the dropshipping competition assessment guide below.
  • Target Passionate Audiences: Niches that cater to hobbies, lifestyles, or specific interests (e.g. pet lovers, fitness enthusiasts, gamers) tend to perform well because people are willing to spend money on things they’re passionate about.
  • Profit Analysis: Focus on products with healthy profit margins. Get a general understanding first, later you will have to carry out a detailed dropshipping cost & profit analysis to ensure it will be a viable business option.
  • Personal Interest: Starting a business in a niche you’re genuinely interested in can keep you motivated and make marketing feel authentic.

Understanding competition

While choosing a dropshipping business niche you should carry out thorough competition research as entering a high-competition industry can lead to increased marketing spend resulting in minimum profit.

Here are some steps that you can take to do dropshipping and general competition research to start a business that may be a profitable one:

Check where your competitor’s advertising online

  • The first step is to competitors’ websites and find out where they are advertising online.
  • You don’t need sophisticated tools to check where they may be advertising online. You can use Google and other search engines to perform popular searches.
  • Utilise the Facebook Ads Library to see who is advertising on Meta platforms, and check other channels like TikTok, Instagram, and Pinterest. Additionally, sign up for competitors’ email newsletters to gain detailed insights into their promotional strategies.

Visit where competitor advertising online page for a step-by-step guide.

Find their ads budget estimate

  • Another important aspect of competition analysis is estimating their ad spend on platforms like Google Ads and Facebook Ads. While this task can be challenging as there is no one tool that can provide this, professional assistance can help you conduct a more detailed analysis.
  • Check out the following two links that talk in detail about ways to get competitor’s ads budget estimates in detail.

Check social followers

  • Higher social followers are a general indication that they may be serious and might be advertising for a long time to acquire a higher number of followers.
  • You can visit their social channels to see followers and engagements.

Check reviews & customer’s feedback

  • Check competitor’s online reviews and customers’ feedback about the experience they may have.
  • It is important to understand the distinction between genuine and fake reviews.
  • While reviewing their online reputation, you may find a gap where you can make a difference by fulfilling it to your advantage.

Now, since you know the competition, you will be in a much better situation to feel confident about whether the dropshipping niche you may have selected is right for you or not.

Dropshipping profitability analysis

This is an integral part of planning and starting a dropshipping business. If you get your cost and profit analysis wrong then you can go into loss very quickly.

The cost, profit and loss analysis for a dropshipping business is no different. However, you must carefully assess specific factors unique to dropshipping and your style of operation to determine whether your business has the potential to be profitable.

Key elements to consider during profitability analysis include:

  • Supplier’s Cost: Understand how much you will be paying your suppliers for products, including shipping and any additional fees.
  • Marketing Cost: Estimate the cost of running paid campaigns, such as Google Ads, Facebook Ads, and other digital marketing expenses.
  • Admin & Staff Cost: Factor in costs like customer support, virtual assistants, and other administrative expenses.

Example of Dropshipping Profitability:

Below is a simple example to illustrate how cost and profit analysis works in a dropshipping business for individual products:

Items Cost
Product Cost $30
Marketing Cost $15
Admin & Staff Cost $5
Total Cost $50
Selling Price $80
Profit $30

This example highlights a straightforward cost breakdown. To achieve better forecasting and long-term stability, consider adding more detailed cost categories, such as transaction fees, returns and refunds, packaging, or other potential operational expenses.

Find a supplier

Finding a trusted and reliable supplier is one of the most critical and challenging aspects of starting a dropshipping business.

Many local suppliers may not like a dropshipping business model as they may consider you not serious or too small for them to consider.

How to find dropshipping suppliers?

  • Local Suppliers: A straightforward way to find local suppliers is by searching online or reaching out to existing sellers in your niche and having a conversation if they are open to being a dropshipping partner.
  • Overseas Suppliers: Use popular platforms like Alibaba, AliExpress, or similar to connect with overseas suppliers offering dropshipping services.
  • Online Communities: Join relevant Facebook groups, online forums, and discussion platforms where dropshippers share recommendations and reviews.

Dealing with local vs overseas supplier

A drop shipping business can work with both local as well as overseas suppliers depending on what you are selling.

Working with overseas supplier

  • Easier to Find: Platforms like Alibaba make it simpler to connect with overseas suppliers.
  • Better Pricing: Overseas suppliers often offer more competitive pricing, allowing for higher profit margins.
  • Challenges: Trust and reliability can be a concern, as some suppliers may not consistently deliver on promises.
  • Shipping Time: Delivery times are usually longer, which may frustrate customers and impact your business reputation.

Working with local supplier

  • Stronger Relationships: Building trust is easier due to shared time zones, local operations, and governing laws.
  • Efficient Delivery: Shipping can be far more efficient while working with a local supplier which will have a positive impact on customers.
  • Lower Margins: Prices from local suppliers are generally higher, which can result in lower profit margins.

Registering the business

Register a business to trade in Australia. It not only gives your business a legal identity but also builds credibility with suppliers and customers.

Get professional advice from an expert. Seeking professional advice from an accountant, business consultant, or legal expert ensures you do the right thing and set a strong foundation.

Consider reading the following resources:

Proper business registration not only ensures compliance but also sets a strong foundation for your dropshipping business to operate seamlessly and grow successfully.

Selling on own eCommerce website vs marketplaces

You can sell dropshipping items on your own online store or marketplace websites. Both have their pros and cons.

Selling on own eCommerce website

Here you have to build an eCommerce website to list your products and market them to generate sales.

Advantages of selling on your own Platform

  • Greater Control: You have full control over your website’s design, branding, pricing, and customer experience.
  • Higher Margins: Since there are no marketplace fees, you keep more of your profits.
  • Brand Identity: Your website becomes the face of your business, helping to establish and grow your brand.
  • Scalability: Over time, you can scale your website by adding features, integrating tools, and expanding your product range.

Disadvantages of selling on your own platform

  • Costly Initial Setup: Building a professional eCommerce website, including hosting, domain registration, and design, can be a significant upfront investment.
  • Takes Longer to Get Started: Creating a website and building traffic takes time and effort, especially for beginners.
  • Do Your Own Marketing: Here you will have to invest on dropshipping marketingon your own.
  • Technical Challenges: For those new to eCommerce, managing technical aspects like website maintenance, and payment gateways can be challenging.

Selling on marketplaces

It’s a lot easier to get started to sell on marketplaces but you have limited control and less profit margins.

Pros of selling on marketplaces

  • Easy to Get Started: Selling on marketplaces is straightforward – simply create an account, list your products, and start selling.
  • Well-Tested Platforms: Marketplaces are user-friendly and optimised for eCommerce, ensuring a smooth selling experience.
  • Existing Customer Base: Marketplaces already have millions of active users, which can result in immediate exposure and potential sales.
  • Marketing Handled for You: Marketplaces often promote your products through their advertising and search algorithms.

Cons of selling on marketplaces

  • Limited Control: You are bound by the marketplace’s rules, policies, and fee structures, which limit flexibility in branding and pricing.
  • Marketplace Fees: High seller fees, commissions, and additional charges can cut into your profit margins.
  • Hard to Scale: Since you don’t own the customer relationship, scaling and building brand loyalty can be more difficult.

Best eCommerce & marketplace platforms for dropshipping

Whether you choose to sell on your own eCommerce or on marketplace websites or a mix of both, it’s important to know the best options in Australia.

Best eCommerce platforms for dropshipping

  • Shopify: This is the go-to and most common eCommerce platform for dropshipping, it has many features and access levels perfectly suitable for dropshipping.
  • WooCommerce: This is another popular eCommerce platform that can be used for dropshipping models.
  • Squarespace/Wix: If you want to try something affordable then Squarespace or Wix may do the job but they are not made purely for eCommerce.

Popular marketplaces for dropshipping

  • eBay: eBay remains one of the most popular marketplaces for dropshipping businesses due to its established user base and global reach.
  • Amazon: Amazon is another great marketplace that offers an unparalleled level of exposure to potential buyers. However, dropshipping on Amazon comes with stricter regulations compared to other marketplaces.
  • Etsy: It is a unique marketplace that focuses on handmade, crafts, and unique products.
  • Facebook Marketplace: Facebook Marketplace is an excellent platform for dropshipping, especially if you’re targeting local customers. It’s free to list products and integrates well with Facebook Ads.
  • Local Australian Marketplaces: There are many local Australian marketplaces that you may consider like MyDeal, Gumtree, Catch etc.

Customer service impact on dropshipping

In a dropshipping business, where competition is high and margins can be low, delivering exceptional customer service can be a key differentiator.

Dropshipping businesses may receive more enquiries related to shipping dealy, product availability, quality etc.

In order to start and be successful, you must have the necessary arrangements to answer customer’s queries through email or chat.

FAQs

Is dropshipping hard?

Dropshipping isn’t very hard, but it does come with challenges such as finding reliable suppliers, managing customer expectations, and handling marketing effectively. Success depends on planning, consistency, and adapting to market demands.

What is the hardest part in dropshipping?

The hardest part of dropshipping is managing supplier reliability and delivery timelines. As you don’t control inventory or shipping, ensuring quality products and timely deliveries can be challenging, especially when working with overseas suppliers.

What is the success rate of dropshipping?

The success rate of dropshipping varies. Success often depends on niche selection, marketing strategies, and how well customer service is handled.

How much does it cost to start a dropshipping business?

Starting a dropshipping business can cost as little as a few hundred dollars to a few thoughts dollars, which includes setting up an eCommerce website, purchasing a domain, and initial marketing. Additional costs like paid ads and apps may increase the budget depending on your goals.

How profitable is dropshipping?

The profitability of dropshipping depends on factors like niche selection, competition and demand. If researched and planned well then you can consider dropshipping business to be greatly profitable.

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