Last updated - July 11, 2022
Despite or perhaps because of the pandemic, retail ecommerce went through one of its biggest year-on-year growth phases in the past decade. According to Statista, it grew from $3.35 trillion in 2019 to nearly $4.3 trillion in 2020. And that’s not all: they estimate it to reach $5.4 trillion by 2022.
With rising incomes, growing populations, and easier access to technology, the internet is the perfect place to look towards when you want to build a new income stream. And courtesy of online marketplaces like Alibaba and AliExpress, you don’t need to invest in large warehouses or stock if you want to sell online.
You can start a dropshipping store and automate its operations with the help of a powerful ecommerce platform like Magento, known now as Adobe Commerce. Let’s explore everything you need to know about dropshipping with Magento 2, including what it is, why it’s so lucrative, and how you can build a Magento dropshipping store.
An overview of dropshipping
Contrary to popular belief, dropshipping isn’t a business model but a fulfillment model. Each time a dropshipping store gets an order, they place it with a third party that ships directly to their customers.
This model reduces the money required to start an online business tremendously. It eliminates the need for businesses to purchase stock upfront and lets merchants use capital towards other aspects such as marketing and website development.
With dropshipping, you only need to purchase stock after you’ve made a sale. So, unlike traditional retail businesses, you have more cash on hand and don’t have to worry about issues like dead stock or non-payment.
Dropshipping allows you to run a business from any place with an internet connection. You don’t need a dedicated office or warehouse. You could be on a beach in Hawaii sipping Mai Tais working off your laptop.
The best part is that you can always scale a dropshipping business into a traditional retail fulfillment model once at your convenience. It lets you test different business ideas and niches without significant investments. Moreover, it also helps you to adapt to changing buyer needs rapidly.
Five reasons why Magento 2 is perfect for dropshipping
Now that you understand what makes dropshipping so lucrative, let’s explore why Magento 2 is the ideal ecommerce platform to build a dropshipping store.
Flexible and scalable
The key to dropshipping success is scaling with customer demand. And when it comes to scalability, Magento is the best there. It lets you scale vertically and horizontally and can adapt to changing demands without compromising performance.
Magento offers a modular architecture that allows you to extend the platform any way you like. You can modify default modules and introduce new functionality without risking the integrity of the entire codebase.
Offers a powerful catalog and inventory management system
Besides an agile codebase, Magento offers one of the most robust catalog and inventory management systems on the market. It supports various product types, including simple, configurable, bundled, grouped, and virtual products.
Additionally, it can support an unlimited inventory size without limiting your ability to introduce new products or experiment with different niches. It also supports multisource inventory so that you can easily automate inventory collection from different warehouses and ensure your store always displays the latest stock information.
As an open-source platform, developers globally review and contribute to the Magento codebase. This ensures that merchants have access to the latest ecommerce features as trends emerge. Moreover, it keeps you in control of your store and customer data.
You won’t be locked out of your store by a third party, and you’ll have complete access to its codebase, unlike popular Software-as-a-Service (SaaS) solutions on the market.
As a leading ecommerce platform, Magento is one of the most SEO-friendly ones out there. The default Magento product template contains markup based on Schema.org standards, reducing the need for third-party extensions out of the box.
Like other aspects of Magento, you retain complete control over your store metadata as well. You can optimize products, categories, and CMS page metadata by yourself. With other features such as canonical meta tags, robots.txt, Google Analytics, and sitemap support, you have everything you need to rank your store on search engines from day one.
The best part about Magento is that you get a mobile-friendly website out of the box. Every Magento store ships with a default theme called Luma designed to ensure pixel-perfect displays on all devices.
You don’t need to invest in building a mobile-friendly website or buying a theme initially. Instead, you can use your capital to fuel your growth.
Seven steps to building a Magento dropshipping store
Here’s how you can build a dropshipping store on Magento 2 in seven easy steps.
Choose a niche
The first step in building a dropshipping store is choosing a niche. Merchants often pursue profitability or popularity when they’re selecting a dropshipping niche. Instead, we recommend that you prioritize familiarity so that you can sell your products quickly.
If you understand the industry and are aware of common customer problems, you can use that knowledge to solve them through your products. For example, if you’re passionate about fitness, you can build a dropshipping store selling protein shakers, fitness apparel, and accessories such as towels, bands, and straps.
Conduct competitor analysis
Once you’ve finalized a niche, it’s time to investigate the competition. First-time entrepreneurs often skip this step or don’t carry it out thoroughly. However, veteran dropshippers understand the value of competitor analysis for building a sustainable and profitable store.
Start with a quick analysis of the top keywords of your niche to identify demand. You can use free Google tools such as Google Trends and the Google Keyword Planner for this. Then, perform searches to identify your competition on search engines. This includes those who rank organically on the first few pages and those investing in Google Ads for your target keywords.
Create a spreadsheet analyzing the average product cost, shipping fees for different postcodes, and the returns policy of each competitor. This information will help you price your products competitively and ensure consistency with industry norms.
Find the right supplier
Working with the wrong supplier can be disastrous for your business. Therefore, spend at least a few days researching both overseas and local suppliers before you choose. Although overseas suppliers might offer lower prices, their higher shipping costs and lead times can hurt your profit margins.
It can be challenging to judge suppliers without purchasing from each one to evaluate delivery times and costs when you’re starting. However, look for those who’re responsive to your queries and willing to work with you on ensuring faster delivery times.
And, if possible, look for ones that can ship with reputed courier companies like FedEx, UPS, and DHL. It’s easier to follow up with the courier yourself in case of delayed shipments or lost parcels instead of relying on your supplier each time.
Take care of the legal stuff
Once you’ve finalized your supplier, it’s time to deal with the legalities of starting a business. You can commence your business as a sole proprietor or choose a corporate entity for more legal protection.
A consultation with a business lawyer or Certified Public Accountant can prove invaluable at this stage. Once you’ve incorporated your business, make sure you apply for any permits required to run your business to comply with local regulations.
Build your store
Once you’ve tackled the initial legalities, it’s time to build your website. First, select a domain name that’s descriptive and relevant. This will make it easier for your audience to understand what your website is about and click through to it on search engines.
Then, pick a host for your Magento 2 store. You can choose a managed hosting service like Cloudways or Nexcess to outsource the technical stuff. Alternatively, if you’re tech-savvy, you can opt for a DIY hosting service like DigitalOcean or Amazon Web Services and configure your Magento store from the ground up.
After that, you can choose to install an off-the-shelf, third-party or custom theme on your website. Once you’ve finalized your store design, it’s time to upload your products, optimize your website content for SEO, and finally go live.
Drive traffic to your website
No matter how good your products or website are, you won’t see any sales unless you drive relevant traffic to your website. Building your organic website authority can take anywhere from a few months to a few years, depending on how aggressively you’re investing in marketing.
A quicker and lower-cost method to drive traffic early on is to invest in online ads. You can use Google Ads, Facebook Ads, and even Instagram ads to advertise your products. Combine that with a foolproof social media marketing strategy, and you’ll be on your way to achieving online success in no time.
Track, analyze, and optimize
Once the orders begin rolling in and your website traffic grows, it’s time to leverage the powerful reporting functionality in Magento to analyze your store performance and optimize it for growth.
You can also look at other metrics from your ad campaigns and social media profiles to identify where your top customers come from and which products they like. Magento gives you everything you need to run a successful dropshipping store.
Magento dropshipping: The best way to build a business without breaking the bank
Building a Magento dropshipping store is one of the best ways to start an online business on a budget. With Magento’s ability to support powerful integrations, you can automate everything in your store, from inventory updates to order processing.
A dropshipping business can give you the freedom to build a passive income without overextending yourself. To ensure ongoing success, experiment with new opportunities and optimize store performance to target changing buyer preferences early.