Dropshipping is a term that everyone has heard. We see countless ads about it on YouTube and other social media platforms. The ads usually depict people earning thousands of dollars per month and encouraging the viewer to try their hand at it. Most of us tend to skip these ads, considering them fraudulent. Others don’t understand dropshipping at all. Well, we are to tell you that dropshipping is not illegal. It is a legit business activity which can prove to be financially rewarding. In this article, we will tell you everything there is to know about dropshipping and how to start it in Canada.

What is Dropshipping?

The figure below shows the value of eCommerce retail sales in Canada.

As you can see, this value is increasing each year. It shows the increasing preference towards eCommerce compared to in-store shopping. Based on this statistic alone, it is quite natural that one would like to set up their own eCommerce store. Indeed, if your store proves to be a hit, it can generate considerable wealth for you. You can say goodbye to your job, pursue all your interests, and retire early.

However, setting up an online store is not easy. There are many challenges involved. For example, which eCommerce platform to select or what products to sell. Even if you have answers to all the questions, you may not have the required investment. After all, it is not just about buying the products. You need a warehouse or dedicated space to store them. Then you need to set up an online store and market it. The costs can quickly rise beyond the savings you had set aside for this business idea.

Instead of giving up on your dream of setting an eCommerce store, let’s tweak it a little. This is where dropshipping comes into play. Suppose you have the money or expertise to set up a store and market it. The only thing you are lacking is the money to procure the products. Well, dropshipping allows you to sell products that are manufactured, stored, and then shipped by a third party.

Confused? In dropshipping, you will be selling products that you don’t own. There are no upfront costs involved either. The third party will only charge you a payment once the product is shipped to the customer. You may be wondering how does this benefit the manufacturer or the product owner? Well, instead of marketing the products themselves, they allow the dropshippers to handle this aspect.

Since they are engaged with multiple dropshippers simultaneously, their market presence is quite large. They enjoy higher sales without investing in marketing. The dropshipper benefits from the fact that they don’t have to worry about the product or the shipment. Thus, we can call it a mutually beneficial relationship. In other words, it is a win-win situation for all the stakeholders.

The below figure provides additional information on how dropshipping works.

Now, let’s focus on setting up this business.

How to Set Up Dropshipping in Canada

1. Register Your Business

The first thing you must do is register your business with the relevant authorities. When it comes to setting up a business, there are various options available. You can opt for a limited liability company, sole proprietorship, or a partnership (if you have a business partner). There are pros and cons for each. The tax liability also varies. We recommend consulting a business consultant to determine which business structure is the right option.

2. Finalise the Products

The second thing you need to do is identify the products you want to sell. There are two options. The first is to go for the most popular products in the market. The second is to focus on niche products. You have to work equally hard in either case. If you are focusing on popular products, there will be countless other dropshippers doing the same. Thus, the competition is quite high.

In contrast, if you are focusing on niche products, then you need to offer substantial points of differentiation to the audience. Otherwise, they won’t show any interest in buying your product at all. Of course, selecting the products is a whole lot challenging than what we just described. Therefore, we recommend that you invest as much time as possible at this stage to ensure long-term success.

Furthermore, there are various tools available for product selection purposes. These tools provide you insights regarding the number of people searching for the specific product and other details. Based on our research, electronics and lifestyle products have always been popular. You can select a subniche within these categories. The below picture is taken from Google’s Keyword Planner tool.

It shows the average monthly searches for elliptical machines in Canada. It clearly shows that the product is quite popular. Similarly, you can use other tools to gather as much data as possible before finalizing the products. Once again, do not rush this decision as you will come to regret it later.

3. Selecting the Suppliers

Once you finalise the products, you need to find the suppliers for it. This step is as important as the first one. You can find suppliers using a simple Google search. Go to Google and type ‘product name + area + dropshipping suppliers’. Google will return a list of suppliers that offer the product in the specified area. If you select a supplier who has a questionable reputation, your store’s reputation will take a hit. Therefore, conduct thorough research into each supplier. Evaluate the shipment time, pricing, and other aspects.

4. Competitor Research

You need to identify your top 10 competitors. Again, a simple Google search can help in this regard. Just go to Google and type the product you wish to sell. It will give you a list of websites that are offering the specified product. Understand what they are doing to differentiate the product from the competitors. What are the strengths and weaknesses in their approach. What can you do differently to grab the market share? Ensure to create a detailed document based on your research. You will need this information when designing your store and marketing strategies.

5. Create an Online Store

We recommend hiring an eCommerce website development company for this purpose. Share your requirements and they will guide you regarding the best eCommerce platform, design, functionality, and other aspects of the store. Of course, you should do your own research rather than blindly agreeing to whatever they suggest. The website should be scalable to cater new products and functionality in the future.

6. Start Promoting

This is the most challenging and resource intensive task of dropshipping. When it comes to marketing, the more money you invest, the higher the returns. However, we understand that not everyone has a high budget. Therefore, you need to select the most effective marketing strategy for your store. Based on our experience, search engine optimization and social media marketing are the most effective.

However, the right strategy depends on the product type and target audience. There is no point in marketing a product meant for older people on TikTok since they don’t use it. The below screenshot shows the platform’s usage by demographic.

Therefore, you need to plan the marketing strategy carefully. This is where we would like to go back to Point 4 – competitor research. Remember, we asked you to compile a comprehensive document on your competitors? Use that information to assess what makes their marketing strategy effective or ineffective. Using this information, design your own marketing strategy.

7. Optimise

Once you start getting visitors to your store, start monitoring the performance. Look at the bounce rate, exit rate, session duration, page loading time, conversion rate, and other metrics. Keep improving on all of them if you wish to achieve long-term success. Remember that setting up the store and marketing is just the beginning.

Real success comes from listening to your customers and catering to their needs. If product feedback is poor, change the supplier or introduce new products. Don’t give up due to any setbacks as it is a part of running any business. Only if you persevere can you enjoy the benefits of your hard work.

Conclusion

This concludes our article on how to start a dropshipping business in Canada. In our guide, we have covered each and every aspect of venturing into this business. If you have any questions or require help with setting up an eCommerce website for your dropshipping business, contact us. Thank You.