How to Become a Dropshipping Supplier (Step-By-Step Guide)

Becoming a dropshipper is relatively straightforward: you choose a supplier, set up your store, and start selling.

But have you ever thought about stepping up to become a dropshipping supplier?

It’s an opportunity to expand your business, reach a larger audience, and build lasting relationships with retailers!

While it might seem more complex, becoming a dropshipping supplier is entirely achievable with the right guidance.

To help you get started, we’ve broken down the process into 11 clear steps.

Let's begin!

What is a dropshipping supplier?

You’re probably already familiar with how dropshipping works一selling products online without keeping inventory.

Instead, you partner with a supplier who manages your production and logistics.

But what’s your role as a dropshipping supplier?

Simply put, you’re the backbone of the operation.

You handle everything from product sourcing and storage to shipping, making it easy for dropshippers to focus on what they do best一marketing and selling to their customers.

Without reliable suppliers like you, the dropshipping model just wouldn’t work.

Why become a dropshipping supplier?

Becoming a dropshipping supplier can initially prove challenging, but the long-term rewards can be huge if you have the time and money to get started.

To help you decide if this path is right for you, let's explore the pros and cons.

The pros of becoming a dropshipping supplier include:

1. Scalability. Once you get the ball running, you can scale your business as a dropshipping supplier. You can grow your client base and increase the size of your warehouse to manage more orders.
2. Established systems. Platforms like Alibaba make it easy to find manufacturers. Plus, many dropshipping directories can help you find dropshippers who want to sell your products.
3. Less competition than with dropshipping. There are fewer dropshipping suppliers than dropshippers, mainly because the market is much harder to get in.
4. Control over profit margins. As a supplier, you have control over pricing and profit margins, allowing you to maximize your revenue without middlemen cutting into your profits.

The cons of becoming a dropshipping supplier include:

1. High upfront investment. If you want to become a dropshipping supplier, you need to invest in an inventory, develop and source your products, and potentially have your own warehouse.
2. Hard to validate product ideas. Unlike dropshippers, who can easily and inexpensively test products, testing product ideas as a supplier is more challenging. You may not know if dropshippers will want to sell your products.
3. Requires a wide range of skills. To succeed as a dropshipping supplier, you must know how to create products, negotiate with suppliers, market your brand, handle logistics, and more.
4. Dependence on retailers. Your sales depend entirely on retailers. If they fail to sell your products, it can negatively impact your revenue.
5. Complicated returns and refunds. If your products are stored by a third party, the returns and refunds process can be complicated, and the third party may not accept them at all.

Most people will be discouraged by the cons of becoming a dropshipping supplier.

However, this doesn't necessarily mean it's a bad business model since the long-term rewards can be substantial.

How do you become a dropshipping supplier?

The process of becoming a dropshipping supplier involves 11 steps:

1. Assess your current situation
2. Get your business and wholesale license
3. Choose your niche and products
4. Find your manufacturer
5. Create your products
6. Plan how you will store your goods
7. Decide where to find dropshippers
8. Price your products
9. Define your service-level agreements (SLAs)
10. Manage your inventory
11. Improve your processes

Below, we have broken down each step in more detail. There are many factors to consider when becoming a dropshipping supplier, so make sure to read every step:

1. Assess your current situation

Assessing your current situation helps you understand if you have the required budget, time, expertise, and legal requirements to become a dropshipping supplier.

Start by asking yourself the following essential questions:

• What is your budget? Your budget will determine how much you can outsource the different steps. For example, manufacturing a product is highly time-consuming, and you most likely want outside help.
• Do you have the required time to become a supplier? Becoming a dropshipping supplier takes a lot of time, and you should be prepared to invest time in it.
• Where are you going to store your products? You're responsible for storing the products you offer retailers. Most suppliers have their own warehouses for storing products.
• Who will be your manufacturer? To become a dropshipping supplier, you need a manufacturer to make your products. Most suppliers use Chinese manufacturers, like Alibaba, but you can also source local manufacturers.
• Do you have existing connections? If you already know manufacturers or people working with manufacturers, it can help with the process.
• Do you have enough experience? If you have no experience with dropshipping or ecommerce in general, becoming a dropshipping supplier can be extremely difficult.
• Are you eligible to become a dropshipping supplier? You must register your business and possibly a wholesale license (depending on where you live) to become a dropshipping supplier. We will go through this process in more detail in the next step.

All of these questions are important before moving on to the next steps. Becoming a dropshipping supplier is not easy, so assessing your current situation is a must.

2. Get your business and wholesale license

A wholesale license legally authorizes you, as a dropshipping supplier, to purchase products in bulk from manufacturers.

If you're a dropshipper, you can operate your business without a wholesale license. In fact, you might not even need a business license at the beginning.

But as a dropshipping supplier, having both a business and wholesale license is essential from day one.

That’s because your initial investments are much higher, and manufacturers will require these licenses before doing business with you.

Depending on where you live, you'll typically need to apply for a business license first, followed by a wholesale license.

The business license is usually easy to get, but obtaining a wholesale license often requires meeting specific criteria:

• Valid business registration
• Sales tax ID or sales tax permit
• Employer identification number (EIN) or federal tax ID
• Physical address for your business (many countries don't accept P.O. boxes)

The above rules apply in the US, but regulations vary by country.

So, you should research the specific laws and guidelines in the country where you plan to operate.

Since many countries (especially the US) don't accept P.O. boxes, you should ideally have your warehouse at this point.

3. Choose your niche and products

Choosing your niche and selling the right products is the foundation for becoming a successful dropshipping supplier.

If your products aren't attractive to retailers, they won't be interested in selling them. That’s why it’s best to focus on one niche at first.

This approach will also make working with manufacturers who often specialize in specific product categories easier—meaning you don't need to work with multiple manufacturers if you choose one niche.

Plus, designing your products is faster when you specialize in one area.

To decide on products, draw inspiration from items currently selling well.

You can use dropshipping product research tools like Sell The Trend and AliExpress Dropshipping Center.

While you can't completely copy products from these platforms, they can inspire you with ideas for what you could sell.

4. Find your manufacturer

Once you have a clear idea of your niche and the products you want to offer, it's time to find a manufacturer.

The platform we recommend for most dropshipping suppliers is Alibaba.

Alibaba is the leading platform for finding manufacturers across all niches. You can directly message them to design your own products or source existing ones.

In fact, many suppliers on AliExpress and CJDropshipping source their products from Alibaba manufacturers.

Let's look at an example of how to use Alibaba.

Suppose your niche is pet supplies. Type 'pet supplies' into the search bar, and you'll see a bunch of product options pop up.

When you click on a product, you'll see the wholesale prices listed on the product page:

If you find an interesting product and want to source it (or design and improve it further), you can message the supplier.

Alibaba also allows you to create entirely new products. However, not all manufacturers make new products.

To find ones that do, change the search option in the bar to 'Manufacturers' and then search for your niche.

Doing this, you'll find manufacturers in your niche, such as shown here:

You can filter manufacturers based on their reviews, product certifications, verification status, location, and more.

This way, you can save time by not dealing with suppliers that are not relevant to you.

Manufacturers also list their capabilities, which is helpful when assessing whether they're a good fit for your needs.

5. Create your products

Alibaba has millions (if not hundreds of millions) of existing products you can begin sourcing and offering to dropshippers, so creating your product isn't a must.

However, creating your own unique products can set you apart in the market.

If you choose this route, make sure you have the time for it. According to Global Trade Specialist, the manufacturing process takes approximately three to five months.

To create your own products, you need to go through several steps:

1. Develop a product concept. You can take inspiration from existing products or develop an entirely new product concept.
2. Design a prototype. You can use 3D modeling software, drawings, and product design tools to create a prototype you can send to the manufacturer.
3. Request quotations from multiple manufacturers. To find a manufacturer with the best prices and quality, you should request quotations from multiple different ones.
4. Order samples. Before you offer your products to retailers, you should order samples to ensure their quality.
5. Negotiate details. To prevent surprises, negotiate details such as payment terms, minimum order quantity, order details, and logistics.

6. Plan how you will store your goods

One of the most critical decisions you'll need to make early on is how you will store your goods.

As a dropshipping supplier, you're responsible for ensuring that products are available for retailers and that you can ship them on time.

There are several options available, each with its own advantages and challenges, which we'll discuss next.

Have your own warehouse

Having your own warehouse can be the most reliable way to store your goods, yet the most difficult.

The advantages are that you are entirely in control of your inventory and shipping process, and there is no middleman taking revenue away from you.

Plus, many platforms, such as Spocket, require suppliers to have their own warehouses.

However, setting up a warehouse, purchasing enough stock, and managing it all can be both expensive and time-consuming.

If you choose this route, you might find it helpful to learn from other suppliers who have documented their warehouse setup processes on platforms like YouTube:

Use 3PL warehouses

Another option is to use 3PL company warehouses. The benefit of this is that there are many good companies to select from, and they already have a system in place.

You can get started quickly and don't have to invest in your own warehouse. You still need to invest in buying stock, but the logistical aspects are handled by the 3PL provider.

The downside is that 3PL warehouses charge fees for receiving your products, storing them, shipping them, and providing pick-and-pack services.

Here is an example of the fees from a popular 3PL warehouse ShipBob:

The fees add up quickly, which will hurt your profit margins.

Because of these additional costs, many dropshipping suppliers don't use 3PL warehouses.

Plus, if you want to list your products on third-party platforms, some dropshipping marketplaces don't allow 3PL warehouses.

However, platforms like Modalyst permit suppliers to use 3PL warehouses, as outlined in their warehouse requirements.

Use CJDropshipping warehouses

Most dropshipping marketplaces don't allow you to store products in their warehouses, but there are options that allow you to do so.

One such option is CJDropshipping:

It's a dropshipping marketplace and fulfillment platform where dropshippers can find products and add them to their online stores.

If you join CJDropshipping as a supplier, you can list your products so that dropshippers can sell them.

CJDropshipping offers suppliers free storage in their China warehouses for the first six months.

They also have warehouses in major countries like the US, Canada, Germany, and Australia, though these may incur additional costs.

Here are some of the benefits CJDropshipping offers:

7. Decide where to find dropshippers

As a dropshipping supplier, finding dropshippers who want to sell your products is a must if you want to make money!

Let's look at the different ways to find dropshippers.

List on dropshipping marketplaces and directories

For most dropshipping suppliers, we recommend using dropshipping marketplaces and directories to list your information and products there.

Millions of dropshippers use these websites to find products, and if you get listed there, they'll potentially start selling your products.

These platforms also have good inventory tracking tools in place, which will benefit you.

For a full list, take a look at our article on the best dropshipping directories.

Avasam, Spocket, SaleHoo, and Modalyst are some popular options. To be accepted, you must complete an application process for each platform.

Here is what Avasam requires from you:

The requirements for all marketplaces are often quality inventory, good margins, fast shipping, and accurate product information.

If you can meet these requirements, you'll most likely get accepted.

Chinese platforms like CJDropshipping have less strict guidelines. You don't have to have your own warehouse since they offer a free warehouse service for the first six months.

Use Shopify Collective

Shopify has a service called Shopify Collective, which connects sellers with suppliers.

This can be a great way to get your products in front of dropshippers and other resellers.

To join, you'll need to apply. Here is what Shopify mentions of the requirements you need to fill:

Shopify Collective is completely free to use if you meet these requirements.

Create an AliExpress store

Another option is to create an AliExpress store. If you decide to go this route, you also make it possible for consumers to buy your products (not just dropshippers).

The advantage is that setting up an AliExpress store and listing your products is free. Here is what AliExpress mentions about it:

The downside is significant competition from Chinese sellers, who often offer similar products at lower prices due to their connections with manufacturers.

Network with dropshippers

You can use platforms like Reddit, Facebook, and different niche forums to network and connect with dropshippers.

This helps you advertise your supplier services and products directly to potential partners.

Improve your online presence

To make it easier for dropshippers to find you, make yourself visible on Google and different social media platforms.

To boost your SEO, make sure that your website includes clear contact information, warehouse locations, and details about who is behind the company.

Include pages like 'Become a Dropshipper' or 'Partner With Us' that are optimized with relevant keywords to attract search traffic.

Here’s a great example of transparency from dropshipping supplier KidsDistribution:

8. Price your products

After buying your products from a manufacturer, you should have high enough profit margins to cover your costs and generate a profit.

You may ask, how big a profit margin should I set?

If you've been a dropshipper, you may have gotten used to 2-5x profit margins. For example, the product cost would be $20, and you would sell the product for $60 (3x profit margin).

As a dropshipping supplier, your profit margins are typically smaller. Since you're selling products in bulk, selling 100 products, for instance, is easier than dropshipping.

The volume of sales compensates for the smaller profit margins.

When setting your product prices, consider these factors:

1. Research your market. Before setting product prices, take a look into your market and see where you fit in. Can you compete on price? Do you want to be known as the high-end supplier or position yourself as the budget-friendly option?
2. Calculate the manufacturer costs. You should know all manufacturer costs, including product and additional costs such as shipping, customization, and packaging.
3. Calculate your breakeven point. The breakeven point is when your total revenue equals your total costs, meaning you're neither making a profit nor a loss. Calculating your breakeven point ensures your pricing is sustainable.
4. Decide your profit margin. Dropshipping suppliers should aim for a 30-50% profit margin, often enough to cover additional expenses.
5. Take extra costs into consideration. These could include warehouse rent/loan, website fees, marketing expenses, customer acquisition costs, and more.

9. Define your service-level agreements (SLAs)

Service-level agreements (SLAs) help dropshippers understand what to expect from you as a dropshipping supplier.

As a result, you should have clear SLAs in place to avoid misunderstandings between you and dropshippers using your service.

Here is what your SLA should include:

• Order processing time
• Shipping methods and tracking
• Product quality assurance
• Responsibilities of suppliers and customers
• Payment terms
• Return and refund policy
• Termination conditions

If you want to list your products on platforms like Avasam, Modalyst, or Spocket, you must meet their SLAs.

For example, here's what Spocket requires from suppliers:

These platforms want to ensure you can provide high-quality service to customers.

10. Manage your inventory

If you want to be known as a reliable dropshipping supplier, you should keep track of your inventory and ensure you always have products available.

For this, you should use an inventory management tool that helps you track stock levels in real time, automate reordering processes, and alert you when stock is running low.

If you use an ecommerce platform, such as Shopify, you can manage your inventory using apps such as Stock Sync:

You can also find many good options just by Googling 'inventory management tools.'

If you use a dropshipping directory or marketplace, such as CJDropshipping, these platforms often have built-in inventory management tools.

However, they are often not advanced enough to replace robust inventory management software.

11. Improve your processes

Once your dropshipping supplier business is up and running, there are many ways to improve it.

Here are some ideas:

• Automate processes, such as inventory management.
• Deepen the relationship with your manufacturer and clients.
• Slowly expand your product range to offer more products.
• Optimize your shipping process for a better customer experience.
• Collect feedback from your resellers so you know what to improve.
• Follow industry trends to see how you could improve your services.

So, is becoming a dropshipping supplier worth it?

To summarize, becoming a dropshipping supplier requires significant upfront investments with no guarantee of returns, which is why we don't recommend it to most dropshippers.

Despite the difficulty, if you still want to become a dropshipping supplier, we recommend using platforms like Avasam, Spocket, and CJDropshipping.

These platforms allow you to list your products, and millions of dropshippers can find them and add them to their online stores.

If becoming a dropshipping supplier sounds too hard, you can consider alternatives.

One alternative is to become a dropshipping agent, where you source, pack, and ship products for dropshippers. However, this requires you to invest in a warehouse (preferably in China), so it also involves risk.

Another alternative is to start your own dropshipping business, which is the least risky option.

With regular dropshipping, there is no need to buy inventory upfront, and testing products is easy, which is why we recommend it.

Taking action

Reading and absorbing information and knowledge is great (definitely if it's' free!), but do you know what's even better?

Taking action!

So, to help you with taking action with what you have learned in this article, take a look at the bullet points:

• Assess your current situation. Consider your budget, the warehouse you'll use, how much time you can invest, and whether you want to design your own products.
• Get your business and wholesale license. To become a dropshipping supplier, you should have your business and wholesale license set up. This is important because you're dealing with higher investments than with regular dropshipping.
• Choose your niche and products. We recommend dropshipping suppliers to specialize in one niche (at least in the beginning), which makes working with manufacturers easier.
• Plan how you store your goods. You can either have your own warehouse, use supplier directories, or use 3PL warehouses to store your goods.
• Find dropshippers who want to sell your products. To find dropshippers who want to sell your products, you can list your products on marketplaces and directories, use Shopify Collective, create an AliExpress store, and network with dropshippers.

As a last step, ensure you keep accurate track of your inventory and have clear SLAs for retailers.

Conclusion

Hopefully, our guide on becoming a dropshipping supplier has been useful.

As you can see, significantly higher financial investment and risk are required than normal dropshipping.

It can still be a suitable business model if you think you have what it takes. However, especially for beginners, we recommend looking into regular dropshipping or alternatives like print on demand and private labeling.

All of these options are less risky and can still bring great results.

Want to learn more about dropshipping?

Ready to move your dropshipping store to the next level? Check out the articles below:

• How Does Alibaba Work? (What You Should Know in 2024)
• How to Find Dropshipping Suppliers in Europe (+ AliExpress)
• Minimum Order Quantity (MOQ) For Dropshipping: What to Know

Plus, don't forget to check out our in-depth guide on how to start dropshipping here!