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Wholesale is an antiquated business model in a lot of ways – mostly due to the fact that it does require quite a bit of overhead, lots of storage capacity, and can cause huge issues if the stock doesn’t move fast enough (or at all).
A much more efficient business model continues to gain traction, and it aims to address all of these issues, while lowering waste and increasing margins.
It’s what’s known as dropshipping.
Dropshipping is basically when a vendor fulfills an order for the customer on their behalf, either themselves or via a third party.
The sales order is sent directly to the supplier, who then fulfills the order by making the product and shipping it to the customer.
This keeps the vendor from having to store their own inventory.
There’s a lot of great benefits to dropshipping, including:
- Less overhead costs
- Easy business model testing
- Quick scaling
- Low barrier to entry
- No brick and mortar locations required
The best part is that the business model is so flexible, it can work for almost any product or niche.
For example, many Canadian print on demand businesses have had great success in using the dropshipping method to create their own unique online stores.
Leveraging strong suppliers and flexible shipping partners, you can create a business that has enough margin to make a profit, while not carrying any inventory yourself.
How to Start Dropshipping in Canada (A Step by Step Guide)
As mentioned, there’s very little barrier to entry in order to start a dropshipping company in Canada, and very little startup money is required to test the model and make your first sale.
Before we begin remember, you need to get to your first sale as quickly as possible, so do not spend your time, attention or money on things that won’t help you get to that sale.
Here’s how to get started:
1. Match Demand and Supply
Finding suppliers and setting up a dropshipping e-commerce store are the easy part, but if there aren’t going to be any customers for you to serve, your entire project is a waste of time.
With the barrier to entry being extremely low in dropshipping and pretty much anyone having access to the same dropshippers advertising on the Internet, you need to either find untapped demand or demand that you can better service or on the opposite, supply a new and innovate product that buyers may not be aware of.
On the demand side:
First and foremost you need to figure out if there are buyers looking for something who are either not being served at all (best case) or being under-served (not many options in terms of stores to buy from, not many choices in terms of colors or sizes for example).
You want to pinpoint an area where you think you can win and actually make sales because there is little competition or because you can work on a tighter margin since your overhead isn’t high vs a big box store.
While we won’t go in-depth into how you do this as this is a topic on its own, generally you want to hear from users or customers that are “looking to buy blue hats in St. Johns” and are having trouble finding them or “can’t find a good place online that sells quick drying towels in Tofino.”
Visit forums where people hang out and chat, Reddit, RedFlagDeals and join the conversations.
Use tools such as Google Keyword Planner, SEMRush and Ahrefs to look at search volume across Google, Amazon, YouTube and more to get real data on what people are searching for.
Once you identify the under-served demand, you’ll need to find a supplier of the product. We have a whole section on this below.
On the flip side, you can also start with suppliers and keep up to date with their new products.
Keep in mind that others may also be doing this, however if you move quickly, you may be able to carve out your piece of the market.
You can start small, for example, I’m going to try to sell this new and innovative BBQ accessory to anyone who has a cottage in the Great Lakes area.
Canada is small but whichever way you start, you may only want to focus on a small geographic location and pinpoint your efforts there until you gain traction.
This is a big step and there’s a lot going on here, but you need to get the above right and be confident that you can fit into the demand and supply equation, otherwise all of the efforts spent that follow are a waste of time.
Summary: Don’t try to be everything to everyone. Having a catalogue of 1,000 items doesn’t help – go for a focused, tailored catalogue, curated to what you think people are looking for (based on data and testing as possible).
I suggest keeping your catalogue small to start with and add complementary products as you gain traction.
2. Complete a Profit Margin Exercise
Once you’ve got a sense of the products you think you can sell, you need to understand what kind of margin they’ll have and if they’re profitable to pursue.
You’ll need to do a pricing exercise here, which should be pretty straight-forward.
Understand what the cost of the product is plus the shipping rate, whether it’s flat or postal code / province based from your supplier.
Look at the market and get a sense of what competitors are selling for.
If there are no competitors, look at complementary products.
You’ll need to get resourceful here – Look at eBay.ca sold listings for your product or similar.
Look at Kijiji.ca
You’ll need to dig to get a sense of what you can sell the product for.
You will need to continue testing pricing once you get your store going and increase / decrease price if necessary, but you want to have a level of confidence that your products are profitable before even starting.
Once you believe you know what the product can sell for, lets say $19.99 and the cost of the product shipped from your supplier is $11.99, you have $8 to work with or a 40% profit margin.
Now from this $8, you will need to pay for marketing and overhead and have something left for yourself.
A 40% margin on a product is healthy and should allow you to pay your expenses and have something left over if you do decent volume.
A 10% margin on a $19.99 product may be too tight to turn a profit, however a 10% margin on a product that costs $799.99 may still work out ok.
Sometimes margins are small, sometimes they are large, but in the end your goal is the same – pay your expenses and have money left over for yourself.
Spend some time understanding the numbers and getting comfortable with where you land before you go any further.
It’s great to have sales, however at the end of the day if you are negative after paying your expenses, you defeat the purpose as to why you started a dropshipping store in the first place.
As for forecasting how much of a product you can sell, that one is a little bit more tough, but again suggest you do a little bit of research on that and err on the side of caution by UNDERESTIMATING when forecasting how much you think you can sell.
This should give you a sense of where to go with this.
3. Order Samples
I highly suggest you order some samples of the product(s) that you plan to sell from the suppliers you’ve identified.
Note the shipping time.
See how the packaging looks.
Check out the quality of the actual product.
Test it, use it for a bit, ensure it does what it is intended to do.
Most suppliers these days will require you to pay for your samples, so don’t let that be a barrier to you moving forward if you’re serious about your business.
You may also need to go through multiple suppliers to find something that matches your standards.
Keep in mind that a crappy product will result in unhappy customers and refund requests.
It’s better to provide something of quality.
4. Take High Quality Product Pictures
While your supplier may have pictures ready to use, there are 2 issues I’ve seen here before.
The first is that the pictures are of poor quality.
If you’re trying to sell on an e-commerce store, you’re mainly selling based off of pictures – the pictures are really worth a 1,000 words.
Second, other savvy folks like you may have found the same supplier and will be using the pictures the supplier has provided.
This is an easy step where you can differentiate your store and position yourself differently.
You’ll need to be a little resourceful here to get to the desired outcome of professional pictures.
This is a good DIY guide to get you set up within $50.
If you need an editor after the fact, head over to Upwork to easily hire someone to touch up and edit your pictures for a very reasonable price.
5. Register a domain and set up an e-commerce Store
With your products chosen, suppliers ready and vetted, prices and margins worked out, pictures in hand, you’re now ready to set up your e-commerce store.
There are lots of really great (and easy to use) drag and drop web builders.
Each platform makes setting up a website and buying a domain quick and easy.
They also allow for Gmail plugins, so once you’ve bought your domain, you can easily set up an email account specifically for your store.
Shopify and BigCommerce are also strong contenders in the space.
Once you’ve set up your e-commerce site, create your product pages, upload your product images and create high quality descriptions for each product.
Share as much information as possible with your audience.
It will save you from answering questions individually via email, and ensure the customer understands what the product is (size, colour, material, etc.) which may lessen the likelihood of returns down the road.
Sidebar: Don’t waste a lot of time or money on a logo and the design of your site.
We’re after completion, not perfection.
Squarespace has some beautiful templates.
Your logo and design can evolve over time and AFTER your site starts gaining traction.
Head over to Fiverr if you really need a logo to get started, but I would just recommend using something simple that your website builder can output or a free logo creator.
6. Execute Your Marketing Strategy
The hardest parts of setting up and getting your store running are Step 1 and this step.
Setting up a store is easy these days, however if no one comes you’ll never be able to sell anything.
Pushing a store live and sitting back waiting for users to roll in is similar to hoping you’ll win the lottery.
You need an active plan to attract users to your site.
Construct a solid marketing plan – In the most ideal setting, you’ll want to create buzz around your store, create an organic following and start collecting emails well before you’re ready for launch.
That way when you do launch, you have a base to work off of.
While this is all dependent on a variety of factors the point is this: start your marketing efforts early and even before your store goes live if possible.
Once you do go live, start by sharing your new site and passion with friends and family and ask them to share it further.
Share your venture with any online communities you participate in.
Zero in on:
- Paid Google Ads
- Paid Facebook Ads / any other social media platform
- Building an organic following on social media platforms
- SEO to benefit from organic traffic
You will be required to spend some money here, however you can move slowly, and set small budgets (~$50) on Google or the social media platforms to start.
Test, tweak, keep iterating and get to that sale.
Dropshipping from China to Canada
For Canadian businesses looking to partner with a supplier in China, a great option might be Aliexpress.
The sister company to Chinese giant Alibaba, the solution is like Amazon for dropshippers and makes setting up dropshipping from China easy.
Many companies will sell goods for pennies on the dollar, providing Canadian dropshippers with excellent product margins.
Basically, when a customer buys an item from your store, you place the order with Aliexpress and the seller ships the item to your customer.
Typically, better rates are offered to vendors who sell more product, so as you scale, you’ll actually increase your margins.
If you decide to dropship using a Chinese company, you may have to deal with customs.
Canada taxes on both exports and imports and on certain products.
While customs costs can occasionally fall on either the seller or buyer, it’s a good idea to be transparent about what a customer should expect.
No one likes surprise charges, especially after they purchase an item.
Being unclear about the process – and the potential extra cost – could lead to a decline in repeat sales.
If you have an understanding of your product and the customs cost (if any) associated with it, it will help you to better communicate with your customers.
Should you need to take on the customs aspect of the purchase from your end, it’s advisable to find a good Customs broker which will help save you the headaches of navigating the complexities.
A broker, being an expert in Customs regulations, will also decrease the likelihood of penalties.
The Canadian Border Services Agency has a list of many reputable and licensed Customs brokers to make it easier to ensure you’re following Custom laws and getting your product to your clients as efficiently as possible.
If there are customs costs that will be accrued upon the delivery of the item, and the customer will be responsible for those costs, make note of it in the products description before checkout.
There are many upsides to having a China-based dropshipper.
- Access to thousands of low-cost products
- A wide variety of suppliers
- Easier to customize products (many Chinese suppliers can offer more variety in terms of colours and styles)
- No import restrictions/duties in China
- Easy to scale
However, there are a few downsides to using China-based suppliers that Canadian businesses need to be wary of:
- High delivery costs
- No quality assurance
- Canadian restrictions on Chinese imports
- Mislabeling of products
- Longer wait times
- You may not be able to bundle items (if a customer buys more than one item, they’ll be mailed individually)
- There may be communication issues if your supplier doesn’t speak French or English
You’ll need to weigh the pros and cons of any supplier, however, when it comes to using China-based suppliers, it’s very important to try the fulfillment process for yourself early on, so that you have a sense of how reliable the supplier is and what the customer will ultimately expect from the experience.
Finding Canadian Dropshippers
You don’t have to go all the way to China to find a dropshipper.
There’s actually plenty of options right here in Canada.
But instead of giving you a list of suppliers in Canada which you can simply find by Googling, we’ll give you some thoughts from our experiences which will hopefully guide you to successfully find the ‘right’ supplier.
To start with, if you can Google ‘Canadian dropshipping suppliers’ and find a list of suppliers within a few minutes, trust that every one else can and has also done the same.
It’s highly likely that all of those opportunities are already exhausted.
Some of the biggest wins I’ve seen in dropshipping have actually come from people finding suppliers to use who do not actually offer dropshipping.
They have no mention of dropshipping on their website and others quickly glance over these suppliers and move on.
In your search for dropshipping suppliers for your product, forget about the dropshipping part of it and start your search by looking for the best suppliers.
While Google is your friend, get creative, search eBay.ca or Amazon.ca for potential suppliers and reach out to them directly for example.
Once you find the right suppliers, it’s going to take additional leg work to get them to work in your dropshipping model if they don’t already.
Don’t let this stop you.
Consider this – no one is probably using the ‘dropshipping’ supplier you’ve found to dropship, as no one knows they dropship – adds a feather in your cap right off the bat.
There will be challenges:
- You may only make a small margin until you can get some decent volume going and prove yourself, after which you can aim to negotiate a larger margin.
- You may not be fully automated, the way some e-commerce stores fully integrate into dropshipping suppliers’ platforms, however, unless you’re doing a very high daily volume, this is something you can manage, and there are also other ways to ‘automate’
Essentially, think out of the box.
If you look for suppliers in the same place everyone is looking for suppliers, you can probably figure out the outcome of your new store right now.
Tax and Shipping Implications
If you are a dropshipping company selling to Canadian customers, keep in mind that you will have to charge taxes according to the province the product is getting shipped to.
You can find the current tax rates by province or territory on The Retail Council of Canada’s website.
Many e-commerce platforms will allow you to customize your website for your Canadian audience and calculate the taxes in the final cost at checkout on your website.
However, there may be other costs that should be factored into your sales price, and that’s shipping and customs.
Since Canada taxes on exports and imports and on certain products, you’ll need to find out what customs taxes will be applied to your product before you start selling.
Remember that your supplier will ultimately mail the product to the customer directly, so take the supplier’s location into consideration when calculating shipping times and costs.
At the end of the day, there’s a lot of money to be made if you are starting a dropshipping company in Canada.
The variety of products available and the general simplicity of setting up a digital store makes the barrier to entry low, even for those who may not be overly tech savvy.
And, while dropshipping from China is an attractive option, there are lots of homegrown businesses your company can support right here in Canada.
When you’re ready to begin, an entire ecosystem of brokers, dropshipping suppliers, and payment gateways are all at your fingertips online.
The best part?
No matter where you live, you can start making money within a few hours while investing very little in startup costs.