💡 How to Start a Digital Dropshipping Business
PS. It's tariff-proof.
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US-imposed tariffs are causing a massive shakeup in the dropshipping world. Today, I’ll tell you how you can run a dropshipping business that avoids tariffs completely.
Dropshipping is a powerful business model that can empower new entrepreneurs. It’s low-cost, low-risk, and enables rapid iteration, so business owners can test different ideas and determine what works before scaling up.
Although dropshipping sometimes has a bad reputation due to some bad actors, many large, reputable businesses got started through dropshipping, including Gymshark,1 whose revenue reached $709 million in 2023.2
However, recent changes to US import regulations and customs duties are wreaking havoc on dropshipping. These changes, particularly affecting goods from China, are forcing dropshippers to rethink their strategies.
A major factor is the elimination of the de minimis exemption, which allows shipments under $800 to enter the US duty-free. The exemption, which was recently eliminated for packages from Canada,3 Mexico,4 and China5 before being temporarily reinstated, is expected to be permanently eliminated soon.67
Dropshippers are adapting to this uncertainty in several ways, including:
Looking for local suppliers to partner with or suppliers from markets not targeted with tariffs. The downside is that many products are unavailable locally, or the costs may be too high for many consumers.
Focusing on selling higher-ticket products with better profit margins and lower order volumes to minimize the burden of new import requirements.8
But there’s one type of dropshipping that is still tariff-proof and doesn’t require any adaptation: digital dropshipping.
What Is Digital Dropshipping?
Digital dropshipping is a business model where you sell digital products (think ebooks, software, audio files, courses, templates, etc.) created by other people. Like traditional dropshipping, you don't handle any physical inventory or shipping. Instead, you partner with creators or companies that provide digital products that you can sell and fulfill automatically.
How Digital Dropshipping Works
Once a digital dropshipping business is set up, the order and fulfillment process is completely automated. Retailers find digital products available for resale and set up an online store to sell those products. When a customer buys something, their order is fulfilled instantly and automatically. Customers receive their digital products through email or download links, and the retailer gets their cut.
Digital Vs Traditional Dropshipping
Digital dropshipping differs from traditional dropshipping in several ways:
Delivery and Logistics: Traditional dropshipping products need physical shipping and handling, but digital products reach customers electronically without storage or transportation issues.
Cost Structure: Digital dropshipping cuts out inventory management, warehousing, and shipping costs. Digital products can be copied endless times with almost no extra cost.
Market Reach: Shipping limits create geographical barriers in traditional dropshipping. Digital dropshipping reaches anyone with internet access.
Digital dropshipping gives you better scalability and profit margins. You only need a computer and Internet connection to run your business from anywhere. Customers get instant access to their purchases, which makes them happy.
How to Start Digital Dropshipping in Four Steps
Starting a digital dropshipping business comes down to four key steps.
Select a Niche
Choose Your Products (+ How to Find Products)
Set Up Your Store
Market Your Products