How to start an online store without inventory

Starting an online store can be overwhelming. There’s so much to figure out — business licenses, website builders, marketing strategies, and so on. If you want to avoid adding product manufacturing, warehousing, labeling, and shipping to that list, you’ll want to learn how to run a shop without holding any inventory.

Luckily, there are multiple ways you can approach this type of business. In this article, we’ll go over how to start an online store without inventory, as well as provide best practices to consider.

Options for how to start an online store without inventory

One of the main reasons entrepreneurs choose to start an online business without any inventory is because it requires less up-front capital investment. You don’t need to pay for the products themselves in addition to warehousing them. Plus, you can spend less time on logistical details and more time on marketing and bringing in more new customers.

Here are the options available to you for starting an online store without holding any inventory.

• Dropshipping: This is one of the most popular ways of running an online store without inventory. In this model, you partner with a third-party supplier who manufacturers (or buys), stores, and ships the product for you. You don’t need to purchase any inventory until you have a customer sale.

However, for this approach to succeed, choosing the right partner is key. “You want someone who can help you get your product from the supplier where it’s produced all the way to your customers’ doorsteps, without any major issues along the way,” says Rengie Wisper, cofounder of Ever Wallpaper, which sells unique wallpaper murals.

• A third-party logistics (3PL) company: A 3PL company is similar to a dropshipper, but they usually don’t manufacture the products. Instead, they procure them from suppliers, warehouse them, and ship them to your customers on demand.
• MLM (multi-level marketing): “MLM works by signing up other people to sell your products for you. You earn a commission on every product they sell,” says Anand K.C., head of marketing for Cloom Tech, a wire harness and cable assemblies manufacturer. “This can be a great way to get started without any upfront investment.”

Many multi-level marketing companies focus on beauty products, home goods, or accessories.

• Print-on-demand products: If you sell products that require customization, this is a good option. You can outsource to an external partner with printing capability who can store basic items (such as plain T-shirts, mugs, and more) and print specific details on them when a customer places an order. “Again, there is no upfront investment required from you,” says K.C.
• Affiliate model: With this method, you partner with other stores that pay you a small commission every time you sell one of their products through your website. They handle product sourcing, warehousing, and shipping logistics.
• Digital products: If you want to create your own products but don’t have the physical storage space for them, digital products may be a good choice. For example, online courses, educational videos, and services all fall into this category.

Best practices to follow

Regardless of which method you use to start an online store without inventory, consider the following to ensure your e-commerce venture is a success.

• Know your target audience. Be sure to have a thorough understanding of your ideal customers’ demographic, geographic, psychographic, and behavioral characteristics. This will help you determine specifically which products and services they’re looking for.
• Make the buying process as smooth as possible for your customers. Your customers likely don’t care whether you’re dropshipping or using a 3PL company — they just want the products they’ve purchased. Minimize hiccups with order fulfillment by working closely with your partners. If any issues occur, take responsibility and support your customers.
• Emphasize the marketing strategy. “This will help you build up your audience and get them interested in what you’re selling before they even purchase anything,” says Wisper. “And then it will help ensure that once they do buy something, they’ll come back again.” 
• Use your strengths. Not all of these no-inventory options will work for every type of entrepreneur. If you have strong marketing skills, then affiliate marketing may be for you. If you love creating content, digital products may be your thing. Know what you’re good at and use that to your advantage in your business model.
• Try multiple options. For some businesses, using more than one no-inventory method may be a good idea. For example, if you create digital courses and sell them, you could also have an affiliate program where you sell other people’s digital courses to compliment your offering. If you make candles, you could sell them alongside dropshipped candle holders.

When you’re thinking about how to start an online store without inventory, remember that you have options. There are several ways you can approach the business, so you don’t have to feel tied to a specific business model.