There’s no question that you’ve come across dropshipping if you have looked into various online business strategies. There has been enough talk about this ostensibly straightforward eCommerce method for more than ten years. So how much can you make from dropshipping?
As a matter of fact, there aren’t many materials available on the topic which don’t seem to be sales videos or pitches trying to sell you something.
When you are on YouTube, you’ve probably seen enough video advertisements demonstrating how “simple” it is for you to launch a dropshipping store using Shopify without any upfront capital.
Yet as you can expect, the dropshipping sector is considerably less glamorous. Nothing against Shopify’s supporters, but that’s just the reality.
But if done properly, dropshipping can help you transform an idea and make it a real business success story.
The simplest and quickest approach to launch a small internet business is definitely through dropshipping.
Regrettably, mistakes are simple to make. A faulty business strategy can result in numerous hours of lost time as well as thousands of dollars if you are not working with a quality product, the appropriate inventory supplier, or a trustworthy dropshipping provider.
Therefore, presuming you do it correctly, let’s investigate how much money you can actually make from dropshipping.
How Does Dropshipping Work?
Order fulfillment is the main purpose of dropshipping.
I mean, that’s it.
The term “dropshipping model” describes an online company that sells to the customer but is not the one that sends the purchased items.
Instead, the inventory supplier sends the items straight to the buyer.
You don’t need to purchase inventory or manage storage, which is obviously advantageous to you as the vendor.
The dropshipper lets you do all the marketing and sales. This enables them to prioritize supply chain management and inventory control.
The dropshipping business model benefits both parties when it comes to particular items that are expensive or heavy to ship.
Different types of businesses engage in this activity. Even large retailers, like Amazon, incorporate dropshipping into their retail operations.
Dropshipping Income – A Variety Of Dropshipping Models
Dropshipping is something that can be divided into two groups: low-cost and premium. If you carefully go through the section, you would already know my preference.
Let’s get into it.
Low-Cost Dropshipping
The business strategy that has presumably been aggressively promoted in those web commercials mentioned earlier is low-ticket drop shipping.
The business plan is broken down as follows:
- You set up a store on Shopify or using other eCommerce platforms and add items from AliExpress – your dropshipper—to your store.
- After that, you try to promote your online store on social media sites like Facebook. You should consider running Amazon advertisements as well if you have an Amazon seller account.
Both the number of items that are promoted and the scale of the store varies. A Shopify business, for instance, can specialize in selling one item or can be a “generic” store selling a variety of different products.
As an alternative, you can approach influencers on social media to promote your products in exchange for a fee or payment.
Although it might appear simple, as a dropshipper, I am not a big fan of this option.
It’s gotten to a point where I genuinely struggle to believe other people that say they’ve had success using this model.
Note: I’m not implying that it is impossible to profit from low-cost dropshipping. It is just based on my unique experience and what I’ve noticed from watching others attempting to do it.
Reasons Why Low-Cost Dropshipping Fails
I believe low-cost dropshipping is a bad model for businesses for the following reasons:
- When you’re utilizing AliExpress, you’re not doing business with local suppliers or partners. Direct shipments from China are being made. Customs problems and lengthy shipment delays could affect you. This is not considering a plethora of other issues that you would need to avoid, like a disruption in the supply chain.
- It typically involves an investment up front to test sponsored Facebook advertising. It takes a lot of time and money to do this. A campaign could cost you hundreds of dollars to develop before it ever turns a profit. Not good.
- A campaign won’t likely be effective for too long after it starts to turn a profit. You will need to update the setting or adjust your advertisement when it becomes stale. This is labor-intensive and expensive.
- I have never seen any of these companies listed for sale on premium marketplaces. Indeed, I have noticed them on Flippa, however, that market is considerably less controlled. It is challenging to trust the numbers as a result.
- Compared to high-cost dropshipping, your profit per sale is significantly lower. In contrast to $500 per sale, we’re talking about $5 per sale. You’ll need to run some incredibly successful campaigns if you want to be truly profitable.
- Through social media, you’re trying to get people’s attention. These cannot be considered warm leads.
Thus, in terms of how much the average dropshipper makes, low-ticket business models result in lower margins compared to high-cost dropshipping.
Premium Dropshipping
High-cost dropshipping is unquestionably the superior method, in my opinion. You get the option to create something that is more durable and valuable as an online asset, in addition to increasing your potential revenue.
Here are the features of the premium dropshipping strategy:
- You set up a Shopify business and collaborate with well-known dropshipping vendors or brands who market high ticket and/or bulky items.
- You incorporate their products into your online shop and launch a Google AdWords campaign.
- Identify the phrases and keywords that convert the most visitors for the lowest price.
- As your advertisements start to generate a profit, you can let them run and test by increasing the budget.
- Due to the fact that you are primarily targeting those who are actively looking, these advertisements should be “evergreen.”
- Continue your search for suppliers and/or further products.
Generally speaking, this technique enables you to develop an increasing number of evergreen ads and grow your business sustainably.
Reasons Why Premium Dropshipping Is Better
Here are some key factors that explain why this is significantly better for business:
- You’re collaborating with legitimate brands and businesses in your region. That supply chain is reliable. You don’t have to deal with international shipping.
- With social media, you aren’t disrupting users who aren’t actively shopping. You are aiming for customers who are actively searching to buy. When a potential buyer is researching products on Google, Google advertisements will get their attention. As a result, there is “strong buying intent.”
- These companies genuinely conduct business on reputable online marketplaces like Empire Flippers. To date, my team has sold a bunch of them. Our upcoming exits are also expected to be significantly bigger.
- The ad campaigns you are creating are evergreen and will be effective for a long time. Because there is a constant influx of searchers, there is a considerably shorter experimenting phase than for social media advertising, and winners don’t become irrelevant quickly.
- Getting traffic is necessary for making profits, commissions, or other types of income online. You cannot make sales if there is no traffic. But the fact remains that paying for traffic is expensive. Regardless of how you look at it, you must make some sort of financial commitment to encourage visitors to your store. They are expensive, whether they are social ads, SEO, or other tactics.
Dropshipping Marketing Strategies
- Invest in social media advertising to get more Facebook users to visit your website.
- Produce the type of content that will eventually rank in Google.
- Use Google advertising when users enter specific search terms
These strategies all include some sort of financial investment. In business, you effectively invest time and money upfront in the hopes of reaping higher rewards down the road.
Nevertheless, the truth remains that just a small portion of the visitors that come to your website will generate any kind of ROI. Not every visit translates into a potential client.
For both a low-cost and a premium business model, the strategies for generating traffic are largely the same. Because of this, I believe that making sales of items with high potential for profit offers the best return on investment.
Dropshipping Product Research – Higher Premium, More Profit
A single conversion from an expensive product can be quite profitable. A higher profit margin increases your chances of creating a successful product.
Every single sale you make every day should result in profits of $100 or more.
This can be compared to selling merchandise or earning affiliate commissions from products like stationery. You will, at most, earn between $10 and $20 per sale. For any kind of consistent income flow, you need tremendous traffic.
Yet, if you’ve made several hundred dollars with affiliate marketing, you may have felt there must be a more effective approach to making money.
The high-cost dropshipping business strategy, in my opinion, is the best use of your time and money at this point.
Average Dropshipping Income – How Much Does The Average Dropshipper Make?
Regardless of how good your business model is, it’s critical to realize that there is never an “easy” or clear road to success in business.
You must have realistic expectations, work regularly, and be prepared to handle any challenges that you are faced with. If you follow these recommendations, you’ll have a better chance of succeeding in the business of dropshipping.
But with high-cost dropshipping, it is not unreasonable to think that, if you work hard and end up finding the right products, you could be generating anywhere from $500 to $2500 in the first month or two of creating your store.
A Very Important Note
Obviously, every business involves a certain amount of luck, but the more work you put in, the less impact luck has. When you start working, you’ll come up with your own special techniques that are effective for your particular business model, which will significantly reduce the need for luck.
Dropshipping Supplier Selection
The level of money you make really depends on one key variable: the number of reliable dropshipping suppliers you can find and establish connections with.
Although it includes other significant forces at play, this is what makes everything else possible.
You may start making thousands of dollars each month in profit with just one supplier’s products. Depending on the items, the average profit from dropshipping varies quite a bit. The potential of a successful dropshipping store is quite astounding.
There is also a happy balance. You can have a number of small suppliers who add up, even though not every dropshipping supplier will be a tremendous success.
The suppliers you are able to get will directly affect your income. Your chances of success increase as you make more efforts to find these providers.
It is entirely up to you whether this occurs over a 3-month, 6-month, or 1-year time frame.
It is simpler to identify and double down on the winners as soon as you find them.
Financial Breakdown
The fact that high-cost dropshipping has much lower initial and ongoing costs is probably its largest benefit. Google ads will be your company’s top expense. Nonetheless, there is very little possibility that they won’t be successful if done right.
Simply put, this is because there is so much margin for error. A profit of $500 from a sale can erase a lot of errors from your advertising budget that you can fix moving forward to increase your profits.
These are the possible expenses you should consider:
- A premium theme with a fixed one-time fee. Although using a premium theme is not required, it makes setup a little bit simpler and it’s nice to have the technical assistance. It’s better not to waste time becoming mired in the details. Yet, whether you choose to go with it or not won’t have a major impact on your business.
- To keep things professional, it’s a good idea to obtain a toll-free number, which costs about $19 per month. Google Voice, however, offers a less expensive option. You can also work with your personal phone number or use a fairly cheap phone plan with a talk-only option.
- Shopify subscriptions are $29 a month after a free trial of 14 days. If you’re short on funds, you can work extra hard to get everything set up during the trial period.
- Google ad campaigns to start at $10–$20 per day. You can slowly increase your budget when you have a winner. Google is kind enough to offer a free coupon for $100 once you spend $50. This can help your business and can be very lucrative to get money right away.
Achieving Full-Time Business Status
Making $2000-$4000 in profit each month should be doable if you’re prepared to put in the necessary effort and persevere.
But after that, you should consider growing it into a full-time gig.
If you want to get to this level, you’ll need to start outsourcing and have systems in place. These are essential steps for entrepreneurs running dropshipping businesses.
If you want to start scaling up, there are 2 types of jobs that you should outsource: customer support, and the creation of product pages.
Customer Support
It makes sense that when you start to sell more products, clients would contact you more frequently with questions regarding their purchases or how to place an order.
When you initially start, this doesn’t take a lot of time. However, as you grow, the time spent can really add up.
To deal with the majority of the customer support work, I recommend outsourcing it to South East Asia at a rate of about $4 per hour. Managing live conversations, calls, emails, and even completing deals over the phone are all included in this.
Remember that you don’t need to be outsourcing all the work, the moment you open your store.
As a small business owner, you can keep it lean and earn a living, but if you are looking to expand, you’ll need assistance along the road.
Product Pages
A significant portion of the difficulty of supplier acquisition is removed when you get help with uploading products. If they are your first set of providers, there is no issue. In fact, when you are getting started, I recommend doing everything by yourself so you can establish a process.
Yet uploading items can quickly become tiresome, and it could turn out to be a full-time job.
This is particularly the case if you’re scaling and adding suppliers quickly.
Improving Business Operations
You will be able to concentrate on the activities that will help your business expand the most once you have delegated the laborious duties of running your dropshipping business to your staff.
- Getting traffic with buyer intent to your website using SEO
- Concentrating on and analyzing ads at a very in-depth level
- Finding new, top-notch suppliers
Dropshipping Case Studies
Some people don’t know that dropshipping could serve as the foundation for a billion-dollar company. You may not want to be at this level, yet it’s important to consider the kind of success that is possible with this business.
In this regard, I can cite a case study of a well-known company that got its start through dropshipping and has been very committed to it ever since.
It’s easy to learn more about the history of Wayfair.com by visiting their Wiki page, which details how two men named Steve Conine and Niraj Shah launched the modest website racksandstands.com.
It is pretty obvious that this website is a dropshipping site if you look into the Wayback Machine (or any of the other Wayback Machine equivalents available).
I looked at the delivery and refund policy. It states that the returns should be sent to the given address, using the preferred shipping option. It could be a distribution center or the main office.
This indicates that it will probably be returned to the brand or manufacturer from where it was initially dropshipped.
Because I’ve worked with vendors who also do business with Wayfair, I’m aware of the extent to which Wayfair engages in dropshipping.
This demonstrates that it is entirely feasible if Wayfair is able to take a straightforward dropshipping business and transform it into a billion-dollar company.
It is possible for you to build a small home dropshipping store and scale to a huge organization by creating systems, investing in teams, and doing everything else that high-level enterprises do.
Dropshipping Revenue Potential – How Much Can You Make From Dropshipping?
You’ll probably agree that there isn’t a simple answer after reading what we’ve discussed. However, if I had to guess how much someone could earn (in profit) from premium dropshipping if they invest the time and effort, I’d break it down as follows:
- $500 per month: This level isn’t that difficult to reach if you’re willing to invest time in creating an effective website, finding a few reliable dropshippers, and picking up Google ads. If you put in the necessary effort, I think a lot of people can accomplish this.
- $5000 per month: If you’re determined and work consistently to find new dropshippers and test each one out, you can probably reach this level as a solopreneur in 6 to 12 months. If you find a great supplier quickly, this can also happen much more easily.
- $15,000 per month: To get there, you’ll need to learn how to outsource and build systems. At this level, having two or three virtual assistants would be beneficial. It’s not as simple as the previous 2 levels, but it’s still very doable.
- $25,000 per month: At this level, you need reliable systems established to keep everything organized on a daily basis, as well as independent systems to maintain growth at a constant rate. The tasks that will help you grow should take priority over daily tasks.
- $50,000 per month and above: At this level, your company must run like a fine-tuned machine. You’ll probably need help managing your virtual staff, and you’ll want people who are also working on growth along with daily operations.
Selling The Dropshipping Store – Can You Make A Living Off Of Dropshipping?
Selling your dropshipping company is an option if you find it challenging to earn more than $15,000 per month.
Starting and selling dropshipping businesses is a fantastic way to significantly increase your income. Focusing on developing and selling even marginally successful dropshipping businesses can be quite profitable because stores on certain marketplaces can be sold for 20–30 times their monthly earnings.
Get started today and before you know it, you’ll be crushing it.
FAQ
When considering starting an eCommerce venture, there will inevitably be some questions. It goes without saying.
The following are some of the most frequent questions about dropshipping businesses.
1. What Businesses Perform Dropshipping?
For some reason, a lot of people start their dropshipping business by seeking suppliers through membership sites or other directories. There is no justification for doing this. You can easily contact any of the innumerable dropshipping businesses directly to enroll in their program.
None of the top ones are promoted on significant directories or platforms. They are mostly average brands and companies.
Some of their items may even be laying around your home or apartment.
Simply consider whether sending anything out several times is efficient. If not, there is a significant probability that a business will include dropshipping into its current dealer or wholesale program. Simply said, it makes sense logistically for them to implement it.
2. Can Dropshipping Make You Rich?
High-cost dropshipping is, in my opinion, the best approach to start an internet business because it enables you to make money quickly and consistently.
Also, it requires far less capital than other company models like FBA.
One of the rare online business strategies that allow you to start earning positive cash flow rapidly without investing any capital is premium dropshipping.
Dropshipping’s disadvantage is that it’s more difficult to scale exponentially than an FBA venture.
What Does This Mean?
The processes are very nuanced as you build a premium dropshipping operation. You’ll deal with numerous vendors having various points of contact.
This is where outsourcing helps to eliminate many difficulties. Growing it up may start to introduce additional layers of complexity to manage, especially once you surpass the $5,000 profit threshold for a month.
The process of scaling an FBA store is fairly simple:
- Come up with a strategy for selecting successful products and delivering them to the Amazon warehouse
- If you make great listings, get positive feedback, and start ranking for the proper keywords, your products will sell themselves
- Once you’ve identified winners, you repeat the exact orders with your suppliers, and Amazon’s automated systems take care of the rest
Note: Just because I mentioned that the process is simple doesn’t mean that they are easy. It takes enough time, effort, money, testing, and research to build a successful FBA business. Along the way, you could also waste a lot of money. But it scales very quickly when you find the right products and have the systems in place.
My Recommendation
To raise money to finance capital-intensive business models like FBA or a niche/authority, use high ticket dropshipping. We currently run our portfolio business exactly in this manner.
Learn how you can utilize one to compound the other and how they both fit into a long-term business strategy rather than attempting to decide between something like Dropshipping vs. FBA.
3. Is Dropshipping Legit?
As was already mentioned, dropshipping is just one type of fulfillment. It’s not against the law in any way.
People only inquire about this because dubious tactics are encouraged by industry gurus. This can be a real issue, though, and it does exist.
Some examples of these behaviors include trying to trick potential buyers into believing that you are not shipping straight from China or selling photographs that are protected by copyright.
You should steer clear of something like this. Try to establish genuine connections with local dropshipping businesses and brands.
You won’t need to worry if you follow this.
4. How Can I Receive Payment From Dropshipping?
When you’re dropshipping, a lot of folks frequently wonder when you’ll actually receive payment. I frequently get inquiries about things like whether a credit card or a large investment is required to get started.
You have a variety of payment gateway options with Shopify, but the three most popular ones are Shopify Checkout (Stripe), Amazon Pay, and PayPal.
As soon as a customer completes the checkout process on your store, their payment is immediately deposited into the payment processor. In a couple of business days or so, Shopify pays out, and PayPal typically does so as well.
With PayPal, the issue is that if it’s a new account, they occasionally put a portion of your money in reserves. Although Shopify has allegedly done the same thing, I don’t believe it has ever happened in my business.
In any case, you typically receive the customer’s payment within two to three business days.
Of course, in order to expedite shipping after placing an order, you must make payment to the supplier.
The vast majority of suppliers take credit card payments, but you might need to make a direct bank payment for some.
The takeaway from all of this is that, in comparison to many other business ideas, you get paid fairly quickly. You don’t have to keep waiting for 60 days like for receiving affiliate commissions (or even 90 days when it comes to certain ad networks).
Note: Select a credit card with a solid rewards program if you plan to use one.
5. Is A Business License Required For Dropshipping?
The truth is that you do require a business license in order to engage in high-cost dropshipping in the manner that I’ve described earlier. An important step you must take before suppliers will cooperate with you is to go out and register as a business since they will only want to communicate with you if you are a company.
If this feels like too much work, here’s what I have to say from experience:
- It’s quite straightforward to set up and get going
- You can start creating your online store and have someone like a CPA set it up for you
- It’s a step that prevents some people from even trying this business. Use this to your advantage as this means lower competition
- You must carry out your company venture in the same manner as everyone else if you’re serious about doing so. This is the case, even if online marketing gives the impression that there are ways to “hack” things or skip necessary but time-consuming steps