The Cost of Drop Shipping

When calculating overall dropshipping costs, it's important to consider every factor that will come into play as you sell dropshipped products to your customers. Although it may be tempting to simply deduct the cost you pay for each product from the price at which you sell the product to determine your profits, this is an oversimplification of the dropshipping process. Some of the other factors that raise your dropshipping costs include the following:

  • Monthly and initial fees from dropshipping suppliers
  • Shipping costs
  • Advertising costs

Comparing Dropshipping Costs Between Dropshipping Suppliers

As a dropshipper, you'll likely be working with a dropshipping supplier. Dropshipping suppliers are companies that compile massive lists of dropship products from reputable wholesale retailers. You'll be required to pay an initial fee, monthly fees or both in order to gain access to these lists. Many dropshipping suppliers will charge additional fees for additional services, such as the ability to push a product listing directly to eBay or a customized personal online store. These additional services may we worthwhile depending on the nature of your business. Be sure to incorporate all of the fees paid to dropshipping suppliers into your bottom line.

Shipping Costs

Unless otherwise noted, you can assume that the product prices listed by a dropshipping supplier only cover the product itself, while shipping fees will be your responsibility. Generally, it's advisable to pass the shipping costs along to your customers. Most online shoppers view shipping costs as a necessary evil of ordering products online, and will be willing to pay reasonable shipping fees on top of the cost of the product. You may also decide to run occasional promotions offering free shipping, or reduce shipping fees for customers whose orders meet a certain minimum dollar amount. Regardless, it's wise to shop around to find the most inexpensive shipping providers, and make your shipping fees commensurate with the speed at which your products are shipped. Customers who wish to have their orders shipped faster will generally be willing to pay more for this convenience.

Advertising Costs

Depending on the marketing tactics you use to promote your dropshipped goods, advertising costs may play a significant factor in your overall dropshipping cost. It can be quite costly to place banner adds on external sites, and these costs will depend entirely on the policies of the sites you choose. It's best to search for sites that charge for banner ads on a per-click basis. This way, you'll only be required to pay when an individual actually clicks an ad and visits your site. This doesn't guarantee a sale by any means, but it does equate to traffic that actually sees your online store as opposed to only your advertising.