Dropshipping Startup Costs How Much Money Do You Need? 2022
Dropshipping Startup Costs: How Much Money Do You Need? (2022) Skip to content Start selling online now with Shopify
Start Your Online Business Today
You don’t need to get a second mortgage, but you will have to put some money into your dropshipping business before your dropshipping business puts money into your pocket.
“For your first store, you shouldn’t be paying hundreds for custom photos, logos, and website designs. Your start-up costs should be very minimal. Your only upfront costs will be purchasing your product and registering your domain. You can take advantage of the free trails offered by Google and Shopify to create a custom email address and get your store up and running. You will want to create custom photos and videos of your products that you can use on product pages, in ads, and in product reviews. This can be easily done with any modern smartphone.”
“When you’re running a dropshipping business, you won’t be handling your inventory—your suppliers will ship your products directly to your customer’s doorstep. With this in mind, it’s always a great idea to place a test order for products that you’re thinking about selling. This will enable you to go through the entire purchasing process, just like your customers will when they place an order. You’ll be able to review the quality of the products, the shipping times and standards, and take personalized product images yourself—it really helps you to take your store to the next level.”
“The budget [for the first three to six months], from my experience, should be around $1,000. Most of it should definitely go to marketing—for testing Instagram influencers and Facebook ads, I’d say about 50% to 80%. The rest should go into plug-ins, domain, and store costs, and also preferably some courses, if you’re new to this business model, and to Shopify.”
How Much Does it Cost to Launch a Dropshipping Store
Article by David Vranicar 27 Apr, 2022 Let’s answer a popular dropshipping FAQ: How much does it cost to start a dropshipping business? Technically speaking, you can start dropshipping for less than $100. With the right combination of free trials and starter plans—and a willingness to look the other way and hope for the best when it comes to the quality of your products—a little investing is all that stands between you and a dropshipping store. But to borrow from the Big Book of English Expressions: Just because you can doesn’t mean you should. This post will break down unavoidable costs that any (legitimate) dropshipping store will need to absorb to get off the ground. Read to the end and you’ll have an itemized list of your dropshipping startup costs, plus insights from entrepreneurs who can tell you what to expect. Start selling online now with Shopify Start your free trialHow much does it cost to start dropshipping
No doubt, dropshipping has lowered the barrier to entry to starting a business. You can coordinate with suppliers from around the world and sell their products without ever holding inventory. It’s an awesome setup. So awesome, in fact, that people can get carried away, dreaming of a six-figure business that doesn’t require any investment. The thing is, starting a successful business has never been free, and that’s still the case. Even with dropshipping.What is dropshipping
Dropshipping is an ecommerce business model that allows entrepreneurs to run an online store and sell products without having to purchase inventory upfront. Only once you’ve made a sale do you pay your supplier, who then ships the products directly to your customer. You can use a tool like DSers to connect your store to thousands of suppliers and find products to dropship.Start Your Online Business Today
You don’t need to get a second mortgage, but you will have to put some money into your dropshipping business before your dropshipping business puts money into your pocket.
Dropshipper corner
Let’s hear about the cost to start a business from Paul Lee, the man behind Husky Beard: “Be comfortable with losing at least $500 before you start to become profitable. Opening up an actual retail store involves spending nearly $10,000 before any revenue comes in, so spending only $500 on an ecommerce business is an extremely small investment that can change your life.”The cost of starting a dropshipping business
The most stripped down version of a dropshipping store would include: A Shopify subscription A DSers subscription We’re going with Shopify because it’s the most popular ecommerce platform out there. And we’re going with DSers because it’s the best AliExpress dropshipping tool. Good news! Shopify has a free 14-day trial! After that, it will cost $29 per month, but at least you can get rolling for free. So Shopify covers the store part of the equation. Now for the dropshipping part. DSers has a free basic plan. You won’t be able to scale with it—there is a 3,000-product cap. But you can at least get set up before forking over your credit card. Eventually, you’ll need to upgrade to the $19.90 Advanced plan to access features like automatic inventory updates and bundle mapping. If you’re serious about dropshipping, then there is one more must-buy: a domain. You can easily buy a new domain through Shopify—you’ll be asked about it during your trial—and it’ll be an annual payment of $14. All right, so if you do it cheap and dirty, the costs of launching your store will look like this: Free 14-day Shopify trial + Free DSers plan = Free Then, with a bit of sprucing up, we’re looking at: $29/month Basic Shopify + $14 Domain + $19.90/month Advanced DSers = $62.90 Then we’d be looking at $48.90 each month after that—the recurring Shopify and DSers costs, minus the $14 domain.Dropshipper corner
Let’s pause this math class to hear from Tim Vangness, Dropshipping Guru and creator of this dropshipping YouTube channel:“For your first store, you shouldn’t be paying hundreds for custom photos, logos, and website designs. Your start-up costs should be very minimal. Your only upfront costs will be purchasing your product and registering your domain. You can take advantage of the free trails offered by Google and Shopify to create a custom email address and get your store up and running. You will want to create custom photos and videos of your products that you can use on product pages, in ads, and in product reviews. This can be easily done with any modern smartphone.”
Dropshipping product validation costs
This is the “eat your vegetables” portion of launching a dropshipping store: Just like nobody is going to force-feed you your daily dose of veggies, nobody will force you to order your dropshipping products for yourself. But you should still do it. The awesome thing about dropshipping is that you never handle the products you’re selling. While this might solve one of the biggest challenges of commerce (having cool products to sell), it introduces a new set of considerations—namely, you don’t control the quality of the products, the timeliness of delivery, or the appearance of the packaging. That’s why we recommend setting aside some time (and money) to order the products that you’re going to be selling in your store. This gives you a chance to investigate the suppliers. After you place your order, for example, you can follow up and ask, “When can I expect my order to arrive?” And when it does arrive you can consider whether it meets your expectations. Is it defective in any way? Would you want to buy it? Once you have your products on hand, you can use them to generate interest in your store. Show them off. Take pictures of people holding them. Ask your friends what they think (and how much they’d pay). OK, so how much will eating your dropshipping vegetables cost you? Well, you don’t need to buy every variation of every product. If you sell yellow, red, and blue dresses from the same supplier, you’re probably fine ordering just one color. But it’s definitely a good idea to order at least one sample from every supplier whose products you plan to offer at your store. Let’s say that this will cost, oh, $75. This is mostly an upfront cost, so if we add it to the store infrastructure costs discussed above, our dropshipping business balance sheet looks like this: So far, we can expect to be paying about $140 by the end of the first month.Dropshipper corner
Tim Kock has much experience in dropshipping and has this to say about test orders:“When you’re running a dropshipping business, you won’t be handling your inventory—your suppliers will ship your products directly to your customer’s doorstep. With this in mind, it’s always a great idea to place a test order for products that you’re thinking about selling. This will enable you to go through the entire purchasing process, just like your customers will when they place an order. You’ll be able to review the quality of the products, the shipping times and standards, and take personalized product images yourself—it really helps you to take your store to the next level.”
Dropshipping store enhancement costs
That $140 that you spent on your website only gets you so far. You might need to install apps to get all of the functionality you want. For example, Shopify and DSers don’t have a default way for you to offer discounts for bulk purchases. There are workarounds, sure. You can offer a “product” that is actually five items bundled into one, and then sell that quintet at a price lower than buying five individual items. But you don’t want to build your business on workarounds. You want your store to be easy to navigate for your shoppers and easy to operate for you. Sometimes, the best solution is to pony up and install Shopify apps. The Shopify App Store is stuffed with apps to address just about every tweak, improvement, or upgrade that you can imagine. Let’s look at a few common features that store owners want, as well as a small sample of the apps that can make it happen.Cross-selling and upselling
Cross-selling involves offering a product or service related to what the customer has already purchased, whereas upselling is a technique used to encourage customers to buy an upgraded, more expensive version of a purchased item. These techniques aim to increase a merchant’s average order value (AOV). Shopify has some great apps for cross-selling and upselling: Cross Sell ($29.99/month) Cart Convert ($19/month) Bold Upsell ($9.99/month)Bulk pricing
Bulk pricing is essentially discounted pricing that customers buying large quantities of products can access before checkout. You can offer bulk pricing on your dropshipping store to encourage people to buy more and return for more shopping in the future. Certain Shopify apps make it easy to implement bulk pricing, including: Discount Pricing ($19.99/month) Quantity Breaks ($20/month) Bulk Discounts & Sales Scheduled ($18.95/month)Exit intent
Exit intent is smart behavioral technology that automatically delivers an enticing offer to a visitor about to leave your website. It tracks the mouse movements of website visitors and identifies when a visitor’s cursor moves to the top of the screen to close the browser window. Shopify has several apps that provide exit-intent technology: Wheelio ($14.92/month) Spin-a-Sale ($9.99/month) POP UPS Smart Popup Builder ($29/month) You don’t need any of this stuff, but let’s say you really want the ability to give customers a discount if they buy 10 products instead of just one. Looks like a bulk pricing app will cost around $20 per month, so let’s tack that on to our starting costs. We’re now up to about $160 after the first four to six weeks.Dropshipping marketing costs— the biggie
Everything we’ve looked at so far has had a specific price tag attached to it. Marketing doesn’t. It’s impossible to say how much money you need to spend on marketing. There are, however, some assumptions that we can use to get an estimate. The average global conversion rate in ecommerce is somewhere between 2% and 3%. That’ll vary by niche and country, but let’s just play this out and say that conversion rate is 2.5%. That means if you get 200 people to your store, you can expect five of them to purchase something. And how do we get 200 people to our store? Marketing. At the moment, the biggest marketing channel for dropshippers is Facebook, so let’s look at driving 200 visitors to your store from the platform. WordStream pegs the average click-through rate (CTR) for Facebook ads at 0.9%. Let’s assume your ads are good, and you have a 1% CTR. To get 200 people to your store, you’ll need your ad to reach 20,000 people. The price for 20,000 impressions will vary depending on who you’re targeting. Reaching US Facebook users will cost more than reaching Singaporean Facebook users. According to marketing software provider AdStage, the average cost per thousand impressions (CPM) was $12.45 in Q4 2017. Let’s call that a clean $12.50. Now we have an equation to work with: (20,000 / 1,000) x 12.50 = $250 Looking at these averages, we land at $250 in Facebook advertising costs to generate five Facebook sales. There are, of course, levers that you can pull to manipulate these numbers and increase your profit. First and foremost, make awesome ads. The better your ads, the more often people will click on them, and the lower your cost per click (CPC). If you want to do some homework on creating high-impact ads, we’ve got you covered. You can also target countries with lower CPM rates. Dropshipping users have had success in lots of countries other than the obvious ones; don’t feel like you have to target the US, UK, Canada, and Australia. Finally, there are steps you can take to increase the conversion rate and increase the average order value at your store. Designing easy-to-navigate product pages, for example, is one way to get people to convert once you lure them to your store. This would drive up that 2.5% percent conversion rate that we used earlier. You can also use cross-selling and upselling apps to increase average order value. Those will cost you a bit of money, but with a few nice upsells per month—hardly an overly ambitious goal—they’ll pay for themselves.Dropshipper corner
Here is some marketing wisdom from another dropshipper – Artsy Wall founder Matīss Ozerskis.“The budget [for the first three to six months], from my experience, should be around $1,000. Most of it should definitely go to marketing—for testing Instagram influencers and Facebook ads, I’d say about 50% to 80%. The rest should go into plug-ins, domain, and store costs, and also preferably some courses, if you’re new to this business model, and to Shopify.”