Like many people, if you’ve ever dreamed of starting your dropshipping store, you can see the enormous profit potential that comes with it. According to Macrotends, Amazon earned over $152 billion in 2020 alone. However, you may not make as much as a drop shipper as you think.
Drop shippers earn between 20% and 30% from each sale. The remaining money from the gross sales goes to buy the product from your supplier, advertising, and other overhead costs.
While Dropshippers have some disadvantages and hidden costs that you must worry about, you can still make some serious money if you use the tips and tricks in this article.
How Much Do Drop Shippers Make on Average?
Let’s look at three different options that can give different income levels. While digging around online, I found several excellent examples of different dropshipping businesses, from the lowly beginner to the drop shipping master.
- First, Kate makes $32,000 monthly selling anime products, jewelry, and clothing. You can read her story here.
- Travis has made over 1 million dollars in two years selling furniture online. You can read his full story here.
- Irwin went from zero to $1 million in 12 months by selling products from Oberlo. You can read the full story here.
Luck doesn’t have anything to do with it. Instead, it comes down to what they were selling and how they marketed their business.
Finding quality suppliers in your niche will give you good deals and work with your business.
Additionally, most sales are exaggerated, as you see below. There are two different types of earnings that workers fill in, and you need to know the difference before you decide to become a drop shipper.
How Much Do Dropshippers Actually Make?
Most drop shippers make around 20% to 30% of their gross sales. If your friend says they have earned $10,000 from their dropshipping business, then around $2,000 to $3,000 is profit.
The rest of the money goes towards the cost of goods sold, overhead costs, and running the business itself.
Here is a list of things you’ll have to pay for as a drop shipper.
- COGS – The cost of goods sold. This is the cost you paid to buy the product. This will typically be 50% of the total gross cost.
- Google Shopping Ads – Google Shopping Ads will be the primary way you initially advertise your dropshipping store. This will account for 10% of the total gross cost.
- Merchant Fees – You must pay merchant fees for credit card processing. This will account for 3% of the gross total cost.
- Shipping Cost – You will also have to cover the cost to ship the product, which will come from your cost if you offer free shipping on your store. This can account for 10 to 12% of the total gross cost.
When you add these costs up, you look at around 75% of the total gross earnings being spent before you make a dollar. For every dollar you make, you will keep around 25 cents.
When a drop shipper claims he is earning a million dollars a month, that is their gross earnings, not their profit.
More money goes into maintaining the business than most people realize, so whenever you see the gross sales of a drop shipper, take 20% of that, and you will be able to calculate the profit.
Of course, you could make more or less of your gross income, and it will be dependent on several factors. You must look out for some things when starting your own dropshipping business.
What Determines How Much You Can Make?
Some things that can change the money you make include the following tips.
1. Go With a Specific Niche
The first thing is the niche you select because you don’t want to pick a massive list of products you are proficient in dropshipping. You must ensure you can store, purchase, and ship these items.
You don’t want to deal with everything under the sun. Instead, if you focus on one niche of items, you can understand your budget a bit more.
For example, if you only ship deck furniture, you know how much shipping those items can cost.
You can also plan your budget around buying these items in bulk and have some bulk order plan whenever the dropshipping orders come in.
The stronger your niche is, the easier the purchasing and shipping process will be and the more money you make.
You should focus on a niche with much purchasing power that people will always buy. Customers will order from your parent company and then come to you.
Research your niche and look at its longevity, and then you can make your selection.
2. The Price Of The Product
A higher-priced product isn’t sold as much as a lower-priced product, but you can receive a much higher profit when the more oversized items are sold.
This also means less work overall because the big orders come in less and less as time goes on.
Lower-priced orders for smaller items come in much more frequently, which means more constant money and more work.
3. Shipping Costs
More oversized products will cost a lot more to ship, and that cost will start to eat into your budget.
If you ship many big products, your wallet will suffer as you get the packages to their owners.
The costs can also make bigger companies much more lucrative because those companies include the cost.
Keep the shipping costs low as you continue working with your products. Most of your shipping costs will be determined by how far away you send the product.
If you are looking at overseas shipping or shipping across long miles, that changes the shipping costs that you will deal with.
4. Advertising
People must know you exist if you want to be a good drop shipping business.
That comes from advertising, which can cost a lot. While Google ads can cost a little bit, traditional advertising for your business (such as flyers, banners, trucks, etc) can cost a pretty penny if you are not careful.
Advertising can put you in the red even while you are using advertising to get yourself out of the red, so you need to make sure you are smartly spending your advertising money.
Plus, you need to track your audience’s engagement with your ads to ensure that the advertisem*nts bring in customers for you.
5. Web Cost
Finally, the cost of your web platform will take something out of your budget. If you use a platform like Shopify or purchase product images, that is a monthly or annual cost that will be drained from your card.
Consider your hosting platform, its cost, and any costs when the website expands.
A lot of thought goes into all of this, and for good reason. Nearly every single cent you make as a drop shipper is earmarked to go to someone and keep your business running.
You need to know what you are spending to determine how much profit you have and that your expenditures do not outweigh your budget.
Where To Get Started As a Dropshipper?
If you feel confident that you understand, “How much do drop shippers make on average?” is a loaded question that can change. Still, if you want to become a drop shipper, you need help getting things started.
Here’s who I recommend.
If you want to get started in the right way, then you need to find some help. One of the best resources I’ve used is Dropship Lifestyle. I’m not affiliated with this company, but I own their course.
It comes with different courses, a YouTube channel, and a blog with all sorts of resources to get you started as a drop shipper. You can start a semi-automated dropshipping business with one of the world’s best eCommerce Courses.
Dropship Lifestyle allows you to create a niche and find top-tier supplies in your approved niche. They provide everything you need to have your drop ship website ranked up and going from day 1.
They also provide a community of over 12,000 followers to ask questions and work with the various successful drop shippers on the platform.
Final Thoughts
Being a drop shipper is complex, and it doesn’t make as much profit as other jobs do, but if you do the best job available and learn some tips and tricks, you can make a good profit.
Being a drop shipper is a good side hustle, especially if you partner with a very large business with several orders.
Make sure to pick a niche with plenty of large and small orders for variety, and keep an eye on your budget to ensure you aren’t spending more than you need to be.
You don’t want to get in the red while trying to make money! It takes quite a while to get started and ready to be a good drop shipper, but once you get into your groove, you can start to make some good money.
