Many gurus in dropshipping claim that they had students that made $100,000 in a few months. Even Spocket and Oberlo have success stories about people who made a lot of money in dropshipping. One such story is about a guy who made $178,492 in three months.
But how much do dropshippers make, really? Honestly?
This is what I want to dig into. The sad thing is that there is no repository of information about this. There is no entity that tracks the earnings of their dropshippers and make that data set available to the public. And we need to sort through BS claims by fake dropshipping gurus before we can find real information 🙂
Nevertheless, I want to give you some ideas about dropshipping earnings. Today, we will talk about:
- The cost of a dropshipping store
- Example profits of a dropshipping store
- Success stories of dropshippers
- The real deal: how much do dropshippers make?
By the end of this article, you should be able to decide if dropshipping is a business you want to get into. While it truly is easy to build, making sales is the perennial challenge of every dropshipper. But I will let you decide on that.
The cost of a dropshipping store
How much does it cost to build a dropshipping store?
There are many who say that it is free. This is possible, but what you get is a store that is unprofessional. You see, there are so many store builders out there—you can use these platforms and build your store for free, but they are mostly incomplete. You cannot use plug-ins or apps unless you upgrade.
If you really want a decent dropshipping store, one that is fully functional, your best option is to use Shopify. For the purposes of this demonstration, we will use the Basic Shopify plan, which costs $29 a month.
If you want to start small, you can use free dropship supplier tools like Oberlo and Spocket. The free versions will suffice, and you can purchase the subscription services later on.
Suffice it to say that it only costs $29 to put up a dropshipping store in a month. What you need to think about now is the effort you put in. You need to spend time to build the store—you have to upload products and then update the content of your store.
You have the option to hire someone to do this for you. If you want an amateur website, you can go to Fiverr or other freelance marketplaces and pay $49. On the other hand, you can also go to AliDropship and buy a store for a minimum of $299.
Just take note that AliDropship does not use Shopify. If you buy a store in AliDropship, your store will be hosted in WooCommerce, and the plug-in used to sell the items is the AliDropship plug-in, which is like the equivalent of Oberlo.
Once the dropshipping store is built, they will hand it over to you, and you have to pay your web host provider for your monthly subscription.
Now, you need at least $100 to spend on Facebook ads. This amount is small, to tell you the truth. But this will suffice if you are just starting out.
Next, you have to spend money on blogging or for creating content that will drive traffic to your store. If you have the time to blog, then great. Ut if you don’t, prepare at least $120 a month for four blogs posts.
Now, let us see your overall monthly costs for a dropshipping store if you are not going to blog.
- Shopify subscription – $29
- Blog – $120
- FB Ads – $100
Overall, you need to spend $249 monthly to make your dropshipping store afloat. As such, you need $249 every month, and this $249 must come from the profits of your dropshipping store.
Example profits of a dropshipping store
Now, how much can you make from your dropshipping store?
This really depends. There are products where you can make only $5 per sale, and there are products where you can make at least $15 in gross profit.
Let us take a look at a sample product. In our example, we are taking a product from AliExpress. As you can see, the pencil dress below costs $10.
If we go to Amazon and investigate, we can see that similar dresses are sold for $19 to $29.96. Given this, we can safely say that we can price our dress at $25, and the market can still pay for it.
Let us just assume that shipping is free via e-packet, or that you would charge your customer for shipping. If the dress costs $10, and you are selling it for $25, your profit is $15.
From this $15, you have to pay your Shopify rent and Facebook ads and blog costs. Remember, we need $249 each month to make our business work.
As such, we have to sell at least 16 of these dresses to break even. If we sold 17 dresses, our gross profit is $15 x 17 = $255. After paying the monthly expenses, we still have $6 left.
The challenge in maintaining an online dropshipping store is always sales. You can build a website for a small amount, but you need to be very good at marketing to it work.
If you spent $100 for your Facebook ad and you only got 17 sales, it would seem that you paid $5.88 for customer acquisition.
Now that you know all these numbers, you can ask yourself how much you can realistically earn a month. If you manage to sell 100 pieces of your item, which equates to roughly 3.5 sales a day, you would make $1,500 in gross profit in a month.
From that $1,500, you need to remove $249, and you still have $1,251. We know that this is not enough for you to live decently. You need more money than this to be able to survive.
Now that you know this, your options are:
- Build another store and double your income
- Sell a different product with a higher dropshipping profit margin
- Increase your price
Let us take a look at the second and third options.
Here is an example of a different product:
As you can see here, this drone sells for only $39.51. But on Amazon, something similar sells for more than $300.
Now, you cannot expect to sell the black drone for $300, as it is not a branded item. The one on Amazon is a known brand—it is like the Apple of drones.
The reasonable price that you can sell the black drone for is about $60. If you just browse on Amazon, you will find out that the average price for similar drones is at that price.
So, let us settle for $60. In this case, your profit is $20. If you sell 100 pieces of this in a month, and if you do our calculation earlier, your net profit is $1,751.
The thing is, how sure are you that you will be able to sell 100 of this per month? The seller on AliExpress has sold only 293 of this.
Again, your efforts must focus on your ability to market this product. At three sales per day, you make a profit, but you do not have the luxury to leave your job yet.
If you increase your price, you will risk losing customers, especially so if they know that the product you are selling are available from other merchants.
For the purposes of this example, let us use the pencil dress one more time.
If we increase our profit to $25, we are now selling the product for $35 and we only bought it for $10. Now, this should make us $2,500 per month as gross profit, or a net income of $2,251 after all payments have been made.
Success stories of dropshippers
As you can imagine, it is hard to find real success stories online. I frankly don’t trust any businesses that relate to dropshipping that have success stories on their websites. These are effectively used as marketing tools so I am sure at least some of them are ‘enhanced’ in some way 🙂 Maybe it’s not that bad, but I am discarding any of these success stories just to be on the safe side 🙂
Instead, I am looking at success stories from forums, as these people have less incentive to ‘enhance’ their earnings. They are not trying to sell anything, often they are just providing information to help other dropshippers.
Don’t take these examples as gospel, just use them to give you an idea of what success you might achieve.
Helena from the Dropship Community
This is Helena’s first drop shipping store that she has ran for 2 months. She says she has made $2360 revenue in this time. Helena recommends avoiding Facebook Ads and instead focusing on honing a Google Shopping advertising strategy. She doesn’t really say how much she has spent on ads so we don’t really know her net profit.
Kingpin from the Dropship Community
Kingpin says he started up a new dropshipping store 30 days ago and was able to make $14,500 profit after spending $900 on Facebook ads. He does share screenshots in his post, so I am confident these are accurate figures. Although you never know online 🙂
Yan from the Dropship Community
Yan from France says that his first ever dropshipping store was able to make him $2000 in around 3 months. Although be aware that this was around Christmas time, one of the busiest times for ecommerce in general 🙂
Moussdog from Dropship Community
Moussdog said that he had this store (his most successful one) for a year and was able to make revenue of $454000 during this time. The net profit from this was a cool $210000. His methods of promotion were Instagram, Facebook ads and email marketing.
Dmickoh from Dropship Community
Dmickoh says that he was able to go from $0-9500 in 17 days with a total Facebook ad spend of $250. Although he says that he also did a lot of manual sharing in order to make this amount too. He recommends waiting for the Facebook pixel to get ‘seasoned’ before relying on it too heavily.
What do these earnings this tell us?
This tells us that it is really a futile attempt to get averages about how much dropshippers make. The dropshipping business is just like any business—you are in the retail industry, and the demand for your products may sometimes go up and go down.
The best thing you can do is to come up with a solid strategy on how to make dropshipping work. And remember that all of these success stories are from people new to dropshipping. If you stick with it and learn the ins and outs well, you could expect to find similar if not more success. Always remember it is NOT a get rich quick scheme though 🙂
If you want to succeed in the dropshipping business, you have to focus your attention to your vision. It does not really make business sense that you just look at the monthly revenue that you can make. Revenue is something that grows, but it will only grow if you do the right things.
These four individuals may not have the same success levels, but they all made a sale—and success always starts from that one sale—it is really up to you how much work and effort you want to put in your online dropshipping store.
The real deal: how much do dropshippers make?
Earlier, we explored how much you can possibly earn based on assumptions. This time, let us look at hard data. According to Fit Small Business, you can make pretty much close to accurate forecasts about your dropshipping store depending on some factors.
These factors are:
- Traffic – the number of people who go to your website; this is best measured on a monthly basis
- Conversion rate – the percentage of people who buy against the total number of people who went to your site
- Margin – this is your gross profit margin expressed as a percentage. If the item costs $10, and you sold it for $20, your profit margin is 100%
- AOV – the average order value refers to amount of money customers spend. Let us say you have four customers. One spent $100, another $78, the third $25, and then last $68, your average order value is $100 + $78 + $ 25 +$68 = $271 divided by four equals $67.75.
Now, according to Fit Small Business, the formula to forecast your income is (traffic x conversion rate) x (AOV x profit margin).
Let us put this into perspective:
- Your traffic – 1,000 per month
- Conversion rate – the average online industry is 2%
- AOV – let us settle with $67
- Profit margin – let us say that ours is 50%
In this case, our calculation would be:
- 1,000 traffic x 2% conversion rate = 20 people would buy
- AOV of $67 x 50% profit margin = $33.5
Now that we have these numbers, the final step is to multiply them with each other: 20 x $33.5 = $670.
So, that is what this particular dropshipper could earn in a month.
As you can see, it is a tad difficult to really pinpoint how much dropshippers really make. We have no visibility on their traffic, AOV, profit margin, and sales.
But since we know the formula, we can experiment in several ways. We can do the following:
- Increase the traffic
- Do things to improve conversion rate
- Increase the AOV
- Or Increase the profit margin.
If we double the traffic, then we also double our income. If we stay at 1,000 traffic but if we double the conversion rate, we get the same thing.
You can test several things with this equation and then decide which actions are easier to do. What you can do is to get a spreadsheet and then test what happens if you change these factors. You need to do it several times until you come to an income where you are happy.
At best, it would be great if your traffic per month is at 10,000, and you are getting a conversion rate of 4%. If you have this performance, you will earn $13,400 per month in gross profit!
I would encourage you to make a simple spreadsheet that includes these calculations and shows you different profit potential figures based on conversion rates and potential traffic. You can find others with stores in your niche and use their typical data as a guide. Just direct message them politely and I am sure you will find some willing to help 🙂
In fact, we have made our own mock up calculator based upon the calculations discussed above HERE.
Is dropshipping worth it? Yes, it certainly is worth it.
Dropshipping works. However, it is not a magic formula or a get-rich-quick scheme. While it easy to build a dropshipping store, you need to learn many skills to make it work. Digital marketing alone is a tough nut to crack, let alone make millions in revenue.
The people who have succeeded in dropshipping are people who have already failed before. Their failure, however, did not make them stop from pursuing their dreams. Instead, they learned from their mistakes and rebounded.
You should do the same. If you do things right, you can build an online business and then leave your day job. If you are patient and you have the dedication to make it work, it will work.