How Much Can You Make From Drop Shipping?

How Much Can You Make From Drop Shipping

If you are interested in dropshipping then the first thing you probably want to know is how much can you make from drop shipping? That is a tough question to answer. Its a bit like asking how long is “too long”?

When you are dropshipping you can make a million or you can make minus a few thousand. There is a really broad spectrum of success and failure in dropshipping as in any other business model.

I don’t consider drop shipping a business model per se. Dropshipping is simply a fulfillment strategy. Its a way of sourcing products without risking large amounts of money on inventory that would potentially not sell.

The business model is still eCommerce. It is selling physical products that you buy low and sell high. Minus all the fees, you get to keep the profit.

How much profit you make depends completely on how well you run your Shopify or Woocommerce store (these are the 2 most popular platforms for creating drop shipping stores).

Making a full-time income from a dropshipping store is not that hard. The median salary in the USA is $40,000 per year.

That translates to about $100 per day. If you want to make $100 per day profit from dropshipping then you will need to do about $250 to $300 in sales.

If you sell a $30 product, then you only need to make 10 sales.

If your store converts at 2% then you will need to send 500 visitors to your store.

That is a very elementary breakdown and within those parameters, there are a LOT of variables. For most people, $40,000 a year may not be the goal but what it does do is to buy you your freedom. Once you can dedicate more time and effort to your store you can quite easily scale this.

A dropshipping store that can make $100 per day profit can quite easily make $500 per day by simply scaling the traffic or the products (or both).

Understanding Dropshipping

For the sake of completeness, I will quickly do a rundown of the dropshipping model and the three variations of it that is most commonly used.

Dropshipping is a fulfillment model where you sell a product that you do not have and that you do not handle yourself. You don’t have to buy inventory and you do not have to stick te products or ship the products yourself.

You can sell a product in your own Shopify store and once a customer buys the product from you, you will then send the customer’s details to a fulfillment partner who will pick, pack and ship the product to your customer.

The customer pays you the retail price. You pay the fulfillment partner the cost price. You net the difference which is your profit to keep.

The real advantage of this business model is that you get paid FIRST. Only once you get paid (retail price) do you buy the product from your fulfillment partner (at cost price).

This greatly reduces the financial risk and allows you to start a dropshipping business with very little money down and with minimal upfront expenses.

There’s essentially three popular strategies for fulfillment (getting the products to your customers) that is most used in dropshipping.

1. Dropshipping Products From China

Dropshipping products from Aliexpress is by far the most popular strategy for dropshipping. There are a number of apps that allow you to automate this to a large extent.

Oberlo is the most popular and it is a Shopify app that allows you to easily import, list and manage your orders from Aliexpress.

There are also Chinese companies like CJ Dropshipping and Udroppy that are dedicated to drop shippers.

They generally offer a much better service than Aliexpress and can get products to your customers much faster and usually have more quality control.

2. Dropshipping Products From The USA

Companies like Spocket specialise in dropshipping suppliers that are based in the USA or Europe.

These products tend to be of a much higher quality and with fast shipping to your customers, it can take away a lot of the normal dropshipping headaches.

3. Dropshipping with Print on Demand

Print on demand is a dropshipping model where you create designs to be printed on blank merchandise. By plugging into a print on demand provider like Printful you can create high-quality merchandise that is printed and shipped from the USA or Europe.

Each one of these has its own advantages and disadvantages and will have a big impact on how much you can make from drop shipping. Its also not just about how much you can make. It is also about how much you can keep.

There are all sorts of issues like refunds, returns, and chargebacks that are much more of a risk with drop shipping than with a more traditional eCommerce model where you have a warehouse and you buy stock upfront.

How Much Can You Make When Dropshipping?

How much (or how little) you can make from dropshipping depends entirely on YOU. There are no real limits to how much you can make from drop shipping.

In my opinion, drop shipping should never be your long term goal. It is a great way to get started without risking a lot of money.

Once you start seeing success you need to start looking at a more sustainable fulfillment model where you can ship your products from the USA.

While there are a lot of “ingredients” to make up a successful dropshipping store, the two biggest ones are your products and your traffic.

These two work hand in hand and if you can the right product in front of the right audience, then making sales is fairly easy. If there is a mismatch between these two in any way then you will struggle.

Your Shopify store of course needs to be on a very high standard as well. I’ve written a very comprehensive guide on everything you can do to maximize your store’s success. I would highly recommend you read it here.

To understand how much you can make, let’s look at an example.

Mr.Posture is a “famous” dropshipping success story by Verum eCom. They took a very popular and (some would say) over saturated product and turned it into a success.

It is also a great example of how to take 1 product from Aliexpress and turn it into a big business.

While the don’t dropship from Aliexpress anymore (duh) it is still a great way to analyse how much you can make from a drop shipping store.

Mr.Posture sells a posture correcting brace that is designed to help you improve your posture. What started as an obscure “gimmick product” on Aliexpress has become a big seller for many dropshippers.

We can still source this product from Aliexpress for around $5 (with free shipping). If you look harder you can probably find it for less.

Mr.Posture sells it for around $40 USD.

It doesn’t take a genius to see the healthy profit margin – around $35 profit per unit.

Mr.Posture of course source it from their private dropshipping agent who probably gets it for cheaper and who uses express shipping lanes that are much faster and more efficient than Expresses. We will use the Aliexpress example to illustrate the concepts.

Let’s look at traffic next.

Mr.Posture gets their traffic from multiple sources but Facebook Ads was by far the biggest source of traffic.

Mr.Posture was shown as an example store on Verum eCom’s YouTube channel and they use some serious ninja Facebook Ads strategies to turn this product into a success.

Replicating their success with Facebook Ads is not for the feint-hearted. To illustrate it more simply we will take the paid ad cost data from Google Ads since there are still many dropshippers advertising this product on Google Ads.

To get a sense of what we will pay for traffic we can look at Google Ads. According to the Google Keyword Planner, the search term “posture brace” has an estimated CPC (cost per click) of $0.78.

From my experience, that is vastly under-estimated and I would think we will probably pay at least $1.00 per click for that keyword on Google Ads (Google Ads tend to convert much better than Facebook Ads though because it is more targeted traffic)

So, let’s do some quick math:

1000 clicks at $1.00 per click = $1000 for traffic
If our Shopify store converts at 4% = 40 Sales (from 1000 clicks)
At $35 profit per product = $1,400

So, you spend $1000 to make $1400. That gives you about $400 profit which is about a 40% profit margin.

This does not take any Shopify fees or refunds into account so the net profit will be even less. A 40% profit is really good for dropshipping standards.

The reality is that the number will be quite different. It does not take returns and refund into account. The margins on Facebook ads tend to be much lower also.

This product can be sourced from Alibaba for about $2. You will still need to pay for logistics and add packaging if you really want to turn it into a long term branded product but you can see how you can effectively buy the product for $2 and sell it for $40.

On Google traffic that store probably converts well above 4%. On a targeted keyword like “posture brace” it can be as high as 10%.

Then you can also factor in things like upsells and bundles to boost the AOV (average order value) and before you know it this store has a 100% margin.

As you can see there are a lot of variables and small changes to any of them can have a huge effect on your profit margin and how much you can make from dropshipping.

If we get back to our original goal of making $100 profit per day then the posture brace probably makes that $100 profit from just 4 to 5 sales.

The cost of your traffic and the cost of your product will have the biggest effect on your bottom line. The quality of the traffic (how targeted it is) and the quality of your Shopify store will mostly determine your conversion rate.

The median conversion rate for Shopify stores are 0.9% for mobile and 1.4% for desktop. That is really poor and from my experience, you can at least expect double that if you do a half-decent job.

You should of course aim for much higher than that. I consider a 4% conversion rate to be acceptable but that depends a lot on the traffic source.

The Reality and How Much Can You Can Really Make From Drop Shipping

Our Mr.Posture example above is not typical. This is a really novel product that they jumped on with a unique marketing angle to create a great brand.

It is highly unlikely that you will create the next Mr. Posture or Snow or Indestructable in your first, second or even third attempt at dropshipping.

Dropshipping as a strategy is not sustainable long term. You want to turn it into a brand and start creating a proper fulfillment strategy that can provide fast shipping and branded products and packaging.

dropshipping store example indestructable shoes

More often than not, it takes some failing to fully understand drop shipping and eCommerce.

Here are a few general tips to help you fail faster (aka succeed faster).

1. See everything as a test

Don’t fall in love with your own ideas. See everything you do as a test. If you get too emotionally involved in the products you sell or the store you created then you will be blinded to the truth.

Follow the numbers! Be guided by statistics. If a product is not selling. Cut it and move on. It might take you 10 to 20 tests to find a product that really sells well.

Don’t be afraid to “fail”. Failures are only stepping stones to success. If you “lose money” then you really only bought yourself some experience.

2. Start with proven products

Do not try and invent the next big successful product. Go with what is already selling. When you start with products that have a proven sales history then at least you know that people ARE already buying the product.

You can find these by looking at the sales history of the products on Aliexpress or any other marketplace like Amazon (look at the number of reviews).

You can also use “spy tools” like Ecom Hunt or Sell The Trend (more advanced) to help you find winning products.

sell the trend

3. Start with a proven traffic source

FacebookAds and Google Ads are both proven traffic sources. Dropshippers have been making millions off these two traffic sources for the last 10 years.

Running paid ads to your dropshipping store is not easy. There is a big learning curve but it is a skill that can serve you well for years to come.

If you don’t like the idea of paying for traffic then SEO is always an option. There are also a few other free traffic sources worth throwing into the mix if you do decide to go down this path.

It is slow but the quality of traffic is well worth the effort.

4. Model, Don’t Copy

There are a lot of guru’s who promote the idea of simply finding something that is already working and copying it. That is a recipe for disaster. It rarely works.

Look at what’s working. Pay close attention to great dropshipping stores and try and figure out WHY it is successful. Then, model their success. Put your own spin on it. Inject yourself into it – your own personality and your own touch.

5. Learn

eCommerce is a very fast-moving industry. You need to learn fast and learn often. Don’t ever rest on your laurels. Keep learning and keep pushing yourself to get better.

That mindset of learning and always being a student is what will help you improve your results daily.