Let’s address one of the most common questions about dropshipping: How much does it cost to start a dropshipping business?
Technically, it is possible to start a dropshipping venture for less than $100. By utilizing free trials, opting for starter plans, and being willing to compromise on product quality, you can establish a dropshipping store with minimal investment – but don’t do this.
This article will outline the essential costs that any legitimate dropshipping store will incur when starting out. By the end, you’ll have a detailed breakdown of the startup expenses involved in dropshipping, along with insights from experienced entrepreneurs who can provide valuable insights on what to anticipate.
Cost of Starting a Dropshipping Business
Undoubtedly, dropshipping has significantly reduced the hurdles of starting a business. It allows you to collaborate with suppliers worldwide and sell their products without the need for inventory. It’s an incredible setup.
However, the allure of dropshipping sometimes leads people to envision a lucrative six-figure business that requires zero investment.
The reality is that launching a successful business has never been entirely cost-free, and the same applies to dropshipping. While it is not necessary to take on significant financial obligations, it is crucial to make some investments in your dropshipping business before you can see some profit.
Here are the essential costs involved in starting a dropshipping business:
- Shopify subscription: This is necessary as Shopify is the most widely used e-commerce platform.
- DSers subscription: DSers is a recommended tool for AliExpress dropshipping.
These two subscriptions are the basic requirements for setting up a stripped-down version of a dropshipping store.
The good news is Shopify offers a free trial, so you can get started without any upfront costs. After the trial period, you’ll need to pay $39 per month, but at least you can begin for free. Shopify takes care of your online store’s needs. Now let’s move on to the dropshipping aspect.
DSers has a free basic plan that allows you to set up your dropshipping operations. However, it has a limit of 3,000 products, which may hinder scalability. But it’s a good starting point before you decide to upgrade to the Advanced plan for $19.90 per month. The Advanced plan offers additional features like automatic inventory updates and bundle mapping.
If you’re really serious about dropshipping, there’s one more essential investment that you should pay for—a domain. Fortunately, you can easily purchase a new domain through Shopify. During your trial, you’ll be prompted to acquire a domain, and it will require an annual payment of $14.
If you opt for a budget-friendly approach, the initial costs of launching your store will be as follows.
A free trial from Shopify and a free plan for DSers equals no cost. However, to enhance your store, the following expenses will be incurred:
$39 per month for a Basic plan in Shopify + $14 for the domain + $19.90 per month for an Advanced plan in DSers. The total cost is $72.90.
After the initial setup, you can expect recurring monthly costs of $48.90, which includes the Shopify and DSers fees, excluding the $14 domain expense.
Product Validation Costs
No one can compel you to order your dropshipping products for yourself. However, you should still do it.
One of the great things about dropshipping is that you don’t handle the products you sell. While this solves the challenge of having a physical inventory, it introduces new challenges. You have no control over the product quality, delivery speed, or packaging appearance.
Having the actual products on hand enables you to generate interest in your store. Showcase them, take pictures of people using them, and gather feedback from friends regarding their opinions and potential pricing.
There’s no need to buy every type available. If you sell dresses in different colors from the same supplier, ordering one color should suffice. However, it’s advisable to order at least one sample from each supplier whose products you plan to offer in your store.
Let’s estimate the cost at around $75 for these product validation expenses. Most of these costs are upfront. Therefore, aside from the infrastructure costs mentioned above, you should add this to the balance sheet:
$72.90 (Shopify + domain + DSers) + $75 (product validation costs) = Approximately $150.
According to these numbers, you should prepare around $150 by the end of the first month.
Store Improvement Costs
Investing in store enhancement is essential. Simply spending $150 on your website might not be sufficient to achieve all the desired functionality. Additional apps may be necessary, especially if you want to offer discounts for bulk purchases, which is not supported by default on platforms like Shopify and DSers.
Although there are workarounds available, such as creating bundled products at a lower price, relying on such solutions is not ideal. You should aim for a store that is user-friendly for shoppers and easy to manage for yourself, rather than relying on temporary fixes.
In some cases, the best course of action is to invest in Shopify apps. The Shopify App Store offers a wide range of apps that cater to various customization needs, improvements, and upgrades. Let’s explore a few commonly desired features and highlight a small selection of apps that can help you achieve them.
Boosting Sales with Cross-selling and Upselling
Cross-selling is the practice of offering customers related products or services based on their initial purchase, while upselling involves persuading customers to opt for a more expensive or upgraded version of an item. These techniques are effective in increasing a merchant’s average order value (AOV).
Shopify offers excellent apps specifically designed for cross-selling and upselling, such as:
- Cross Sell ($29.99/month).
- Cart Convert ($19/month).
- Bold Upsell ($9.99/month).
Driving Sales Through Bulk Pricing
Bulk pricing refers to discounted pricing available to customers who purchase larger quantities of products. Implementing bulk pricing on your dropshipping store can incentivize customers to buy more and increase the likelihood of them returning for future purchases.
With certain Shopify apps, implementing bulk pricing becomes a breeze. Here are a few recommended apps for this purpose:
- Discount Pricing ($19.99/month).
- Quantity Breaks ($20/month).
- Bulk Discounts & Sales Scheduled ($18.95/month).
By leveraging these apps, you can optimize your store’s revenue potential and enhance the overall shopping experience for your customers.
The Significant Investment – Dropshipping Marketing
While we’ve discussed various costs associated with dropshipping, one area that doesn’t come with a specific price tag is marketing.
Determining an exact amount to spend on marketing is challenging. However, we can make some assumptions to provide an estimate.
The average global conversion rate in e-commerce typically falls between 2% and 3%. Although this varies based on niche and country, let’s assume a conversion rate of 2.5% for the sake of discussion. This means that out of 200 people visiting your store, you can expect five of them to make a purchase. And how do we attract 200 visitors to the store? Through marketing.
Currently, Facebook serves as the primary marketing channel for dropshippers. Let’s consider driving 200 visitors to your store through this platform. According to WordStream, the average click-through rate (CTR) for Facebook ads is approximately 0.9%. Assuming your ads are compelling and achieve a 1% CTR, we can proceed with this figure.
In order to attract 200 people to your store, your advertisement needs to reach approximately 20,000 individuals. The cost for 20,000 impressions will vary depending on your target audience. Targeting Facebook users in the United States, for example, will typically incur higher costs compared to targeting users in Singapore.
According to AdStage, a marketing software provider, the average cost per thousand impressions (CPM) was $12.45 in Q4 2017. Let’s round that up to $12.50 for simplicity. With this information, we can calculate the estimated cost as follows:
By performing the calculation, we find that dividing 20,000 impressions by 1,000 and then multiplying the result by the average cost per thousand impressions ($12.50) equals $250.
Based on these average figures, you can expect to spend around $250 on Facebook advertising to generate five sales from the platform. It’s important to note that these are estimates, and actual costs may vary depending on factors such as targeting, ad quality, and market conditions.
SEO to Boost Dropshipping Sales
A dropshipping store is a specialized website that offers e-commerce products without the complexities of inventory management. This allows you to focus more on developing SEO-friendly website pages, including detailed product descriptions, category descriptions, and engaging blog content that drives visitors toward making transactions.
While it’s possible to hire a single freelancer to handle your SEO, we highly recommend seeking out a reputable SEO agency to handle this task. The reason is that, especially in the early stages, you require more than just SEO tactics – you need a comprehensive SEO strategy to ensure you start off on the right path and achieve long-term success.
Furthermore, it is uncommon to come across a freelancer who possesses the complete skill set and expertise required to handle all the necessary aspects for achieving high search engine rankings. SEO services provided by agencies often encompass a comprehensive package that covers all essential components. By establishing a well-defined strategy, you ensure that your SEO efforts are directed towards the intended outcome and prevent ending up in an unintended position.