Starting an online business is no more limited to high school teenagers. It is the reality of growing enterprises and businesses across the globe.
Today, if you have an idea to sell a product on a different side of the world, you don’t even need to buy that product first to sell it later.
You can start a dropshipping business using your computer.
We have already shared how to start a dropshipping business.
A guide will help you understand dropshipping and how you can start selling products online.
This guide will focus on determining the cost of starting a dropshipping business.
You’ll also learn if it is profitable and the pros & cons of dropshipping.
By the end of this guide, you will know precisely if the dropshipping business model is for you or not.
Is the dropshipping business profitable in 2023?
The very fundamental of every business is to make sure that it is profitable.
No matter if it’s online or offline, if the brand is not profitable, your only goal is to change the strategy/approach or restart with a new idea.
Now, Is the dropshipping business profitable?
The answer is Yes, it can be. There are a lot of external elements that affect the profitability of dropshipping. Like:
- The product you are selling (supply, demand, and competition)
- Your manufacturer
- Area of the manufacturer
- The region where you are selling the products
- Shipping cost
- Percentage of returning products
- Your profit margin
- Cost of running a business
- And miscellaneous costs.
If you calculate the cost of dropshipping carefully – which you’ll learn here – yes, the dropshipping business will be profitable in 2023.
With more and more people equipped to buy products online and try new products, 2023 is a great time to start a dropshipping business.
Note that the business model itself motivates to keep the profit margin low. I’ll also share further how to overcome this con in this article.
Pros and Cons of dropshipping business
Before we get started with the cost of starting a dropshipping business, let’s look at the pros and cons of dropshipping.
- No inventory required: You don’t need to own the products to sell them. Your job is to market the product and collect orders from targeted customers. Once they place the order, ask the manufacturer to ship the products to the customer’s address. Get paid for the product, cut your share, and pay the manufacturer for the product.
- No Storage facility required: Because you don’t have to hold the products at any stage of the business, you don’t need a storage facility for your business.
- Low cost of entry: Compared to other eCommerce business models, the price to start a dropshipping business is meager. Since you are not spending on inventory, storage, and manufacturing, you pay the cost of building an online store and marketing it. The cost of which is pretty low.
- Less Employee: Dropshipping does require your time and effort. But after the initial push, the journey is pretty smooth and can be easily automated. If one plans to stick with the dropshipping business model, they will require fewer or no employees.
- Borderless business: Nor the manufacturer nor the storage is holding you back. That means you can sell products to any part of the world, from any part of the world. That means you can start selling products in France while living in California, USA. Choose the manufacturer from France, and target your customers in France. When a customer orders, keep your share and pay the manufacturer to ship the product.
- Profit margins can be low: Most drop-shipped products can be easily bought and sold by anyone online. That is why the sales of products rely on branding and pricing.
- No quality control: For the customers, you are the seller. Hence you are responsible for ensuring the product’s quality is not compromised. But as you know, you are not the manufacturer or even there to ensure quality.
- Lacking brand building: Presentation of products is essential. Product photo editing, product description, and website experience are critical in building trust. But after placing an order, there is no way to make the after-sales experience branded. Customers can get the product and would not even remember which online store to thank.
Cost of starting a dropshipping business in 2023
The cost of starting a dropshipping business in 2023 is categorized in the following manner:
Let’s break down each point and get an average cost to start a dropshipping business in 2023.
Building Digital Infrastructure
The digital infrastructure includes your basic setup to build your online store.
While budgeting, the goal is to ensure we pay for all the necessary stuff that will impact sales. At the same time, we are not adding additional tools of no use at the first stage.
Keeping that in mind, an early-stage eCommerce digital infrastructure requires
- Domain Name
- Store Builder
- eCommerce Theme
- Payment Gateway
One of the best ways to cater to all these requirements is by using Shopify. A tool that made starting and running online eCommerce easy for the masses.
The basic plan is $29 and includes a store builder, hosting, and SSL. The cost of a domain name — the name of your website will cost $15.
There are also free Shopify themes that you can use to set up your store. But if you are looking for premium themes, you can get them for $200 – $300.
And yes, Shopify has a payment gateway that costs around 2.9% + 30¢ USD per transition.
Now, if we exclude the paid theme, your total cost will be
|Shopify Basic Plan||$29|
|Payment Gateway||2.9% + 30¢|
Testing is an essential part of dropshipping business. Why? To learn more about the product and ensure the quality is good for the price.
Before we start selling products and convincing people to buy them, we must know it in and out.
After all, we want to ensure customers are happy with their purchases. And since it’s hard to build a brand through dropshipping, the product has to leave a positive impact.
So what’s the cost of testing?
Quoting a price here is utterly useless as the cost of testing can be zero to x.
It depends on the product that you would like to test. That means if you are trying to dropship t-shirts, the price will be different compared to dropshipping a watch.
Also, you must calculate the cost of the number of products you test and their shipping charges.
While this step is not entirely required, it is recommended as a good selling practice as a brand to test your products yourself before you ship them.
The following cost to start a dropshipping business that you would need is marketing.
Due to high competition, lack of branding, and low margins, marketing becomes highly valuable. That is why it has the highest share of cost in starting dropshipping business.
Most of the time, the profitability of a dropshipping business is based on the number of bulk units sold.
For example, for every ten pieces sold, the business earns a profit of $100.
To keep the business sustainable, it can be necessary to begin your marketing with paid advertising.
Since other channels like SEO, content marketing, and social media marketing take some time to deliver results, getting started with Google Ads, Facebook Ads, Instagram Ads, and more seems to be a much better option in most cases.
The marketing cost can vary again based on the niche and your target product.
But at the start, let’s set a general ad budget of $100 to $150.
The cost to start a dropshipping business in 2023 has many variables, as discussed in the beginning. And as per Bluecart, the profit margins are usually around 15% to 20%.
How can you increase your profits and overcome the cons of dropshipping in the long run?
The answer is to introduce other eCommerce, business models.
The one that can easily align in the lines of dropshipping business is the Private label — a model where instead of manufacturing the product, you sell it under your brand name.
In our article Dropshipping vs. Private Label, we shared this eCommerce business plan in detail.
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