Today we will answer a very popular question when it comes to dropshipping: How much do I have to invest in order to start my dropshipping business?
We are sure that you have read on the internet that it is technically possible to start dropshipping by investing 0. You can find the right combinations of free trials and start your shop, but at some point you will have to foresee a monthly investment to make your business feasible and manageable.
We will analyze together the inevitable costs that every dropshipping shop will have to face in order to take off in the best possible way.
- What is Dropshipping?
- The initial costs of a dropshipping business.
- Time is money.
- The costs of marketing.
- What are the earnings with dropshipping?
What is Dropshipping?
Dropshipping is an ecommerce business model that allows entrepreneurs like you to run an online store and sell products without having to buy inventory upfront. You will only pay your supplier once you have made a sale. Your supplier will always take care of shipping the products directly to your customer.
The initial costs of a dropshipping business.
You have finally decided to undertake this online business: the first costs to bear are related to the creation of your shop and the choice of your supplier. Searching online, however, you may come across various free trials; this marketing strategy allows companies to let you test their services. The free versions often vary in duration: seven, fourteen or thirty days.
Don’t forget the costs related to the domain on your website and the legal and administrative costs that you will have to deal with, but we are sure that a good accountant will be able to guide you in this process.
If you initially do not intend to open your own online shop and you want to rely on an existing marketplace, the initial investment could be higher, in fact the proceeds of the goods sold will not be recognized in real time.
The payment times for the various marketplaces are approximately the following:
- Amazon: collections available after about 15 days
- Aliexpress: collections available after about 15 days
- eBay: collections available immediately
- Eprice: collections available approximately every 7 days
Time is money.
One of the key concepts is that in order to start a successful dropshipping business you will need to invest a lot of your time. First of all you will have to find a reliable and serious supplier to work with, we advise you to trust only those who sell authentic goods and are transparent. You yourself should take a test and order some of the products to see them physically and define their real value.
The great thing about dropshipping is that you will never handle the products you are selling and doing some sort of sample test will be very useful for your future; if they are quality goods, returns will be reduced to a minimum. This way you will also have the opportunity to test the speed of the shipment and the packaging.
Once you have some products that you will sell in your shop, you can take photos and show your customers the authenticity and real value of the goods in your shop.
You will also need to invest your time doing market research, identifying the perfect market niche for you and focusing all your energy on developing a communication and marketing plan.
You’re now ready to face this exciting adventure that only a dropshipping business can give you!
The costs of marketing.
At this point, according to our calculations, you should:
- Have a functioning online dropshipping shop.
- Have handled all the financial matters with your accountant, such as registering for VAT.
- Have found the right supplier for you after a careful search.
Now you must be wondering “How do I attract new customers to my online store?”
Here come the costs related to marketing. It’s impossible to determine how much money you will spend on marketing, however you can set weekly or monthly budgets to achieve your goals in a realistic way.
Once you have established how much to spend on your marketing, you will also need to identify which strategies to start focusing on. The most used platforms for advertising are social media such as Facebook and Instagram, and search engines such as Google, but you could also invest a small portion of your budget for more innovative and contemporary activities, such as influencer marketing, or for a competition.
What are the earnings with dropshipping?
Successful dropshippers can earn up to $ 100,000 in their first year of business. This depends a lot on their ability to market their online shop and on the size and competitiveness of the target niche. Since no earnings are tied to inventory or a warehouse, profits are maximized.
There are two types of dropshipping businesses that offer different outcomes: low ticket dropshipping and high ticket dropshipping.
In low-ticket dropshipping, you create a digital store with the intent of selling large quantities of low-cost products. These dropshipping shops are very common and often advertise their products using social media marketing. They can be very profitable, but have a short shelf life, as customers hardly come back to buy and word of mouth is generally negative.
In high-ticket dropshipping, the focus is on sourcing the best dropshipping products to sell. This model is slower to grow, but has a longevity that can lead to increased profits every year. This business model usually sells quality and branded products that never go out of style and relies less on marketing investment because they can count on loyalty and word of mouth from their customers.
On average, dropshippers earn between 20% and 30% from each sale. This means between $ 1,000 and $ 5,000 a month. The remaining money is used to purchase the product from the supplier, the dropshipping fees, to pay the dropshipping website host, and marketing. You can earn a lot more if you choose high margin products.
One thing to note is that dropshipping businesses that sell high quality products naturally have a higher margin. However, they also sell fewer products. Finding a balance between price and demand is the key to maximizing your revenue and growing your business.
Also remember that spending money to launch an ecommerce store means investing to earn even more money. As your ecommerce becomes more and more successful, the investments will grow, obviously according to your desire for income.
If you want to be successful with your dropshipping ecommerce business, it is essential that you evaluate the costs and opportunities.