Dropshipping has a reputation of having low profit margins and in my experience, the reputation is usually true. However, there are products that have higher margins than others and there are strategies you can use to ensure you have margins higher than the industry average.
In this article, I’m going to provide you with all the information you need to maximize your margins as well as a list of products and niches I have found to be fruitful in dropshipping.
What is a Good Dropshipping Profit Margin?
As a general rule, after expenses including product cost, shipping, advertising costs and payment processor fees, a good dropshipping profit margin is considered 30% and above.
Obviously, you want to maximize your profit, to do this you need to find the pricing sweet spot that provides adequate profit margin without impacting your sales volume.
Unfortunately, there is no exact pricing markup that will give you that sweet spot. It’s different for every business and will require some split testing and optimization.
For example, lowering a product price to a 10% profit margin may increase sales substantially and be more profitable overall for one business. Conversely, another business may actually increase sales by increasing the product price as the product now has a higher perceived value.
How to Price Dropshipping Products for Maximum Profit
It’s hard to give exact price guidelines as it varies depending on the niche you’re selling and the type of items within that niche. I will, however, provide you with some general guidelines so you know if a product is a feasible option before selling it.
How to Calculate Product Price
| Product Cost Price | Sale Price |
|---|---|
| Under $5 | Minimum $19.95 |
| $5 – $10 | 4x cost price |
| $10 – $25 | 3x cost price |
| $25 – $100 | 2.5x cost price |
| $100 – $1,000 | 2x cost price |
| $1,000 and over | 1.5x – 1.75x cost price |
If you can’t make a minimum of $15 net profit (after all expenses) it may not be a viable dropshipping product. The main reason for this is the additional work involved. You may need to fulfill the order with your supplier, provide customer support and process returns and refunds.
The amount of time or virtual assistant costs this will incur may mean the lower profit margins may not be worth it. Especially if there are other higher profit product options available.
It’s important to test and monitor your product pricing closely. Depending on your product, pricing your products too high or too low can raise red flags to your customers.
List of Dropshipping Products with High Profit Margins
1. Car Roof Top Tents
Larger items are often drop shipped from domestic suppliers or bulk orders from Alibaba. Alibaba prices are often between $300 – $600 and sale prices vary from $500 up to $5,000 depending on the materials.
2. Phone Covers
Phone covers can be purchased on AliExpress for under $2 and are even cheaper when purchased in bulk. Often stores sell these same phone covers for $30 and higher. Phone covers have some of the highest profit margins of all dropshipping products.
3. Weighted Blankets
Weighted blankets have been trending for several years and dropshippers have taken full advantage of this. Whilst shipping prices from AliExpress can be a little high there is still healthy profit margins to be made.
4. Unique Footwear
Unique footwear such as tough indestructible shoes and minimalist barefoot shoes have a high perceived value because they are difficult to locate in brick-and-mortar stores. There are several successful stores currently dropshipping these shoes.
5. Drones
There are a plethora of different types of drones available. Drones are a relatively inexpensive item on AliExpress and by dropshipping unique drones that can’t be found in most retail stores the profit margins are more than adequate.
6. Home Decor
Home decor products have a high perceived value and therefore consumers don’t understand how much the cost price really is. Stores such as Articture have taken full advantage of this and their profit margins are incredible for a dropshipping store.
7. Solar Panels
Portable solar panels grew in popularity several years ago and the demand has continued. Unique solar panel products such as phone covers and camping products have great profit margins.
8. Jewellery
Jewellery is another product that has a high perceived value and is often very inexpensive on AliExpress. Dropshippers take advantage of these prices by targeting consumers who have specific interests and are willing to pay 10 to 20 times the cost price.
9. RV/Caravan Covers
Retail stores often have a limited selection of vehicle covers providing opportunities for dropshippers. RV and caravan covers can be purchased from Alibaba in bulk at low prices and can be sold domestically for high prices.
10. Educational Toys
Educational toys for kids of all ages are very lucrative for dropshippers as they have thousands of varieties on AliExpress at low prices. Typically, dropshippers target parents and grandparents with Facebook as this audience is willing to pay top dollar for products that benefit their children.
Product Selection Strategies for High-Profit Margins
Choosing the right products is the foundation of a successful dropshipping venture with high profit margins. To achieve this, you need effective product selection strategies:
Market Research
Start with comprehensive market research to gain a deep understanding of your target audience’s needs, preferences, and pain points. Identifying niches or industries with the potential for higher profit margins is essential. Look for products that not only fulfill consumer needs but also offer unique value.
Profit Margin Analysis
Profit margin analysis is a crucial step. Calculate the potential profit margins for each product category you’re considering. This involves comparing the total cost, including product cost, shipping fees, and any associated expenses, to the expected selling price.
Aim for products with profit margins significantly higher than your costs. While there’s no fixed percentage, many successful dropshippers target products with at least a 50% profit margin.
Competition Assessment
Assess the competition within your chosen niche or product category. Analyze your competitors’ pricing strategies, customer reviews, and market positioning. Seek opportunities where you can offer better value or differentiate your products from existing competitors.
Supplier Relationships
Establish strong relationships with reliable suppliers. Reach out to multiple suppliers for the same product to negotiate better pricing and terms. Consider using supplier directories and marketplaces to find reputable suppliers who can provide high-quality products at competitive rates.
Trend Analysis
Stay updated on industry trends and changes in consumer behavior. Products that align with current trends may have a higher profit potential. However, be cautious with trending products, as their popularity can decline rapidly. Balance them with evergreen products for a stable revenue stream.
Marketing Tactics
One of the best advertising strategies is to choose a product to dropship that has a very specific audience and has a unique selling point (USP). This will drastically increase your conversion rate and return on ad spend (ROAS) which will ultimately increase your overall profit margin.
Profit Margin Calculator
Summary
It’s important to have realistic expectations when it comes to dropshipping profit margins. If you’re a complete beginner and you’re profiting anything after expenses, that’s a win! Many newbies are running at a loss.
If you’re just getting started, I suggest you read my article for a full step by step tutorial on creating your own dropshipping store.
There are many components of a store that can be changed and optimized to increase your income. As you become more experienced you will better understand which of these components require you to make changes.
The key takeaways from this article should be:
- Although 20% – 30% is an average dropshipping profit margin, these vary drastically so don’t be disheartened if you’re not in this bracket.
- When it comes to pricing your products, test multiple prices and offers, then analyze the results until you find that sweet spot for maximum profits without reducing your conversion rate.
- Don’t believe the screenshots most YouTubers are showing you as their overall net profit.
- You can expect higher profit margins with a branded Shopify store as opposed to dropshipping on marketplaces such as Amazon and eBay.
- Branding is one of the keys to higher profit margins as the perceived value of the products is much higher.
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