Hey it's Spencer here. I just wanted to give a brief introduction to this guest post from Joseph Brusca on how much money you can make dropshipping. Joseph is someone that I had on the Niche Pursuits podcast recently (along with his brother Mike).
These guys have been involved in dropshipping for a long time and shared a lot of their tips for getting started in this podcast interview.
Today, Joseph dives into high ticket vs. low ticket dropshipping and how much money can be made pursuing these options. If you are interested in getting even more tips from Joseph, you can check out his Instant eCommerce Training.
Either way, enjoy the article!
If you've been reading about different online business models to get started with, then there's no doubt that you've run into dropshipping. For over a decade, there's been buzz around this seemingly simple ecommerce strategy. But how much can you make dropshipping?
The reality is that there are very few resources on the subject that don't seem like “hyped up” sales pages or videos trying to pitch you on something.
If you’ve ever been on YouTube, you’ve surely seen some of the video ads that show just how “easy” it is to start a dropshipping business with no money through Shopify.
But as you might imagine, the dropshipping industry is much less flashy and grounded in reality. No offense to those following the Shopify plan.
That said, you can turn a business idea into a real success story with dropshipping—if done right.
Dropshipping is probably the easiest and quickest way to start a small business that generates income online.
Unfortunately, it's easy to get it wrong. If you don't have a good product, the right inventory source, or even a reliable dropshipping supplier, a bad business model can mean countless hours wasted as well as thousands of dollars.
So, assuming you get it right, let's explore how much you can make dropshipping in the most realistic sense possible.
What Is Dropshipping?
Dropshipping is nothing more than order fulfillment.
Seriously, that’s it.
The dropshipping model refers to an online business that makes the sale to the consumer (or business) but does not actually ship the goods that were purchased.
Instead, the goods are shipped directly to the buyer by the inventory source.
The obvious advantage for the seller is that there is no need to buy inventory or handle storage.
Comparatively, the drop shipper can leave the marketing and selling to you. This means they can afford to put more emphasis on supply chain and inventory management.
For certain products that are heavy and/or expensive to ship the dropshipping model is win-win for both parties.
It's a practice that’s utilized by businesses of all sizes. Even huge retailers, such as Amazon, utilize dropshipping as part of their retail business (more on this later).
Different Types of Dropshipping
I like to group dropshipping into two different categories: low ticket and high ticket. If you read the definition carefully, then you might already have a guess for which one I prefer.
Let’s break them down…
Low Ticket Dropshipping
Low ticket drop shipping is probably the business model that you’ve seen pushed heavily in those online advertisements I mentioned earlier.
The business model breaks down like this:
- You create a Shopify store or use another ecommerce platform and upload products from AliExpress (this is your dropshipping supplier) to your website.
The number of products you list and the size of your site varies significantly. For example, a Shopify store can focus on selling a single product or be a “general” store that sells a wide range of different goods.
- Next, you advertise on a social media platforms, like Facebook, and try to drive traffic to your online store. If you have an Amazon seller account you'll probably want to look at doing Amazon ads as well.
Alternatively, you can outreach to social media influencers to advertise your stuff for a commission or for a fee.
While this might seem easy to do on the surface, I absolutely detest this business model as a dropshipper.
So much so, that when I see others claiming success with it, I honestly have a hard time believing them.
Side Note: I’m certainly not saying that its NOT possible to make money doing low ticket dropshipping. This is merely my personal experience and what I’ve observed when I’ve seen other people try to make it work.
Why Low Ticket Dropshipping Doesn't Work
Here’s why I think low ticket dropshipping is terrible business model for a small business:
- It usually requires you to spend a lot of money upfront testing paid advertising on Facebook. This is a huge time/money investment. You could spend thousands of dollars before ever creating a campaign that makes profit. Not great.
- Once a campaign does make a profit, it’s probably not going to last too long. The audience or ad will grow stale and you’ll have to modify your ad or change the audience. This requires lots of work, money, and time.
- Since you’re using AliExpress, you aren’t dealing with real business partners or suppliers in your home country. They’re shipping directly from China. You’re subject to customs issues and long shipping times. Not to mention all sorts of other things that you don’t want to deal with. Like supply chain interruptions.
- I’ve never seen one of these businesses for sale on a higher-tier market place such as EmpireFlippers. Sure, I’ve seen a few on Flippa, but that marketplace is much less regulated. Because of this, it’s difficult to always believe the numbers.
- You’re interrupting people’s day on social media. These are NOT WARM LEADS.
- Finally, the amount of money you make per sale is MUCH lower than with high ticket dropshipping. We’re talking $10 a sale compared to $1000 per sale. To be truly profitable, you’ll have to have some massively successful campaigns.
So, when it comes to how much you can make dropshipping, low ticket models mean your average dropshipping profit margin will be lower than with a high ticket business model.
High Ticket Dropshipping
In my opinion, high ticket dropshipping is by far the better way of doing things. Not only do you stand to increase your potential profits, you have the chance to build something that's more sustainable and worth more as a web asset.
Here’s an example of a high ticket business model:
- You create a Shopify store and partner with established brands or dropshipping suppliers that are selling expensive and/or heavy products
- You add their products to your online store and start advertising using Google Ads
- Figure out the keywords and phrases that get the most conversions at the least cost
- Once your ads are running profitably, you can leave them as is, and experiment with upping the budget
- These campaigns should be mostly “evergreen” because you’re targeting people that are ACTIVELY searching
- Go out and find more products and/or suppliers and repeat the process
In general, this model allows you to build more and more evergreen campaigns and scale your business in a sustainable way.
Why High Ticket Dropshipping Is More Successful
Now there are a few major reasons why this makes for a much better business:
- You aren’t interrupting people on social media who aren’t in buying mode. You are targeting people already looking to buy. Google ads will capture a potential customer while they are doing product research. This is referred to as “high buying intent.”
- You’re partnering with real businesses and brands in your country. That's a solid supply chain. No dealing with shipping from overseas.
- The search campaigns you’re building are evergreen and can last for years to come. There’s a much shorter testing phase than social media ads and winners don’t get stale because there’s always an influx of searchers.
- These businesses actually sell on high-quality website marketplaces such as Empire Flippers. My brother and I have sold two of them to date. One for $80,000 and one for $133,000. We’re planning for our next exits to be substantially larger as well.
Why We Prefer the High Ticket Model
Making sales, commissions, or any sort of revenue online is contingent on one thing: getting traffic.
If you can’t make traffic then you can’t make sales.
But the thing is that getting traffic costs money. No matter how you slice it, there is some form of investment that you need to make to get people to come to your website. Whether Facebook ads, content marketing, or something else, they cost money.
Driving Traffic to Your Dropshipping Store
- Create content that you hope you will rank in Google over time
- Pay for social media ads to drive traffic to your website from places like Facebook
- Serve Google ads that show up when people search for certain queries
All of these methods cost money in one way or another. In business, you’re essentially spending money and time at the start in hopes that you’re going to get a greater return later.
But the fact is that only a small percentage of the traffic that comes to your website is going to result in any sort of return. Not every impression is a potential customer.
The methods of acquiring traffic for a low ticket and a high ticket business model don’t really change much. Because of that, I’m of the opinion that selling things that can have huge returns gives you the biggest bang for your buck.
High Ticket, High Profit
By selling high ticket items, a single sale can be worth a lot of money. A bigger profit margin gives you a better chance of a winning product.
All of the sales we make on a daily basis result in a profit anywhere from $50 – $5000 or more.
Compare this to selling a T-shirt or making an affiliate commission from something like a juicer. At best, you’re going to be making something in the $5 – $15 range. That means you need insane traffic for any decent cash flow.
But if you've sold hundreds of thousands of dollars through affiliate marketing, you've probably thought there has to be a better way to make money.
This is where I think that the high ticket dropshipping business model is the best investment of your money and time.
Setting Expectations For How Much You Can Make Dropshipping
No matter how good your business idea is, it’s important to understand that nothing in business is ever “easy” or a straight path forward.
You need to set reasonable expectations, do work consistently, and adapt to any curveballs that get thrown your way. If you do these three things, you're more likely to make decent money in the dropshipping industry.
But with high ticket dropshipping, it’s not unreasonable to say that you can be making anywhere from $200 – $3000 in the first month or two of making your store if you put in the work and happen to get a little lucky with the right product along the way.
Yes, there is an element of luck to EVERY business, but the impact luck makes becomes less and less the MORE you work at it. As you start to get your hands dirty, you’ll develop your own little methods of doing things that work for your specific business model which makes luck much less of a factor.
Factors That Influence How Much You Can Make Dropshipping
Really, the amount of income you make hinges on one major factor: How many good dropshipping suppliers can you secure and develop relationships with?
There are other important factors involved, but this is the thing that makes it all possible.
All it takes is one supplier’s products to take off and you can start profiting five figures per month. The average dropshipping profit margin ranges pretty significantly depending on the product. The ceiling to a good drop shipping business is pretty amazing.
And there is a middle ground as well. Not every dropshipping supplier will be a huge win, but you can also have a bunch of smaller suppliers that add up.
Your income is going to have a direct relationship with the suppliers you’re securing. The more attempts you make to secure suppliers, the more successful you’re going to be.
Whether this takes place over a one-month period, a six-month period, or a year-long period is all up to you.
The faster you move, the easier it is to find and scale up the winners.
Probably the biggest advantage of high ticket dropshipping is that the startup cost and running expenses are extremely low. The biggest cost in your business is going to be Google ads. But when done correctly, there's a very small chance that they won’t be profitable.
This is simply due to the fact that you have so much room for error. Making a sale for $500 profit can wipe away lots of mistakes from your ad campaigns that you can correct going forward to become even more profitable.
So here’s a breakdown of the expenses that you should expect:
- We currently recommend a premium theme that is a one time cost of $167. It’s not necessary to use a premium theme, but it just makes the setup a bit easier and I prefer having the technical support. I don't have time to get bogged down in technical stuff. But it’s not going to make or break your business whether you use it or not.
- Signing up for Shopify costs $29 per month after you get a 14-day free trial. If you’re strapped for cash, you can really hustle during your 14-day free trial to get everything setup properly.
- We like to get a 1-800 number to keep things professional and this costs around $29 per month after a free trial or free minutes you can use. However, you can use Google voice as a cheap alternative. Or if you’re feeling bold use your personal cell phone number or get a really cheap talk-only phone plan.
- You can start google ads at $20-$30 per day and scale it profitably. After you spend $50, Google is nice enough to give you a free $100 coupon. You can use this to get your business profitable out of the gate.
Scaling Into a Full-Time Business and Beyond
Assuming you’re willing to stick at it and put the work in, it should be relatively straightforward to make $1000-$5000 profit per month.
But then you need to start thinking about scaling it into a full-time business.
This is where you’re going to have to start to develop those universally important business skills such as outsourcing and creating systems. These are crucial steps to succeed as a dropshipping business owner.
There are two main sets of tasks that you’re going to want to outsource if you want to begin to really scale: product page creation/uploads and customer service.
Once you have someone that’s able to upload products for you, it removes a lot of the burden of supplier acquisition. It’s not a problem if it’s your first group of suppliers. In fact, we’d recommend doing it all yourself at first just so you can learn and develop a process.
However, uploading products can get quite tedious and before you know it, it can become a full time position.
This is especially the case if you’re scaling and suppliers at a rapid rate like we are doing currently.
As you begin to make more sales, it’s only natural that you’re going to get more inquiries from customers about their orders or about placing an order.
This doesn’t take a huge amount of time when you’re first starting, but as you scale it can REALLY start to add up.
We recommend hiring people from the Philippines at around $3 an hour to handle the bulk of the customer service work. This includes anything from handling live chats, phone calls, emails or even closing sales over the phone.
It’s important to understand that you aren’t going to open your first store and have to worry about doing all of this outsourcing right away.
You can get off the ground and make a basic income as a single person, but if you want to really scale then you’re going to need help along the way.
Focusing on Business Development
Once you get the tedious tasks of operating your dropshipping business in the hands of your employees, it will allow you to focus on the things that bring the most growth to your business.
- Acquiring new high-quality suppliers
- Focusing and learning ads on a very deep level
- Driving buyer-intent traffic to your site with SEO
Example of Taking Dropshipping to the Highest Level
Many people don’t realize that dropshipping can be the start to a billion dollar business. Are we at this level? No, of course not – and I’m not sure that I’d ever want to be. But it's worth knowing what kind of a success story you could build.
To that end, I can always point to one major company’s case study that began with dropshipping and still has very strong roots in it today.
That company is Wayfair.com and seeing their history is as simple as looking on their Wikipedia page which talks about the history of two guys, Niraj Shah and Steve Conine getting started on the humble domain of racksandstands.com.
If you use the WayBack machine to look at this website, it’s very clear that this is a dropshipping site.
I know this because I had a look at the shipping and return policy. It states:
“Send your return using your preferred shipping method, to the address you are provided. Note: this may be our main office or to a distribution center.”
In my humble opinion, this means that it’s going to be most likely sent back to the manufacturer or brand that it was originally dropshipped from.
We also know that Wayfair does a lot of dropshipping because we work with suppliers that also work with Wayfair.
The point is this: If Wayfair can take a simple dropshipping store and turn it into a publicly traded company, it shows that it is totally possible.
By developing systems, investing in teams and doing all of the things that high level businesses do, there’s no reason why you can’t scale a work from home dropshipping business to a massive company.
Frequently Asked Questions
There are always going to be some questions when you're looking at a new ecommerce business of any kind. That's to be expected.
Here are some of the biggest and most common dropshipping company questions.
Is Dropshipping Really Worth It?
In my opinion, high ticket dropshipping is the number one way to get started in online business simply because it allows you to generate profits in a way that is quick and reliable.
It’s also not NEARLY as capital intensive as other business models such as FBA. Not by a longshot.
If you need to start generating positive cashflow quickly without investing much capital, high ticket dropshipping is one of the few business models online that allows you to do this.
However, the downside to dropshipping is that it’s not as easy to scale it in an exponential way the same way you would an FBA business.
What do I mean by this?
When you start to scale a high ticket dropshipping business, the processes have a lot of nuance. You’ll be dealing with multiple suppliers with different points of contact
The good news, is that outsourcing can alleviate a lot of the headaches, but it’s simply that scaling it can start to add more layers of complexity to deal with, especially once you get beyond the $10,000 profit per month mark.
With an FBA business, the way to scale is VERY straightforward:
- Figure out a way to find winning products and send them into the Amazon warehouse.
- Create solid listings, get reviews, rank for the right keywords and your stuff will sell on autopilot.
- You place the same orders over and over again to your supplier’s once you’ve found winners and Amazon’s robots handle the rest of the work.
Sidenote: Just because I said those two bullet points are straightforward does not mean that they are easy by any means. To have a successful FBA business requires a lot of time, research, testing and money to get right. You can also LOSE a ton of money along the way. It’s just that once you get it right it can scale very quickly.
So our recommendation is this:
Use high ticket dropshipping to generate cash to fund capital intensive business models like FBA or a niche/authority. This is exactly how we operate our portfolio business to date.
Rather than trying to decide on something like whether you’re going to do Dropshipping vs FBA, understand how you can use one to compound the other and how they both fit into a long term business strategy.
What Companies Do Dropshipping?
For whatever reason, many people make the mistake of starting their dropshipping journey by looking in “directories” or other membership places to find suppliers. There is absolutely no reason to do this. There are countless companies that do dropshipping that you can simply reach out to and join their dealer program.
All of the best ones aren’t advertised on big platforms or directories. They are just regular companies and brands.
You might even have some of their products lying around your house or apartment.
Just think whether something is efficient to ship multiple times. If it’s not, then there’s a good chance that a company will do dropshipping as part of its existing wholesale or dealer program. It simply makes logistical sense for them to do so.
Is Dropshipping Illegal in Any Way?
As stated earlier, dropshipping in itself is simply a method of fulfillment. There’s nothing illegal about it.
The only reason people ask this is because of the shady practices promoted by gurus in the industry. Unfortunately, this is a problem that does exist.
Examples of these actions include selling copyrighted images or trying to deceive potential customers into thinking that you’re not shipping directly from China.
This is the kind of stuff you want to stay away from. Focus on building real relationships with real companies/brands who dropship in your country.
Do this and you don’t have anything to worry about.
Do You Need a Business License for Dropshipping?
To do high ticket dropshipping the way that we recommend, the answer is that you do need a business license. Suppliers are only going to want to speak with you if you’re a business so going out and registering one is a small step you need to take before they’ll work with you.
If this seems overwhelming, consider the following…
- It’s actually pretty easy to do and setup.
- You can get started building your store while you have someone else set it up (like a CPA)
- It’s a barrier to entry which prevents many people from getting started – this is good because it means less competition.
- If you’re serious about starting a real business, you need to do things the proper way that everyone else has to do them. Even though online marketing makes people think that there’s a way to “hack” something or get around the necessary, but tedious barriers.
How Do I Get Paid From Dropshipping?
Many people often get confused about when you actually get paid when you’re doing dropshipping. I commonly get asked about whether you need huge sums of money to start out, a credit card, etc.
With Shopify, you get the option to choose multiple payment gateways, but the main options Shopify Checkout (which is Stripe), PayPal or Amazon Pay.
We mainly use the first two in conjunction with a separate service called Klarna which allows customers to finance their purchase.
But anyway, as soon as the customer checks out on your website, their payment gets deposited directly into your payment gateway. Shopify Payments pays out every 2 business days or so and PayPal usually pays out pretty quickly as well.
The trouble with PayPal is that they sometimes will put a percentage of your cash on reserves when you’re just starting out if it’s a new account. I’ve heard of Shopify doing this too, but I don’t think it’s ever happened to us.
But either way, most of the time you get that cash from the customer within 2-3 business days.
When an order is placed, you obviously need to pay the supplier to get it shipped ASAP.
The large majority suppliers will accept credit cards, but for others you may have to do a direct bank transfer.
So what you can glean from all this is that you get paid pretty quickly compared to most other business models. No need to wait 60 days for an affiliate commission payouts or even 90 days for some ad networks!
Quick Tip: If using a credit card make sure you get something that has a good rewards program!
So How Much Money Can You Make Dropshipping?
Considering everything that we’ve covered, I think you’ll agree that there’s really no straightforward answer. But if I absolutely had to make an educated guess, here’s how I’d break down how much a given individual could make (in profit) at high ticket dropshipping if they were to put in the effort…
- $1000 per month – If you’re willing to spend time setting up a nice website, securing a few good suppliers and learning Google ads, this level isn’t that hard to reach. I believe most people can achieve this if they put in the work.
- $5,000 per month – You can likely reach this level as a solo person in 6 months to a year if you’re persistent and work regularly to acquire new suppliers and test them out. This can also happen much quicker if you get one really good supplier early on.
- $10,000 per month – To reach this point, you’ll need to develop the skills to create systems and outsource. It would be helpful to have 2-3 virtual assistants at this point. It’s still very achievable, but not as easy as the other two tiers.
- $30,000 per month – At this point, you need solid systems in place to keep all of the daily things in order along with separate systems to keep growth going at a steady rate. You should mainly be focused on growth tasks rather than day to day.
- $100,000 per month and beyond – By this point, your business needs to be a well-oiled machine. Along with virtual employees, you’ll most likely need others to manage those employees and you’ll even want people focusing on growth in addition to the day to day.
Selling Your Store
If it’s intimidating to you to move beyond the $10,000 per month mark there is an alternative: selling your dropshipping business.
Creating and flipping dropshipping stores is a great way to up your income substantially. You can sell stores for 20-30x their monthly earnings on Empire Flippers, so focusing on building and flipping even moderately successful dropshipper stores can be a very lucrative path.
And an alternative profitable model to only focusing on growth.
Pick a path, stick with it, and good luck!