Hey it’s Spencer here. I just wanted to give a brief introduction to this guest post from Joseph Brusca. 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 alot 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 right here.
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.
However, 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 Shopify.
But as you might imagine, the truth is much less flashy and grounded in reality:
Dropshipping when done right is probably the easiest and quickest way to start generating income online and creating a web-based asset that you can sell.
But when done wrong, a dropshipping can cause you waste countless hours and lose thousands of dollars.
In this article, we’re going to explore how much money you can actually make dropshipping in the most realistic sense possible.
Let’s get started…
What is Dropshipping?
Dropshipping is nothing more than a method of fulfillment.
Seriously, that’s it.
The term refers to when the business who makes the sale to the consumer (or business) does not actually ship the goods that were purchased.
Instead, the goods are shipped directly by the manufacturer or brand.
The obvious advantage to the seller is that they do not need to buy inventory.
For the shipper, it allows them to not have to focus on marketing and selling. Instead, they can put a bigger emphasis on supply chain and inventory management.
For certain products that are heavy and/or expensive to ship it’s a win-win for both parties.
It’s practiced 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 dropshipping 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 and upload products from AliExpress to the website. The number of products and site size can greatly vary all the way from a store that’s focused on selling a single product to a “general” store that sells a wide variety of different products.
- Then, you advertise on a social media platform to try to drive traffic to your store.
- 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. So much so, that when I see others claiming success with it, I have a hard time believing them.
Side Note: I’m certainly not stating that it is 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.
Here’s why I think it’s a terrible business model:
- It usually requires you to spend a lot of money upfront testing advertising on Facebook. This is a huge time/money investment. You could spend thousands of dollars before ever creating a campaign that makes profit.
- Once a campaign does make 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, long shipping times and all sorts of other things that you don’t want to deal with.
- 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 and 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 which are the exception rather than the rule.
High Ticket Dropshipping
High ticket dropshipping is by far the better way of doing things if you want to build something that’s sustainable. Here’s how the business model looks on paper…
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- You create a Shopify store and partner with established brands or distributors that are selling expensive and/or heavy products that are conducive to being dropshipped.
- You add their products to your store and start advertising using Google Ads.
- You 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, experiment with upping the budget.
- These campaigns should be mostly “evergreen” because you’re targeting people that are ACTIVELY searching
- Then, go out and find more products and/or suppliers and repeat the process.
- This allows you to build more and more evergreen campaigns and scale your business in a sustainable way.
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 as they are doing product research or already looking to buy. This is referred to as “high buying intent”.
- You’re partnering with real businesses and brands in your country and don’t have to deal 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 market places 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
Makes sales, commissions or any sort of revenue online is continent on one thing: getting traffic.
Plain and simple 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 in order to get people to come to your website. All of the following are different ways of getting traffic that cost money one way or the other.
- Creating content that you hope you rank in Google over time.
- Paying for social media ads to drive traffic to your website from places like Facebook.
- Serving Google ads that show up when people search for certain queries.
In business, you’re essentially spending money and time now 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.
This is true no matter how good your copy is or how fantastic the products are that you’re selling.
By selling high ticket items, a single sale can be worth a lot of money. All of the sales we make on a daily basis can profit us anywhere from $50 – $5000 or sometimes even 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 $5 – $15 or something in that range.
Now, I understand that these are two different business models and it’s hard to compare them in this way.
But considering that the methods of acquiring traffic for a low ticket and a high ticket business model don’t really change much, I’m of the opinion that selling things that can have huge returns gives you the biggest bang for your investment of money and time.
Setting Expectations for Income
No matter how good a business model is, it’s important to understand that it’s never truly “easy” or a straight path forward.
You need to set reasonable expectations, do work consistently and adapt to any curve balls that get thrown your way.
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 along the way.
Sidenote: Yes, there is an element of luck to EVERY business, but the impact luck 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 you and make small tweaks over time to your specific business model that makes luck much less of a factor.
The amount of income you make hinges on one major factor: How many good suppliers you can secure and develop relationships with.
There are other important factors involved, but this is the thing that makes it all possible.
Realistically, all it takes is one supplier’s products to take off and you can start profiting 5 figures per month.
And there is a middle ground as well. Not every 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 1 month period, a 6 month period or a year long period is all up to you. The faster you move, the easier it is to find and scale the winners.
Probably the biggest advantage of high ticket dropshipping is that the 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 so I don’t 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 that you can use 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.
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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 Phillipines 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 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 their 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
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?
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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 “Is Dropshipping Legal” is because of the shady practices promoted by gurus in the industry such as selling copyrighted images or trying to deceive 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 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.
But there is one final thing to consider: selling your store.
If it’s intimidating to you to move beyond the $10,000 per month mark there is an alternative: selling your store.
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 is an alternative model to only focusing on growth.
Pick a path, stick with it and good luck!