We have a golden opportunity to leverage the massive uprise in online shopping. In fact, dropshipping has been booming over the previous years, and there has been a steady increase in growth. Notably, the dropshipping market is projected to reach 476.1 billion U.S. dollars by 2026.
However, dropshippers may not understand the costs that go along with starting a dropshipping business. So, how much does it cost to start a dropshipping business?
In this article, we will learn about the expenses of dropshipping. We’ll learn about selling channel fees, shipping costs, marketing costs, and much more. That way, we can see how dropshipping is a worthwhile venture. In short, we will learn how much it costs to start a dropshipping business.
How Much Does It Cost To Start A Dropshipping Business?
Although dropshipping requires little to no initial investment, there are costs associated with the business model. So, we’ll take a look at all of them to get a clear picture of how much it costs to start a dropshipping business. As a result, this will give us a clear idea of our expenditures and allow us to calculate a profitable price for our products.
With that in mind, let’s see what costs are associated with running a dropshipping business:
- Selling Channel Fee
- International Selling Fees
- Payment Provider Fees
- Shipping Costs, Taxes & Customs Duty
- Marketing Costs
Selling Channel Fee
To begin, we need to consider the selling channel fees. In fact, these expenses are something we can look at before deciding which selling channel we want to dropship on.
Interestingly, the selling channel fees vary from platform to platform and cover different expenses. So, let’s take a look at the selling channel fees for the most converting dropshipping channels.
- Subscription fee
- Listing fee ($0)
- Selling fee
- Additional dropshipping apps
First and foremost, as these are customizable eCommerce websites, they come with a monthly subscription. To elaborate, this subscription fee allows us to use the channel and all of its features for a set monthly payment. On that note, the subscription fee for Wix is $17/month for the Business Basic plan, $25/month for Business Unlimited, and $35/month for the Business VIP plan.
On the other hand, Shopify costs $24/month for the Basic plan and $69/month for their Shopify plan. As for their ‘Advanced’ plan, it costs $299/month. But, we can always start with the Basic plans and move up from there.
Interestingly, there are no listing fees. To explain, listing fees are fees that are paid for each product a dropshipper lists on a selling channel. But, since this is a custom eCommerce website, listing fees do not apply.
Now, selling fees are a different story. Both Wix and Shopify have selling fees which are usually applied as a percentage of the sale. Wix and Shopify use the industry-standard processing fee of 2.9% + $0.30 per transaction for all online purchases.
What’s more, there are numerous additional paid apps we can connect to our site in the app markets. Dropshipping apps allow us to optimize our business. For example, AutoDS automates all of the dropshipping processes for us. Nonetheless, the fees vary from app to app. Moreover, some apps are free, enabling us to scale our business at a low cost.
WooCommerce is also a platform where we can create a custom dropshipping website. It’s worth mentioning that WooCommerce is a WordPress plugin, so there are a few additional charges.
With that in mind, let’s take a look at the costs associated with WooCommerce:
- Subscription fee
- Listing fee ($0)
- Selling fee
- Additional plugins
WooCommerce is an open-source eCommerce plugin for WordPress. So, there are no monthly subscription fees that apply. However, these are other costs we have to cover to run a successful WooCommerce store. This includes hosting and domain fees, extra plugins, and more, which we will cover below.
Furthermore, when it comes to the listing and selling fees, the same information applies here as for Shopify and Wix. There are no listing fees, and the selling fees are 2.9% + $0.30 per transaction.
On top of that, for WooCommerce, we also need to consider the cost of our domain and the cost of hosting it. With that said, the cost of a domain through WordPress is $12/year, while hosting costs $2.95/month. Alternatively, we can pay $2.99/month for web hosting on Siteground and $20/year for a domain from GoDaddy.
Purchasing a domain from GoDaddy is advisable since we can choose a unique domain name. As a result, we can choose a domain that fits our business. However, with WordPress, we get a generic domain that doesn’t portray our store. And, by hosting on Siteground, we get more control over our domain and hosting.
Lastly, WooCommerce has additional paid plugins we can connect to our online dropshipping store. Although there are a lot of free plugins, the ones we do have to pay for have varying prices. So, these costs are unique to every dropshipper based on which plugin they want to include. For example, if we want to automate our marketing on WooCommerce, the AutomateWoo plugin costs $99/per year.
Next, we’ll take a look at the costs of selling on eBay. Contrary to the previous selling channels, eBay is a marketplace. To clarify, we list our products alongside other sellers in a marketplace. But, we can take advantage of eBay’s already existing huge customer base.
However, if we want to dropship on eBay, we need to consider these costs:
- Listing fee
- Selling fee
- Final value fee
So, since on eBay we don’t have our own personal store, we don’t have any subscription fees. However, because it’s a marketplace, we need to pay for the listing fees.
For casual dropshippers that list less than 250 items per month, there are no listing fees. On the other hand, if we list more than 250 items per month, then there is a $0.30 insertion fee per listing. Notably, these are also dependent on the product categories.
Amazingly, the AutoDS eBay Insertion Fees Calculator will help us calculate how much we are going to pay eBay for listing products. Additionally, it helps us understand when it’s time to upgrade our eBay store subscription.
Unsurprisingly, the selling fees are the same as the selling channels before. The cost is 2.9% + $0.30 per transaction.
Finally, we have a final value fee that applies to eBay. The heftiest single fee we’ll pay on eBay is called a “final value fee.” To explain, this fee represents the amount we owe eBay for every completed sale on its platform. So, eBay charges 12.9% – 15% for final value fees.
Final value fees vary depending on the category and the sale amount. For example, for jewelry and watches, the fee is 15% if a sale is up to $5000 and 9% if it’s above. However, for watch accessories, parts, and tools, the fee varies from 3% to 15%, depending on the sale amount.
The AutoDS eBay Fees Calculator helps us calculate our eBay profits accurately. So, we’ll know exactly how much we’re spending and profiting from our eBay business.
Before we start dropshipping on Facebook Marketplace, we need to know about Facebook Marketplace Fees. So, let’s look at the pricing structure of Facebook. In general, if you are selling as an individual, Facebook Marketplace does not charge any fees.
However, merchants or registered sellers on the platform have to pay different fees:
- Subscription fees
- Listing fees
- Selling fees
- Chargeback fees
Uniquely, Facebook doesn’t have any subscription fees or listing fees. So, it’s free to start dropshipping on this selling channel.
Furthermore, selling fees are deducted automatically after we make each sale. As a selling charge, Facebook Marketplace charges 5% per shipment or a flat fee of $0.40 for products costing $8.00 or below.
Now, let’s look at chargeback fees. In some cases, buyers may file a chargeback, meaning they want their money back. When this occurs, Facebook holds the transaction amount or “chargeback fees” in a chargeback dispute until the issue is resolved.
International Selling Fees
Now, we need to learn what international selling fees are and how they apply to our overall dropshipping costs. The international fee is calculated on the total amount of the sale. Moreover, it’s automatically deducted from our sales proceeds.
The total amount of the sale is the item price, handling charges, the shipping service the buyer selects, sales tax, and any other applicable fees. Importantly, these fees apply to dropshippers that dropship on eBay.
To explain, these fees apply if the delivery address for the item is outside our registered address country on eBay. The fees vary between countries and also depend on where they are shipped from. To understand the costs unique to our store, we need to look at the international fees for eBay global sellers.
Payment Provider Fees
Another fee to consider when dropshipping is the payment provider fee. To explain, these are fees charged to merchants for processing credit card payments and online payments from customers.
So, these fees will vary depending on which payment provider we use for our specific selling channel. There are various payment gateways we can use, but the most used ones are Paypal and Payoneer. For example, if we use Payoneer, we will pay 3% of the transaction amount when using a credit card.
Moreover, if we use PayPal, we will pay 2.9% + $0.30 per transaction for US transactions. Furthermore, for international transactions on PayPal, it’s 4.4% + a fixed fee. The fixed fee differs between locations.
Shipping Costs, Taxes & Customs Duty
Next up, we need to account for shipping costs, taxes, and customs duty. Firstly, shipping costs are set by our supplier. So, we can add those shipping costs as an added fee to our product listings. Generally, international shipping fees can cost an average of around $20. On the other hand, domestic shipping fees are usually very low or even free. But, the costs vary from country to country.
However, a better way to account for shipping fees is with the help of AutoDS. Uniquely, AutoDS can include the shipping cost in our sourcing price, allowing us to offer free shipping to our buyers. Simultaneously, we can maintain our desired dropshipping profit margin.
Additionally, we need to consider taxes and customs fees. To elaborate, the amount of import tax and duties to be paid depends on the country that the goods are imported from. Notably, duty tax rates are between 0 to 37.5%, with the typical rate being 5.63%.
If we want to run a successful dropshipping business, we need to generate interest and turn that into sales. Plus, we need to navigate through the competition and do our best to stand out. With that said, the best way to achieve this is through marketing.
However, marketing is an investment that will help us scale. With that in mind, we need to consider the costs of marketing our dropshipping store. Marketing costs will vary depending on which marketing method best fits our business.
So, let’s take a look at the average marketing costs for the following methods:
- PPC ads
- Influencer marketing
- Standard Promoted Listings
- Promoted Listings Advanced
- Facebook promotions
Pay-per-click ads (PPC) or paid dropshipping ads are a great way to target our audience actively. It allows us to define the parameters to target our ideal customers. Thus, we pay each time someone clicks on our ad for PPC ads. However, the cost per click varies depending on the platform and ad type.
For example, we can run Facebook PPC ads. On that note, we need to consider the costs of running an ad specifically on Facebook. With that said, the average cost-per-click on Facebook is $0.94. This makes Facebook PPC cheaper than LinkedIn, Instagram, or YouTube advertising.
Overall, we can start with a low budget and scale as our PPC ads gain more traction and our website attracts more traffic. Thus, enabling us to increase sales and, therefore, our return on ad investment.
Without a doubt, influencer marketing is a goldmine for great ROI on our dropshipping marketing efforts. Influencers have specialized knowledge, authority, or insight into a specific niche. Undeniably, their pre-existing presence in a niche makes them a useful launching pad for our dropshipping business.
However, the cost of influencer marketing varies from influencer to influencer. Also, the cost also depends on the influencer’s social media presence and the number of followers. So, let’s review the costs based on the type of influencer:
- Nano-influencers: 1,000–10,000 followers → $10 – $100 per post
- Micro-influencers: 10,000–50,000 followers → $100 – $500 per post
- Mid-tier influencers: 50,000–500,000 followers → $500 – $5000 per post
- Macro-influencers: 500,000–1,000,000 followers → $5000 – $10 000 per post
- Mega-influencers: 1,000,000+ followers → $10 000+ per post
Promoted Listings Standard
Uniquely, marketing with Promoted Listings Standard is a marketing method only applicable to eBay. To elaborate, these promoted listings are less target-oriented. However, placing ads across the eBay platform can increase our store’s visibility.
Interestingly, eBay promoted listings follow a bidding system. So, we can choose an ad rate between 2% – 100% of the item’s total sale amount. The higher the ad rate, the higher the possibility of ad placement, leading to increased visibility. However, we pay for these ads only after we make a sale from the ad.
Promoted Listings Advanced
Now, with Promoted Listings Advanced, we can compete for higher ranks on eBay search results. This is the eBay version of PPC marketing.
Thus, as eBay’s version of PPC, when using this method, we need to consider the cost-per-click (CPC) on eBay. With that said, the average CPC on eBay for a specific keyword is around $2.50.
However, we can set a daily budget that will limit our spending. But, if we don’t get enough clicks in the day to fill the budget, we will only be charged the total CPC amount.
Lastly, we can market our business with Facebook Promotions in the form of ‘Boosted Posts.’ This simply means paying Facebook to show our posts to more users, based on our defined targeting.
Facebook charges for boosted posts on a cost-per-mille (CPM) model. So, the cost to promote our posts depends on how many people we’re trying to reach and our target audience. With that said, the average CPM is $6.35 / 1000 views.
All in all, these are the key costs of starting a dropshipping business. Overall, dropshipping is a low-investment business model that we can profit from substantially.
Is It Possible To Start Dropshipping For Free?
Yes! If we don’t want to invest anything initially, we don’t have to. That’s the beauty of the dropshipping model! But, we need to be mindful that this can’t last forever.
When we are starting our dropshipping business, there are a few tricks we can take advantage of. In fact, there are different ways that we can start dropshipping for free, depending on the selling channel.
Selling Channel Tips
We can start by looking for ways to cut costs on our selling channel expenditures. For example, on Shopify and Wix, we can begin dropshipping for free by taking advantage of their free trials. As a result, we can avoid paying their subscription fees from the start. On top of that, these platforms don’t have any listing fees, so we can also cut costs there.
Furthermore, WooCommerce is an open-source platform, and it’s free without any additional plugins. Similarly, there are no listing fees.
Furthermore, there are ways we can cut costs on dropshipping automation software while using it to scale. To demonstrate, we can take advantage of dropshipping automation with AutoDS’ $1 trial.
During this time, we can quickly find our winning products and just as easily list them in our store. By taking full advantage of the $1 trial, we can optimize our store without investing a lot of money. In fact, AutoDS has helped numerous dropshippers succeed. Afterward, the automation will do the work for us, and we can focus on scaling our business with marketing and customer service.
Dropshipping Business Model: Only Pay After Getting Paid
Now; another way we can save money is by relying on the core of the dropshipping model. With that said, this business model works on the basis of only paying our supplier after we receive payment from our customers. Thus, we don’t need to worry about investing in inventory or paying for products upfront.
Free Marketing Methods
Lastly, to grow our store, we can rely on free marketing methods. As a matter of fact, we can work on email marketing campaigns to reach customers and optimize blog posts to boost organic traffic. Additionally, we can use various social media platforms to post content and target consumers.
All in all, there are different methods to explore to avoid certain costs. Ultimately, dropshipping is one of the most lucrative e-commerce business models to take advantage of and earn high profits.
How To Cut Costs And Scale Your Dropshipping Business
It’s time! We’re ready to learn the secrets of how to save time while increasing sales. Now that we know about our costs, it’s important to understand how to maximize our profit potential. The best way to do so is to fulfill customer orders quickly, stay on top of trends, and run an efficient and fully optimized business.
So, how can we achieve this? Through dropshipping automation! In fact, with dropshipping automation, we can save money and boost sales by optimizing our dropshipping business. Plus, since the automation software does the work for us by automating all of our dropshipping processes, we can work on scaling through marketing and customer service.
With this in mind, the best all-in-one automation tool to use is AutoDS. AutoDS has a myriad of tools that allow us to scale and grow our dropshipping business:
- Advanced Product Research Tool
- Quick & Easy Product Imports
- Complete Order Fulfillment
- 24/7 Price & Stock Monitoring
- One-Screen Inventory Management
- Automatic Price Optimization
- Updated Tracking Numbers
Frequently Asked Questions
How Much Money Is Required To Start Dropshipping?
Technically speaking, you can start dropshipping for completely free. However, there are some fees that we cannot avoid, like taxes (if applicable), payment provider fees, and selling fees.
How Much Does It Cost To Start Dropshipping On eBay?
It costs you almost nothing to start your eBay dropshipping business. However, you need to pay eBay for dropshipping on the platform. eBay dropshipping fees include listing fees ($0.30 for each extra listing beyond the free 250 listings/month), and final value fees.
How Much Does It Cost To Start Dropshipping On Shopify?
If you’re starting an online store using Shopify, expect to pay around $50 to $100 in monthly expenses at the start, including add-ons.
Can You Start Dropshipping For Free?
Yes! If we don’t want to invest anything in the beginning, we don’t have to! That’s the beauty of the dropshipping business model. However, this can’t last forever if we want to scale.
We are ready! Now we know all costs of dropshipping that may apply to our business. Plus, we have systematically gone through each selling channel and all of the unique costs.
However, dropshipping remains to be a super low-investment business model with high-profit potential. As such, it’s clear that it’s definitely worth diving into the world of dropshipping.
But, in order to do so, we need to check out these articles to help us on our journey: