Have you ever considered starting a dropshipping business but are still determining how much you need to invest? Don’t worry—today, we will tell you how much you need.
The market size of dropshipping was $243.42 billion in 2023; it will be $301.11 billion. Dropshipping will not slow down anytime soon, and the market will continue enlarging.
The primary reasons contributing to this rise of dropshipping are low risk, scalability, flexibility, and low inventory management. Therefore, many entrepreneurs invest in dropshipping because it needs low capital to start and launch.
Most people have been asking how much it costs to start dropshipping. However, there is yet to be a specific amount set to start a dropshipping business. Therefore, we will cover the main areas that need investing and how much each might cost.
Table of Contents
How Much Does It Cost to Start Dropshipping
Dropshipping is a profitable business venture to start. There are certain dropshipping costs that you need to consider before venturing into this business. However, these are the basic costs for dropshipping; thus, you might opt for the premium or free packages.
Here are some of the significant dropshipping costs that you need to consider;
- Registration and licensing
- Domain name and hosting
- Marketplace and ecommerce platform fees
- Product costs
- Marketing costs
- Dropshipping Apps and plugins
- Supplier and shipping costs
Registration and Licensing
Most people venture into dropshipping as a side hustle and thus need help registering the business with the government.
Even though this is unnecessary, you must register for dropshipping to get different benefits, such as customer trust.
Some vital Registration and licensing you need for your dropshipping business include business licenses and permits, sales tax payments, business registration, and employer identification numbers.
You must register your business as a legal entity or a sole proprietorship.
You might need to pay fees depending on the location where you register. The minimum cost to register your business is $50.
You can register your business in the US or UK as an LLC or UK limited company.
Depending on your business location and its nature, you may need to obtain additional business permits or licenses. The costs of these licenses and permits vary depending on various factors, such as niche. Some include professional licenses, specialized industry permits, or health department permits.
If you plan to hire employees or open a business bank account, you need to register an EIN, which is free. The last business permit your dropshipping business needs is a sales tax certificate. The cost of getting a sales tax permit will vary depending on your business location.
Domain Name & Hosting
To build a dropshipping business that customers can trust and rely on, it would be best to have a professional brand name representing your store. The domain name will act as the address of your dropshipping website.
A domain should be unique and easy to master so customers can find your business online. Depending on your domain provider, a good domain should cost between $5 and $15 annually using Namecheap.
Hosting is a server where you will host your dropshipping website. You must include hosting when determining the cost of starting your dropshipping business.
The cost of hosting will vary from $10 to $100, depending on your hosting company. After purchasing your domain, you can build your website on WordPress, which is free.
Marketplace Fees and Ecommerce Platforms Fees
When starting a dropshipping business, you can decide to sell your products on online marketplaces like Amazon, Etsy, or eBay. You also sell them on ecommerce platforms such as Wix, Shopify, and Squarespace. And these platforms come for a fee.
An online marketplace is perfect for your dropshipping business as it will likely bring new customers to your store. Launching a dropshipping business online is easy; however, these marketplaces have limited customizations.
Furthermore, you must pay a specific fee for every product you list and each sale you make. Although Etsy is a free marketplace to sign up, the platform charges $0.20 for every product you list and 6.5% for every sale you make.
For each item sold, the payment processing fee is $0.25 + 3%.
E-commerce platforms allow drop shippers to customize their stores to their liking, but they must deal with traffic. These platforms charge monthly fees to use their services and an extra fee for every sale.
For example, Shopify’s basic plan costs $29 monthly, $0.30 for each transaction, and an additional $2.9 credit card fee. However, if you upgrade your monthly plan, these fees will continue to decrease.
Product Costs
You need the right products for your store to build a successful dropshipping business. With the rise of suppliers offering different products online, you must research and analyze them well and their sourcing methods.
Print-on-demand, private label products, wholesale, and dropshipping platforms are the most common and popular sourcing methods in dropshipping.
The print-on-demand method allows you to design your products, such as hoodies, t-shirts, home décor, or apparel.
Once you create the product, you market it, and when someone purchases the item, a supplier dealing with POD prints the item and ships it directly to your customer.
The most common dropshipping and wholesale platforms are Wholesale2B, SaleHoo, and AliExpress. The above offers differing unique products and operates from different places worldwide.
Product costs on these platforms depend on the category you want to sell. Thus, it would be best if you found a perfect niche that is less competitive.
Private-label products are sold under your brand name and manufactured by third-party suppliers. The process includes identifying a unique category, finding a manufacturer, and including your brand logo on the packaging.
Marketing Cost
Your work must be completed after creating and launching your dropshipping store, but it has just started. The dropshipping sector is saturated, as more entrepreneurs are investing in it each day. Therefore, you need to invest in marketing to succeed in this sector.
To succeed with your marketing campaigns and reach a vast engagement, here are some of the common marketing strategies you can use;
Email Marketing
Email marketing is a good strategy for increasing your brand’s ROI. If you invest in email marketing, you will likely gain high returns on your investment. For example, if you spend $2 on email marketing, you can get an average return of $80.
With email marketing, you don’t have to do every task alone. The introduction of AI in the marketing sector has made this possible because it automates tasks, making it easy to create optimized email campaigns that target the right audience.
Some of the best email marketing tools include Campaigner, Zoho Campaigns, Drip, HubSpot, Brevo, and MailChimp.
Social Media Marketing
Most people spend more time on social media, making it a perfect platform for advertising your business. The most common social media channels include Instagram, TikTok, Facebook, and WhatsApp.
Using social media, you can create ad campaigns for your social media accounts that advertise your business and products.
The cost of your ad campaigns will depend on your goals and the duration you want them to run. Social media marketing has no set amount; however, Meta recommends the lowest amount be $5.
Additionally, you can invest in chatbots like Ecommercebot to help you manage your social media accounts in activities like creating quality and optimized ad campaigns. But note that this bot comes at an extra cost.
Influencer Marketing
Influencer marketing is a type of business marketing on social media using product mentions and endorsements from influencers. With the rise in influencer marketing, ecommerce business owners can ascertain that influencers significantly increase brand visibility and bring in new customers.
If you want to invest in influencer marketing, they range in different tiers depending on the number of followers they have. For example, influencers with over one million followers are known as Mega influencers, and costs range from 20,000 per post. However, you can consider the Nano influencers with 1,000 to 10,000 followers, and their prices range from $5 to $25 per single post.
Supplier and Shipping Costs
Suppliers add a fee for dropshipping that caters to their products and services. Subscription and transaction fees are standard in any industry. This supplier cost is determined by different factors such as premium products, increased product limits, order synchronization, and ecommerce integrations.
The supplier fees range from $25 to $300, depending on your chosen platform. For example, SaleHoo is a platform with over 8,000 suppliers and over 2.5 million products. The basic plan costs $27 monthly, while the premium one costs $97.
With dropshipping, since you don’t operate an actual store, you’ll have to pay for every product your customer purchases. However, the shipping cost is also determined by product weight and size, delivery time, delivery origin and destination, and the service provider.
The most common shipping options include UPS, DHL, and FedEx courier services. The second option is AliExpress standard shipping, which is most suitable if you get products from AliExpress.
Lastly, you can use ePacket to ship packages from China. Local carriers and the United States Postal Service (USPS) are other shipping options—the shipping cost ranges between $5 and $30.
Dropshipping Plugins and Apps
Dropshipping has become easy nowadays, as there are different apps and plugins for activities like marketing, tracking, and customer support. They make it easy to get your business off the ground.
You will need different apps for different activities, such as chatbots, wholesale and bulk pricing, and upsells.
These apps simplify the dropshipping process by automating most customer experience services.
One common platform you will need is an e-commerce chatbot. For your Shopify store, Ecommercebot automates tasks such as social media management, which takes over and markets your business online on all the social media platforms. On Shopify, Ecommercebot tracks your orders and manages inventory. The cost of the E-commercebot starter package is $49 per month.
What Is The Total Cost of Starting a Dropshipping Business?
We have discussed all the costs of drop shipping, and now you already know what it takes to start and own a business.
Let’s sum up all the above and calculate the total cost of entering the dropshipping business.
Registration and licensing cost $200
Domain and hosting= $60
Ecommerce platforms= $48
Product cost= $100 (minimum)
Marketing cost= $20
Dropshipping plugins and Apps= $50
Total=$478
With $500, you can start and run a successful dropshipping business.
Conclusion
In conclusion, dropshipping is a profitable business idea anyone can pursue and succeed in.
The business requires little capital; beginners can start with only $500. With this amount, you can build, host, start, market, and operate a successful e-commerce business.
Ecommercebot is a perfect plugin that can help you operate your dropshipping store. If you plan to build your store on Shopify, you can integrate it with the Shopify bot by Ecommercebot to automate most of the activities.
You can try Ecommercebot for free; no credit card is required. You agree to turn your E-commerce business into a success story by clicking the image below.
The bot gives you an overall store performance and shares optimization suggestions, order and inventory tracking, analytics for your ads performance, and additional marketplace for apps. You can try Ecommercebot with our 30-day free trial.
Frequently Asked Questions (FAQs)
What is the Minimum Amount I Need to Start Dropshipping?
The minimum amount you will need to start dropshipping is $500. However, you can start a simple dropshipping business with as little as $200.
Can I start dropshipping with no money?
Yes, you can start dropshipping with no money, but it can be challenging because you have to rely on free services, apps, and plugins with limited features and functionalities.
How long until dropshipping is profitable?
Dropshipping is hard, and success only comes after some time. It can take 6-12 months to earn a good profit.
Is dropshipping a profitable long-term venture?
Yes, dropshipping is a profitable long-term venture since it is low-risk as you are not responsible for manufacturing or shipping.
What is a low-profit margin for dropshipping?
The average profit margin for a dropshipping store ranges from 10% to 30%. However, this differs depending on the type of business model, niche, and products. The minimum profit margin should be 10%.
