Is dropshipping profitable?

What determines your profit?

Dropshipping can be profitable. It is a popular way to start an online business without large upfront investments: you sell products as a reseller and only buy a product once your customer has ordered it.

How profitable your webshop becomes depends on several factors you have a lot of influence over yourself. Below we explain how to keep dropshipping profitable and what to watch out for when you start your webshop. The starting point is simple: prepare well, and calculate both your variable and fixed costs before you set a price.

Make sure you have enough margin

It is tempting to think that the difference between the purchase price of a product and your selling price is your profit. It is not. The purchase price is only one of your costs.

On top of the cost of goods, you also need to account for marketing, software, customer service and any commissions charged by marketplaces such as bol. Also count subscription costs, for your dropshipping app and sometimes for the supplier itself (such as dropXL for vidaXL), and return costs with suppliers that don't accept returns. Build all of these into your calculation so the margin that is left is real profit, not a number that disappears the moment the first ad runs.

Calculate your maximum CPA

Marketing costs come in many forms. You can run paid ads, invest time in making your webshop findable in search engines, or use marketplaces to list popular products. Whichever route you take, decide up front how much marketing budget an order is allowed to cost. That figure is your maximum cost per acquisition, or CPA.

Distinguish between the CPA of new customers and the CPA of returning ones. If customers come back often, you can accept a lower profit on the first order, or sometimes none at all. A customer in your database is valuable, and much of your profit can come from the repeat purchases that follow.

Test shipping costs and new channels

Shipping is one of the biggest expenses for any webshop, so treat it as something to test rather than guess. One option is to use the lowest possible selling price and charge shipping separately. Another is free shipping, which sounds appealing and can pay off: high shipping costs are a common reason for shoppers to abandon their cart. If free shipping lifts conversion, it can earn you more than it costs.

The same experimental mindset applies to marketing. Many webshops advertise on Facebook, Instagram and Google, so competition there is high and clicks can be expensive. Also test newer channels and formats. Competition there is sometimes lower and a click cheaper. Start with a small budget and measure your CPA.

Build repeat revenue

A new fragrance every month, a fresh sports kit each season or 20% off a fifth purchase: subscriptions and loyalty incentives can raise the lifetime value of your customers. Be creative and design something that genuinely appeals and adds value, rather than a discount for its own sake.

Loyalty and subscription apps are installed in your own webshop platform. GOGETTERS makes sure the orders from those customers go to the supplier automatically. You can compare what each plan includes on our pricing page.

In short, dropshipping offers plenty of opportunity to make a profit. Prepare well, calculate your variable and fixed costs, and you will know the minimum price you need to make a profit.

Frequently asked questions