Is Dropshipping Profitable or Not?

 

In articles that deal with dropshipping, the most frequently asked question is: is dropshipping profitable? This question is legitimate, because in online commerce it is quite difficult to estimate the possible profits you will have afterwards.

Also, I will help you find out if dropshipping is profitable or not. And also how to make it profitable if it is profitable?

How to define if dropshipping is profitable?

In any trading activity, as with dropshipping, the amount you earn is a key factor in its profitability.

Indeed, for an activity to be profitable, the sum of the commissions you incur in the activity must cover the expenses related to your e-commerce activity.

What are the main expenses of a Dropshipping site?

There are different expenses regarding the operation of an e-commerce store.

The cost of managing your site

This is the selling price for your monthly subscription if you use a CMS such as Shopify or the amortization cost of buying your internet sales site (if the site cost several hundred, or several thousand euros).

But this amount can be a brake on the profitability of your Drop shipping site, especially initially, and that you still have very little sale.

The cost of acquiring potential customers

This is all the costs you invest to engage Internet users on your own shop. This is the case, for example, of buying Adwords keywords to increase the place of your ads in the results of search engines like Google.

It can also be the case of an investment of tens or hundreds of euros to offer its digital products on Facebook. All these investments lower your profitability.

See also: How to avoid cart abandonment in e-commerce to succeed in earning more?

The cost to evolve your site

Initially, your internet sales site may not seem perfect, because for you, the important thing is to succeed in making your first sales as a good seller on the internet. But the more your sales grow, the more you'll want to increase your conversion rate.

You will then develop your site so that it is more efficient, and so that it looks more like you. The investment for this development is to be considered, because it lowers the profitability of your dropshipping site.

The cost of your salary

As a start-up, it is better to evolve it so that it has a direct impact on your online business and / or reinvest your income to increase the notoriety of your site.

Then, when you have dozens or hundreds of sales a day, you can think about taking a salary. But your salary depends on how much margin you have left after accounting for and totaling all previous costs.

When is a dropshipping site profitable?

As we have seen, making a dropshipping site profitable depends on the expenses that the site causes for its development. Also, a dropshipping site is profitable, but on the condition that the sum of the commissions earned with sales is greater than the sum of the costs incurred for the development of the site.

How to make Dropshipping Profitable?

As we can make dropshipping profitable, you must now know how to make the sum of commissions exceed your investments.

To this, there are 3 main elements for you to move towards a profitable dropshipping.

Learn the challenges of Dropshipping

The first element to make a dropshipping profitable concerns your knowledge of the challenges of e-commerce. Because as a beginner auto-entrepreneur, you will inevitably make mistakes related to your lack of knowledge of the challenges of e-commerce but also related to the lack of experience.

And because of this, many e-merchants close shop for lack of means. But there is a solution to avoid making a lot of mistakes (or even none) and gain weeks or months of experience in ecommerce.

This solution is taking a free dropshipping training, because it gives you the keys to success while avoiding you to make beginner mistakes. So, don't hesitate to start by taking a dropshipping training before you start right away.

Reduce your expenses as much as possible

Indeed, as we have seen above, the less there is expense, the more dropshipping will be very profitable. Also, it is necessary to set up a digital marketing strategy that allows you to spend as little as possible to attract prospects to your site.

Because the goal is that each sale of products on your site does not cost you a penny. Moreover, here are some digital strategies that you can put in place:

• Natural referencing or Search Engine Optimization (SEO): this is an action that improves the position of your site in the results of search engines such as Google.
• Social networks: In case you are going to sell products related to impulse buying, social networks are the best sales platform to generate sales. To do this, simply create a community and animate it to make it want to follow you more regularly and make purchases at home.
• Loyalty: it is seven times cheaper to make a customer loyal than to acquire it. And to retain a customer, it is necessary to set up a loyalty strategy such as Customer Relationship Management (CRM) which is a reminder by email or SMS marketing.

In any case, you must document and train yourself, because the more you learn, the faster you will evolve.

Negotiate commission rates

The negotiation of commission rates is a lever that promotes the profitability of a dropshipping. But initially, as long as you don't exceed dozens or hundreds of sales per month, you'll settle for the commission rate assigned by your dropshipping suppliers.

Indeed, it is better to negotiate that you can generate interesting turnover for your dropshipping supplier. Negotiating commission rates has a direct impact on your margins, because if your commission rate increases, you automatically increase the amount you get when the sale of one is made.

To go further, increasing the commission rate can also benefit you in another way. Because by rewarding the percentages of commissions earned in your competitive selling price, you can lower your prices without losing margin. Thus, your prices will be attractive and your conversion rate will increase, which will also increase your sales.

The mistake not to make for a profitable Dropshipping

There is a beginner's e-merchant mistake not to do if you want a profitable dropshipping site. This mistake is to lower your selling prices.

Because e-merchants who launch want to imitate Amazon or Cdiscount by offering a discount to their users. Certainly you will make your first sales, but you will lower the commission you will recover.

To have a profitable dropshipping, it is important that your commissions are higher than your expenses.

So, don't sell off your profitable products by lowering prices. Showcase your most purchased products and show your expertise.

And stand out from the competition with the customization of your virtual store by making beautiful visuals, giving detailed product sheets of your product range, etc.

Conclusion

Making a dropshipping site profitable depends on your commissions and expenses. But for this, you have to find the best-selling products (or even: Which product should we sell in dropshipping?) and market these products. Indeed, there is no ideal product for a lucrative business.

It all depends on the competitors thanks to the market research, the products sold commercially (which must be the best products on the market), each product sheet produced and the logistics of the suppliers.

Finally, to develop the very lucrative trade so that dropshipping is profitable, take example on large marketplaces such as Shopify, Amazon FBA, Magento or Alibaba who are already experts in web marketing.

Indeed, they are already used to making money on the internet thanks to their profitable business. They are therefore examples, but also future competitors. Because at their level, you can import physical products and even become a wholesaler.