How much money do you need to start a dropshipping business? Almost every newbie asks this one of the most common questions when starting dropshipping.
Dropshipping has really lowered the barrier to entry to online selling, that you can even start a dropshipping business without money, but just because you can doesn’t mean you should.
Dropshipping is like any other business, and starting a successful business does cost money. In this post, we’ll talk about the areas where you may require to put some money into your dropshipping business before it puts money into your pocket.
Let’s have a glimpse of the costs of starting a dropshipping business through this table:
| Expense Category | Average Cost | Notes |
| Domain | $14 per year | |
| eCommerce Platform (Shopify) | Rs 1,994 per month | Plus 2% transaction fee |
| Sampling Products | $200 one-time | Can vary depending on product selection |
| Marketing |
Rs 8000 to Rs 10,000 per month
|
Google and Facebook Ads |
| Other Business Expense | Rs. 6,000 to Rs. 30,000 | Depends on the state and no. of directors your company has |
The Cost of Starting a Dropshipping Business
Online Store Setup
For starting a dropshipping website, you need to select a platform that best suits your business requirements. Shopify and WooCommerce are among the top recommendations due to their comprehensive toolkits, allowing you to manage inventory, process orders, and receive payments, among many other functions.
Shopify offers various pricing plans, the basic of which is Rs 1,994 per month, while premium plans can reach up to Rs 30,164 per month. WooCommerce, on the other hand, is a free plugin for WordPress but requires you to bear the hosting costs, which can vary depending on the provider and plan chosen.
On top of these, you must also consider the cost of purchasing a domain for your site if you don’t already own one. Within Shopify, you can buy a domain starting at $14 per year.
Another often overlooked expense is the transaction fee associated with these platforms. With Shopify’s basic plan, there’s an additional 2% transaction fee, if you choose a third-party payment provider like Stripe or Paypal.
Supplier Fees
It’s crucial to remember that dropshipping suppliers aren’t merely providers of the products that you list in your online store. They also have the responsibility of logistics and shipment once your customers place orders, significantly lightening your load.
Suppliers’ pivotal role in dropshipping underscores the importance of investing in reliable and efficient dropshipping apps. DSer is a reputable dropshipping Shopify app widely used by dropshippers. It serves as a bridge between you and your suppliers, offering access to a wide range of products, import & edit products, Auto update stock & prices and streamlined order management.
The costs associated with a DSers subscription can vary, primarily depending on the scale of your operations and your specific needs. DSers comes with a basic free plan, but you won’t be able to scale with it as it is limited to only a 3000-product cap. To list more than the product cap, you have to upgrade to an advanced plan which costs $19.90, plus you get access to additional features like Advanced Bundle mapping, etc.
Return Costs
Dealing with return costs is an inevitable part of running an eCommerce business, and the dropshipping model is no exception.
Understanding the potential financial impact of these unexpected return costs is crucial. As a rule of thumb, an eCommerce business should anticipate a return rate of about 20% to 30%. Of course, this rate may vary depending on the products you sell and your specific audience. In addition, return shipping costs should be accounted for, which could range anywhere from Rs 300 to Rs 5000 or more, depending on the product’s size, weight, and distance of travel.
Marketing Costs
The right marketing strategy can propel your dropshipping business to new heights, while its absence can leave you floundering in a sea of obscurity.
Various platforms are available for marketing your business, each offering unique advantages. For instance, Google and Facebook are powerful digital advertising tools, capturing a substantial portion of internet users worldwide.
From Google’s search engine marketing (SEM) and search engine optimization (SEO) to Facebook’s targeted social media ads, these platforms provide powerful tools to reach your target audience.
For Google Ads, you might spend anywhere between $1 and $2 per click, depending on your industry and keywords. Facebook Ads can cost around Rs 0.51 to Rs 2.26 per click. However, keep in mind that these are averages, and actual costs can fluctuate based on factors like your targeting parameters, competition, and the quality of your ads.
It’s common for new dropshipping businesses to dedicate at least Rs 8000 to Rs 10,000 for initial marketing campaigns.
Other Business Expense
Starting a business is not only about deciding what to sell and whom to sell it to. It’s also about legally establishing your business. One of the first steps in setting up your dropshipping venture is deciding on your business structure, typically a choice between a sole proprietorship or a Limited Liability Company (LLC).
While operating as a sole proprietor might not incur any registration costs, an LLC, on the other hand, provides more protection to your personal assets should your business face any legal issues. Depending on the state and no. of directors of your company, forming an LLC can cost between Rs. 6,000 to Rs. 30,000.
Also Read: Dropshipping on Amazon: What are its Pros and Cons?
Conclusion
Even with all these startup costs, dropshipping still is one of the best ventures for new online sellers looking to enter into eCommerce. Because with this much investment, you can generate six-figure or even seven-figure revenue.
Furthermore, it is crucial to understand the reality of starting a dropshipping business. While the potential for profits is undeniable, it is not a get-rich-quick scheme. Dropshipping requires dedication, hard work, and ongoing investment. It is important to manage expectations and approach the business with a long-term mindset.
FAQs
Can you start dropshipping for free?
Yes, it is possible to start dropshipping for free. There are a few ways to get started with dropshipping for free. One way is to use platforms like Shopify, which offers a 14-day free trial to new users and then charges a monthly fee after the trial ends. Another way is to use free marketplaces like Facebook or Instagram to sell your products. But the catch here is that you cannot tackle the competition without investment. You need to invest some money in order to achieve profitability and sales.
Is dropshipping legal in India?
Yes, dropshipping is legal in India. The dropshipping business model operates within the boundaries of Indian law and regulations. It is a legitimate and cost-effective method for fulfilling orders.
What is the minimum profit for dropshipping?
The minimum profit margin for dropshipping typically falls between 15% and 20% of the wholesale price. It is considered a good profit margin if you are able to sell products at a price that is 10% or higher than the wholesale price.
Is it worth it to start dropshipping?
Yes, it is worth it to start dropshipping. Dropshipping can be a profitable business model that drives revenue growth and increases profitability for retailers and vendors. It offers several advantages, such as low startup costs, the ability to sell a wide range of products, and the flexibility to run your business from anywhere.
