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To be honest, starting a dropshipping business can cost as little or as much as you want!
But among the various expenses involved in building a profitable dropshipping model, I would say that the most costly one is the marketing part.
If you don’t have money to spend on ads, it will cost you time, and you will likely get slower results.
You can also choose to spend money on product testing or ad campaigns to see which one works best for your business.
In this article, I’ll discuss all the dropshipping startup costs you’ll have when creating and growing a dropshipping business.
How Much Does It Cost to Start a Dropshipping Business: The Verdict
In a nutshell, starting a dropshipping business can range from a minimum of around $200 to upwards of $2000!
As with starting any other business, everything depends on the product you sell, your location, budget, and ad spend.
| Learning | Inclusions | Price | Total Startup Costs |
|---|---|---|---|
| Learning how to run a successful online business | Online resources that teach you how to start and manage a profitable business model. You may also check free YouTube videos, enroll in cheap Udemy courses, or subscribe to paid community courses. | Free / Paid online dropshipping courses can cost from around $10 to up to $2000+ | Free / up to $2000+ |
| Setting Up Your Online Business | Web hosting, domain name, store builder, themes, logo designs, product images and descriptions | $25 to around $500 | $25 monthly for Shopify’s basic plan Upfront costs can hit around $1000 if you choose to use premium store themes and hire professionals to do your logo, photos, and product listings. |
| Product Validation & Sourcing | Product research tools, supplier research tools, product samples | Free | $15 to $39.99 monthly for premium product research tools. Ordering product samples depends on how much your product costs. |
| Marketing Your Dropshipping Business | Paid ads, VA (virtual assistant) | Free | Marketing costs can reach $1000 to upwards of $2000 if you use paid ads, and hire professionals to do your ad copy, photos, logos, and product descriptions. |
| Business Registration | Cost of forming an LLC, sales tax ID (if you’re selling from the USA) | $100 to over $1000 | $100 to over $1000 (depending on local laws and where your business is located) |
| Total Estimated Cost to Start Dropshipping | If you plan on going all out with paid research tools, professional designers and copywriters, and extensive marketing campaigns, expect to shell out upwards of $3000 to get your dropshipping business running. |
Costs To Run a Successful Dropshipping Business
While dropshipping is a low-risk business model, there are still some dropshipping startup costs.
Here are some of the most common dropshipping investment upfront startup costs to build and maintain a successful dropshipping store.
Setting Up Your Online Business
Your online store is where you sell products are over the internet.
This can be a website with a URL and domain name that you created on your own.
You may also set up your online store via ecommerce website platforms, such as Shopify, Wix, Ecwid, or Squarespace.
Here are some of the costs involved with setting up your dropshipping store.
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Hosting | This service stores your website content and files online so you can run your website on the cloud. Think of it as a dedicated storage space for your site. | Except for the Starter plan, all of Shopify’s paid plans ($25-$399 monthly) already include secure, unlimited ecommerce website hosting. | |
| Domain Name | A domain name is the unique address people visit to access your store. | A domain name costs money, and you can purchase one from Shopify, Hostinger, or GoDaddy for around $10-$20 yearly. | |
| Online Store Builder | An online store builder, also called an ecommerce platform, allows you to create and customize your online store, even if you don’t have technical knowledge or coding skills. | All of Shopify’s paid plans (including the $5 monthly Starter plan) come with a free online retailer store builder. | |
| Theme | Online stores need a theme to make them look attractive, inviting, and well-organized. | Shopify offers 12 professional-looking website themes that are free of charge. | Shopify’s premium paid themes can cost from $180-$380. |
| Logo Design | Your business logo is the recognizable symbol that sets your brand apart from competitors. | Use Canva to create a logo for free, or hire someone to create your logo on Fiverr for around $5-$25. | Hire a professional logo designer for around $100. |
| Product Images | Visually appealing product images easily catch the attention of potential customers. | Take product photos using your smartphone or use your supplier’s product images. | Hire a professional photographer for around $50-$300 per hour. |
| Product Descriptions | Your product descriptions should convince customers to purchase your goods. This is also essential for SEO (Search Engine Optimization) purposes, making sure that your online store is easily found on search engines. | Write the descriptions yourself. You may also use free AI writing tools to help you out. | Hire a professional copywriter for around $25-$150 per hour. |
Product Validation & Sourcing
Before committing to a product to sell, take time to gather data if it has a market, is in high demand, and has the potential to generate huge profit margins in the long run.
You also have to secure a dropshipping supplier that is reliable, delivers orders on time, and supplies high-quality items.
Below are some of the costs involved in sourcing and validating products:
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Product Research Tools | These software programs will scrape the web to find high-demand products that people will want to buy. | Although not recommended, you can browse through Amazon’s Best Seller list, AliExpress Dropshipping Center, or Google Trends to find profitable products to sell. You may also take advantage of free trials of paid product and dropshipping supplier research tools, such as SellTheTrend, Spocket, or AutoDS. | Find winning products fast by signing up for a professional product research tool, such as Thieve.co for $15, SellTheTrend for $39.97, or Spocket for $39.99 monthly. |
| Supplier Research Tools | These are websites that provide directories to help you find dropshipping suppliers. | SellTheTrend, Spocket, and AutoDS offer free trials of their paid supplier research tools. You may also manually search for suppliers for free on CJdropshipping or AliExpress. | Access an extensive database of reliable dropshipping suppliers by signing up for a professional supplier research tool, such as SellTheTrend for $39.97, Spocket for $39.99, or AutoDS for $9.90 monthly. |
| Product Samples | Order a product from a dropshipping supplier to have an idea about shipping time, product quality, and product packaging. | No need to order a sample if you choose a supplier from AliExpress or Alibaba with excellent reviews. | Order samples for different products from various suppliers and find out which one best suits your dropshipping business. You may use these samples as marketing materials, such as product images or video ads. The cost depends on how much each ordered product is worth. |
Marketing Your Dropshipping Store
Building your own dropshipping business site alone won’t make your dropshipping business profitable. Just like how you would treat any other business, you’ll also need to drive traffic to it.
For store owners like you, diversifying your marketing strategy is the key to attracting customers and more internet users to your online store and potentially lead to customer purchases.
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Paid Ads | Using paid ads is a great strategy to drive more ecommerce sales. Paid ads are mostly run on Facebook, TikTok, Instagram, or Google. | Take advantage of Google Ads’ free $100 credit. I recommend spending around $10-$15 daily on paid ads. If you want, you may also team up with niche influencers, or integrate your store on Amazon or Walmart for organic traffic. | Prepare to spend around $1000-$1500 if you plan to run ads on Facebook, Tiktok, Instagram, or Google. |
| VA (Virtual Assistant) | A VA can help you create cool a cool blog post, ad copy, videos, and graphics. They can also help with monitoring and managing your ads. | Do everything yourself. | VA’s may charge fixed project or hourly rates, ranging from $10 to $50 or more. |
Order Fulfillment
Order fulfillment involves all the steps needed to ensure that your customer’s purchases are successfully completed and delivered.
There are paid tools you can use to help with placing orders, tracking shipments, processing returns and exchanges, and creating shipping labels.
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Fulfillment Automation Tools | These are platforms that streamline your order processing, inventory management, and shipping workflows. | You can do the fulfillment manually for your first few orders. | Use paid fulfillment automation tools, such as SellTheTrend for $39.97 or AutoDS for $9.90 monthly. |
Business Registration
You’ll need a business registration if you want to do business properly.
Moreover, some dropshipping companies require this, so it’s best to have a business registration before you even start selling online.
The best registration route for dropshipping businesses is forming an LLC (limited liability company).
This will establish your ecommerce business as a separate identity from the buyer, protecting you and your personal assets.
With an LLC, you can separate your personal finances, ensuring that your business won’t hurt you if it gets into trouble.
You’ll also need an EIN for your business and pay for sales tax.
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Forming an LLC | Forming an LLC can enhance the credibility of your business. Compared to big corporations, LLCs tend to have fewer formalities and compliance requirements, making them relatively easy and less costly to run. | You can do so as soon as you start making money. | Forming an LLC can cost you around $100 to over $1000, depending on the state. This includes paying for legal services, filing fees, publication costs, and operating agreements. |
| Sales Tax ID | If you’re selling in the US, you need to gather and remit sales tax for orders sent to customers residing in states where you have a nexus (a physical presence or economic connection). | Free to $100, depending on the state |
Extra Costs to Consider As Soon As You Start Making Sales
Once orders come pouring in, you need to consider setting aside money to cover a number of extra expenses, depending on the nature of your business.
These can include packaging materials, extra shipping costs, payment transaction fees, returns, customer support, and inventory management—just to name a few.
| What to secure | What is it? | Budget-Friendly | Pro |
|---|---|---|---|
| Customer Service | Customer support staff helps with handling inquiries and addressing buyer concerns on your behalf. | You can just do everything yourself. | Hiring a customer service representative can cost around $3 to $5 per hour. |
| Return Costs | When running a dropshipping business, you’ll eventually deal with losing packages, chargebacks, or customers who want to return products. All these can translate to added expenses. | To help minimize returns, make sure to use accurate product descriptions on your listings or provide detailed sizing charts. Also set a well-defined policy that states whether the customer pays for the handling and shipping cost in case they wish to return a product. Product returns can run you up a few hundred dollars to thousands of bucks, depending on your product. | |
| Transaction Fees | These include fees involved with payment gateways, credit card processing facilities, or currency conversions. | Spend time comparing available payment getaway options and select one with the most competitive transaction fees. | Credit card processing fees can reach up to a maximum of 4% per transaction. Payment processing fees can cost around $0.05 to up to $0.30 per transaction. |
| E-mail Marketing Software | These tools or software are all about automating, managing, and creating your email marketing campaigns. E-mail marketing software can also help you reach out to customers more effectively. | There are E-mail marketing apps that offer free plans, such as Mailchimp, HubSpot, MailerLite, Omnisend, Brevo, Zoho Campaigns, and Benchmark. However, these may have limited features and automation capabilities. | Paid E-mail marketing apps can cost around $6.50 to $3600 monthly, depending on subscription fees. |
| Cross-selling & Upselling Apps | Cross-selling means offering a product that’s related to what your customer has already purchased. Upselling means encouraging a customer to buy a better version of their purchased item. | Shopify has a variety of free cross-selling and upselling apps, such as Wiser, Cross Sell PRO, K-Post Purchase Upsell, AfterSell Post Purchase Upsell, and more. | Paid cross-selling and upselling apps can cost around $4 to up to $129 monthly, depending on subscription fees. |
| Bulk Pricing Apps | Offering bulk pricing encourages customers to buy more in order to get a discounted retail price from your products. Bulk pricing apps can also help boost your store’s average order value, which is important for profitability. | Shopify has a number of free bulk pricing apps, such as Unlimited Bundles & Discounts, Bulk Discounts, Amai Bulk Discount & Sales Manager, and more. | Paid bulk pricing apps can cost around $4.50 to up to $29 monthly, depending on your subscription. |
Frequently Asked Questions (FAQ)
Is $500 Enough to Start Dropshipping?
$500 should be enough to start a drop shipping business. Of course, the costs involved with starting a dropshipping business can change depending on the product you decide to sell, your location, budget, and marketing campaign costs.
What is a Good Starting Budget for Dropshipping?
Having a budget of between $200 to $1000 should get you started with a decent online ecommerce store, as well as premium market research tools to help you discover a profitable dropshipping niche.
How Much Money Should You Spend on Ads for Dropshipping?
Spending around $10 to $15 daily on paid ads is reasonable. If you are planning to run paid ads on popular social media and ecommerce platforms, you can end up shelling out as much as $1000 to $1500 to do so.
How to Start a Dropshipping Online Store for Free?
Strictly speaking, you can probably start dropshipping for free.
But most likely, you’ll enjoy limited success from your online business if you don’t invest in building an attractive Shopify store with converting landing pages, searching for profitable dropshipping products, and carrying out effective marketing campaigns.
You may take advantage of free trials offered by website builder platforms to create your own business.
You may also use Google Trends, Amazon Best Seller lists, or AliExpress Dropshipping Center to look for trending niches.
Do You Need an LLC for Starting a Dropshipping Business?
No, you are not required to form an LLC if you wish to make your dropshipping profitable.
However, an LLC can grant you personal liability protection as it keeps your personal finances separate from your business.
Forming an LLC also boosts your business’ credibility and flexibility when it comes to management and ownership structure.
In case you will store products locally, having an LLC will also help you pay sales tax when selling.
What’s Next?
Drop shipping isn’t a get-rich-quick scheme. It will require work, commitment, and dedication.
One of those commitments is to manage your expenses well so you don’t deplete your bank account.
Hopefully, this guide helped you understand how much money do you need to start dropshipping on Shopify, along with the dropshipping fees and expenses to help you start dropshipping on the right foot.
Are you ready to kick off your dropshipping journey? Check out my comprehensive guide on starting a dropshipping business.
