How Much Does It Cost to Start a Dropshipping Business?

how much does it cost to start a dropshipping business

Omar Founder of OJ Digital Solutions

Table of Contents

Many people today want to start a business but need one essential factor—capital.

Fortunately, aspiring entrepreneurs now have low-capital venture options. One of the most popular is dropshipping.

But how much does dropshipping cost? Do you need money to start dropshipping?

In this article, I’ll discuss all the costs you’ll have when creating and growing a dropshipping business.

What Is Dropshipping?

how much does it cost to start a dropshipping business

Before diving into dropshipping costs, let’s first define what it means.

Dropshipping is a form of ecommerce selling where you take orders and have your suppliers ship them directly to your customers.

The main difference between dropshipping and other forms of online selling is that you don’t need any on-hand merchandise.

While there are ways to start dropshipping for free, setting aside money to build a better site and promote your store can help drive more customer purchases.

When you start a dropshipping business, you spend less because you have certain costs removed from your business operations. Some of those costs include:

  • Inventory management systems
  • Warehousing or storage
  • On-hand stocks
  • Packaging suppliers
  • Staffing and operations expenses

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 upfront costs to start and maintain a dropshipping business.

Website and Business Registration

Any online business will need a personal dot com. It’s a way to help people find you and gives you complete control over your own platform. Dropshipping businesses are no different.

Your ecommerce website is where people will go to see your products, place an order, and communicate with you.

Every successful dropshipping store will need this. You’ll need to set aside money to create a website.

An online store has a few requirements. When creating and maintaining a website, you’ll need to pay for these things.

Domain Name

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A domain name is the unique address people visit to access your store. If your business name is XYZ Company, you might need to buy a domain name like “xyzcompany.com” or “xyzcompany.store.”

There are many great domain name registrars where you can buy a domain name for your dropshipping business. These are some of the most common ones.

Domain names will cost anywhere between $10 to a few thousand dollars per year, depending on your domain’s demand.

You’ll need to pay a fee for your domain name every year after acquiring it. You’ll lose ownership of that domain name if you stop paying for it.

Cost: Starts at $10 a year

Hosting

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In some cases, you might need to buy domain hosting along with your ecommerce website domain name before you start dropshipping.

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.

Sometimes website builders or ecommerce platforms already act as your host, so check what service you’ll use before paying for a host.

For instance, Shopify won’t require a hosting service. We’ll discuss this platform in more detail later.

You can pay for hosting plans for your online store monthly or annually, depending on the service you go for and the plan you get. Any of the domain registrar sites I mentioned above also offer hosting.

Cost: Plans can go as high as a few hundred dollars a month for dedicated hosting for more storage and bandwidth. However, you can start with only $3-5 a month.

Business Registration

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You’ll need a business registration if you want to do business properly.

Moreover, some dropshipping services require this, so it’s best to have a business registration before you even start selling.

The best registration route for online companies 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.

Online Store Builder

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Once you’ve acquired a website domain, you can start building your site. You’ll want to use a website builder that requires little to no coding.

Your website builder will also serve as your fulfillment backend.

All ecommerce website creation platforms have an order management system that makes it easy for you to track, extract, and send customer order details.

These dropshipping site builders have subscription and setup fees, so it’s good to weigh the pros and cons of each one and see which builder will work best for you.

While there are many options out there, these four options are my top picks.

WooCommerce

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Woocommerce is a free ecommerce site builder available to anyone worldwide. The plugin works with WordPress and can be added to your site via a free plugin.

What’s excellent about WooCommerce is how much you can do with it. There are many enhancements and themes to choose from, although you’ll need to pay extra if you want to access them.

Most of these services operate on a one-time fee, making it a long-term, low-cost option.

If you want to create a WooCommerce site, you’ll have to pay for hosting and an SSL certificate, which you can buy from a domain registrar. An SSL certificate will cost you $7 a year, more or less.

Cost: Free with paid options for upgrades

Shopify

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Shopify is another famous ecommerce store builder for your dropshipping business.

Over 6 million sites today use Shopify because of its smooth user experience, especially for people without a technical web development background.

Shopify also has other great features, including:

  • An app store with dozens of available store enhancements
  • A theme store for professional-looking site designs
  • A marketing platform for email blasting and follow-up
  • A payment collection method

Cost: Free for 14 days; no credit card required; paid plans start at $29 monthly

Wix

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The last option on this list is Wix, a website builder and ecommerce platform best known for its ease of use.

You can build a Wix site for free, but there will be limitations to its capacities. The service will charge you for a subscription when you want advanced customizations and a custom URL.

Like Shopify and Woocommerce, Wix has a payment processing system called Wix Payments.

Cost: Starts from less than $20 monthly and includes unlimited products and bandwidth. The domain name is free for a year.

Dropshipping Store Enhancements

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Most website builders have store enhancements to help you with additional promotional functions.

These enhancements help you improve conversion rates so you turn more of your website visitors into customers.

Some of the most common store enhancements for dropshipping store owners include:

  • Cross-selling and upselling to promote the other products in your store
  • Bulk pricing for creating buy-one-get-one and other bulk order bundles
  • Exit intent for holding on to visitors a little longer when they plan to leave
  • Fulfillment automation to automate communications between your site and suppliers

You can use apps within your website builder to access these enhancements. There are also third-party apps available with these enhancements and more.

Product Research Tools

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A dropshipping business model depends highly on demand for its products. When you find high-demand products, you’ll be raking in profits.

However, your online business will struggle if your products don’t have any potential customers.

You’ll need tools that help you with market research and product validation.

These software programs will scrape the web to find high-demand products that people will want to buy.

You can search through marketplaces manually or use data scraping and validating tools to measure demand for certain products and dropshipping niches to enter.

Here are some niches and tools I recommend.

Finding the right products or niche will keep your dropshipping business profitable. So don’t be afraid to spend money on product research tools.

Try one or two at a time and see which yields the best results. Remember to cancel your membership when you no longer use them.

Suppliers

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On top of finding the right products, every successful drop shipping venture will also need a set of reliable dropshipping suppliers.

These partners will provide you and your clients with products and take care of fulfillment.

So what does it take to find suppliers, and how much will it cost to maintain that relationship?

Dropshipping Supplier Research

Some great websites provide directories to help you find dropshipping suppliers. Here are some that I highly recommend and the related dropshipping costs.

When finding suppliers, look for companies closest to your potential buyers. That way, you or your customers won’t have to pay extra shipping costs.

For the most part, a dropshipping supplier will charge for shipping. But as standard practice, the customer pays for that cost.

However, you might want to consider absorbing that cost if your profit margins permit. This helps give customers another compelling reason to buy.

After all, up to 90% of customers say they will shop more if a store has a free shipping option.

Make sure your product’s shipping cost doesn’t eat into your profits. You can also set a minimum order to get free shipping to convince your buyers to purchase more.

Branding and Visuals

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Branding and visuals are also crucial to a successful online business. But getting branding right costs money. Thus, branding is one of the startup costs that dropshipping companies skip.

However, selling products is much more challenging when your business doesn’t have a solid brand image. Branding helps build customer trust and loyalty.

So, before you start selling online, create a good brand identity. You’ll need to invest in a few branding elements.

Logo

To help your business stand out, you’ll need a good business logo. This mark will go on your website, ads, product packaging, and many other applications.

If you want to create your logo, you can use a tool like Canva or Wix Logo Maker. However, I highly recommend that you hire the services of a professional graphic designer.

You can hire someone on Fiverr or Upwork to design your logo for you.

Cost: $100 to a few thousand dollars, depending on how good you want your logo design to be.

Photography

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Your product photos play a crucial role in attracting customers.

Online stores with beautiful photography stand out in the sea of endless competition. Products with great photos can even command a higher retail price.

So don’t be afraid to be a little picky about your photography. When starting a dropshipping business, you want to be sure that you put up great images on your site.

If you’re an online retailer with an excellent eye for aesthetics, you can buy a phone with a good camera or a basic DSLR.

If you don’t have photography skills, hire a photographer to take pictures for you.

You’ll need to order a few products for your photo shoots from your supplier. It also helps to get a few models to showcase your products.

Cost: The cost can vary depending on what option you take. If you want to do your own photography, you might need to spend $500 to $1000 for an excellent camera.

If you’re hiring a photographer, you’ll pay the professional upwards of $500 for a few shots.

Promotional Graphics

When you have your store, you’ll need a steady flow of graphics and posters to use in ads, email blasts, social media posts, and so on.

That means you’ll either need to do graphics yourself if you have a knack for it or hire a graphic designer.

You can sign up for a Canva account if you prefer to do your own graphics. You can work with a free account, but I recommend getting the premium version if you want more elements, templates, and capabilities.

Canva Pro starts at $12.99 a month.

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If you don’t want to do your own graphics, you can hire a graphic designer VA and pay them for graphic design work.

An offshore virtual assistant might cost between $500 to $1,500, depending on the quality of work you want them to provide.

Marketing Costs

Building your site alone won’t make you a successful dropshipping site owner. You’ll also need to drive traffic to it.

Diversifying your marketing strategy is the key to getting more internet users to your online store.

Here are some avenues to promote your store.

Paid Ads

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Using paid ads is a great strategy to drive more ecommerce sales. There are many kinds of ads you can run to drive website traffic. Some of them include the following:

  • Facebook ads
  • Google ads
  • TikTok ads
  • Instagram ads

Ad costs vary depending on the platform, so feel free to set your own budget. I highly recommend setting a daily budget aside to run ads.

Measure your return on ad spend per campaign so you can maximize advertisements that work and stop the ones that don’t.

Cost: Depends on your ad budget

Social Media Marketing

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Any business that isn’t marketing on social media leaves money on the table. Some platforms that you should be on include:

  • Facebook
  • Instagram
  • Pinterest
  • TikTok
  • Twitter

While it costs nothing to organically market on social media, it does take time and effort.

You might want to get a social media manager to take care of your social media business accounts and free you up to focus on other aspects of your business.

A social media manager will cost you around $1,000 a month or more, depending on their level of expertise.

You might also want to use a few tools to optimize your workflow. For instance, you can use a social media scheduler like Buffer.

Cost: $1,000 a month or more to outsource

Search Engine Optimization (SEO)

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SEO involves optimizing your site so that search engines index them and rank them higher on search results. It’s one of the most cost-effective ways to get traffic to your site.

You’ll need good website content to implement this marketing strategy. Write a blog post and optimize it with high-search volume keywords.

Other business owners include SEO consulting for their startup costs and get professional writers to write blogs for them.

If you want to search for great keywords to rank for, here are some tools we recommend:

What’s Next?

Dropshipping 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 to dropshipping fees and expenses will help you start your dropshipping business on the right foot.

Are you ready to kick off your dropshipping journey? Check out my comprehensive guide on how to start your dropshipping business.

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