fbpx

What’s a Good Profit Margin In Dropshipping (2020)

What’s a Good Profit Margin In Dropshipping (2020): I’ve been dropshipping for quite a while now and In today’s post, I am going to be telling you, one of the most common questions of beginners/intermediate drop shippers i.e. what is a good profit margin while running ads with Facebook and dropshipping in 2020.

So sit back, relax, and simply read this post as I’m going to be giving you practical examples of my store of different prices and how much effect did it make in the conversion rates.

What’s a Good Profit Margin In Dropshipping (2020)

Dropshipping Profit Margin

Scenario 1 (Price $24.95)

I’ve been selling a common product on one of my niche stores and before COVID, these were the stats of the product with my analytics:

Good Profit Margin In Dropshipping

  • My Selling Price: $24.95
  • Profit Margin: 2.7X
  • My Product cost: $9 (shipping from China)
  • ROAS to break even: 1.56
  • My ROAS: 2.31
  • Countries I targeted: USA, CA & UK

Scenario 2 (Price $34.95)

After a few months, I started testing it again, this time with a US Supplier, the product cost increased so I also increased the selling price.

  • My Product cost: $13  (with USPS shipping & additional costs)
  • My Selling Price: $29.95 + $4.95 ($34.90 Total for 1 unit)
  • ROAS to break even: 1.84
  • My ROAS: 1.59 (without including additional shipping cost-profit)
  • Countries I targeted: USA, CA & UK

Profit Margin In Dropshipping

 

If we compare scenario 1 with scenario 2, we’ll notice that the conversion rate dropped by 2.18 – 1.82 = 0.36% but the profit margin increase and also the average order value, so overall because of the better profit, It didn’t affect much!

Scenario 3 (Price $39.99) 

I’ve started testing at an increased price of $5 recently and here are the stats:

  • My Product cost: $13 (with USPS shipping & additional costs)
  • My Selling Price: $39.99
  • ROAS to break even: 1.48
  • My ROAS: 1.8 (approx)
  • Countries I targeted: USA, CA & UK

As you can see in the scenario no.3, even though the price was increased by $5, my conversion rate actually increased. This might’ve happened because I’ve been creating new ad creatives and overall this has made me even more profitable! What do you say should I increase by $10 again and see whether this time it actually makes any much of a difference or not?

One important thing to notice here is that I also, did a few tweaks like installed a new sticky add to cart at my page and included an illustration showing the product and what difference it makes – before and after, reduced the text on the product page and added ‘Shipping From US’.

Conclusion

My profit margin currently is more than 3X, and to be honest, I’ve tried a lot of products by pricing them at 2X however, I have not seen much success at that profit margin. In 2020, with ads getting expensive day by day, I’d recommend you sell your products at at least 2.5X the price!

Also, I would recommend you to have a profit margin of at least $20, when it’s a really low priced product. For example if a product costs $1, I’d recommend you sell it at at least around $20, coz otherwise, there is a very low chance that you’ll be able to generate a good amount of profit off of that product in the long term.

So yeah, that’s about it for this post, I hope that you found this post on ‘What’s a Good Profit Margin In Dropshipping (2020)‘ to be helpful for you. In case you have any queries regarding this then feel free to let me know in the comments section below and I’ll be happy to help you out.

Leave a Reply