How to work out dropshipping margins
Your supplier price is only part of the cost. Every sale also pays for shipping, payment and platform fees, and usually ads. Add them all up before you judge a product. A $40 item that costs $12 looks like a 70% margin, but after $4 shipping, about $1.40 in fees and $10 of ads it's closer to 32%.
Start with the break-even ad cost. If a product's break-even is under $10, most paid traffic will lose money on it. Look for products where it leaves room for testing. Read more in our product research guides.
Common questions
What is a good profit margin for dropshipping?
Many sellers aim for at least 30% margin after product cost, shipping and fees, so there is room left to pay for ads. Below about 20%, a single refund or a pricier ad day can wipe out the profit.
How do I calculate dropshipping profit margin?
Subtract product cost, shipping, payment and platform fees, and ad cost per sale from your selling price. Divide what's left by the selling price and multiply by 100.
What is break-even ad cost?
It's the most you can spend on ads to win one sale before that sale loses money. It equals your selling price minus product cost, shipping and fees.
What is the difference between margin and ROI?
Margin is profit as a share of the selling price. ROI is profit as a share of what you spent to make the sale (product, shipping, fees and ads).