Average dropshipping income explained with stats:
Other interesting dropshipping statistics:
Dropshipping can be a good business model for anyone wanting to explore ecommerce. However, it requires knowledge, hard work, and marketing skills to succeed in the industry. For example, you want to price your products appropriately. So how do you increase your profit margin without overcharging? There are several ways to do that, such as upselling, selling more products, and using multiple sales channels.
With dropshipping, your success rate is only at 10%. In comparison, the lead generation business model can deliver 80% to 90% profit margins. Building websites and then ranking and renting them to business owners can bring you a passive income stream. Additionally, you can work less since you won’t have to rely on selling products online. Competition is also significantly lesser since you’re not going against thousands of dropshippers - you’re only competing with 20 to 30 local businesses for the top spot on Google. In short, lead generation is truly an online business worth considering.
How much does the average dropshipper make?
The average dropshipper makes a profit margin of 10% to 30% for each sale. This can mean earning less than $1,000 for some or over $100,000 for others in their first year. For the most part, your potential income depends on the type of products you’re selling, the size of your dropshipping market, and how you actually promote your business to your target buyers.
Some people also automate their dropshipping by using an automation service. However, this decreases earnings because you split your profits, so a done for you dropshipping automation store on a platform like Walmart is not worth it for everyone.
Sharif Moshin’s YouTube experiment: Creating a dropshipping store for $100
In a YouTube video, ecommerce entrepreneur Sharif Mohsin conducted an interesting experiment where he only spent $100 to build a dropshipping business from scratch. Mohsin, who has already made over 7 figures from dropshipping, decided to find out what would happen if he lost everything and had to start over.
So without using his personal brand and past connections, Mohsin started a Shopify store using a $100 budget. He later found a product - a mini portable wireless speaker he sold for $39.99 each. He then started uploading videos on TikTok to generate interest among potential buyers.
At the end of the experiment, Mohsin sold only 3 speakers, making a total sales of $119.97 and a profit of $53. To date, the said video has been viewed over 1.4 million views on YouTube since he uploaded it in May 2022.
Viewers praised Mohsin for the experiment with one commenting, “I'm glad to see an honest and realistic result because so many people are making it look like a get rich quick scheme… The actual purpose of drop-shipping is to test out ideas to see what works or doesn't.”
So far, Mohsin has over 190,000 subscribers on his channel. Aside from doing ecommerce videos on YouTube, Sharif Mohsin is also a course creator. You can check out our Sharif Course review to learn more about his course.
What is a good profit for dropshipping?
A good profit margin for dropshipping is between 15% to 20%. This may differ depending on your products’ average cost and your chosen niche. In some cases, dropshippers may earn lower or higher than that. This is why studying the market and the competition is always important for all dropshipping business owners.
How to calculate your dropshipping profit margin
To calculate your dropshipping profit margin, you’ll need to consider a product’s original cost and its current market price. A simple formula for this would be: Your Price - Supplier Price = Your Profit Margin.
Using an online calculator
Another idea is to use free online tools such as Shopify’s Profit Margin Calculator. This free and user-friendly calculator can help drop shipping business owners “determine selling prices for your products in order to save money and increase profits.”
To use the tool, simply type the cost item and your desired markup percentage. Hit the Calculate Profit button to see automatic computations on your Sale Price, Profit, and Gross Margin.
Remember that calculating your profit margin for all products you sell in your store is always a must. That way, you can monitor how much you can potentially earn and not lose any money.
Again, you will need to do your own research to do this right. Study current trends and check out competitor prices to see how you can position yourself in the market. Increasing your product price may be tempting, especially if you’re aiming to earn bigger. You should, however, consider how this can positively or negatively affect your business.
Factoring in other costs
Of course, you should also consider factoring in your marketing costs and other expenses (such as dropshipping fees and commissions). For example, you may have to pay a dropshipping fee of $2 to $15 or a commission rate of 15% to 20% for each order.
This depends on the product you’re selling and which supplier you’re using so see if this applies to your business. Doing so will give you a clearer picture of how much you should price your products. Moreover, you can avoid low profit margins that could lead to business failure.
How to increase your profit
1. Upselling
With upselling, you get to generate more sales by targeting existing customers instead of convincing new ones. You can persuade additional purchases on your store by offering premium add-ons. For example, showcase related items below your products so buyers can easily see them. You can also offer a discount voucher whenever they reach a certain amount of purchase.
2. Negotiating with your suppliers
As you bring in large numbers of orders to your suppliers, see if it’s possible to get the same products at wholesale prices. Your supplier shouldn’t find any problem granting you discounts, especially if you’re regularly bringing business to them. In return, this can help you grow our profit margin without having to increase your product cost.
3. Selling more products
Naturally, adding more products in your store allows you to attract new online shoppers and increase your earning potential. For this to work, however, you’ll also have to spend time and money on research. Also, be ready to invest in marketing to drum up interest for your products. Consider doing PPC advertising on search engine sites and social media platforms. Go with what works best for your business to make the most of your efforts.
4. Increasing your price
Sometimes, increasing your product’s cost makes perfect sense. So pay close attention to your competitors and how much your customers are willing to spend. While it’s acceptable to sell lower than others, you have to avoid undercharging because that will lower your ecommerce sales.
5. Using multiple sales channels
A dropshipping business owner can also do multi-channel selling. Instead of focusing solely on their own website, a store owner can likewise tap other dropshipping sources (such as Amazon dropshipping or Shopify dropshipping) and social media channels (such as Instagram or Facebook Marketplace).
How big is the dropshipping market?
The global dropshipping market has surpassed the $200 billion mark and is expected to hit $243.42 billion within this year. Experts also estimate the market to reach $301.11 billion by 2024 and up to $476.1 billion by 2026 - a 95.5% increase compared with the 2023 figure. If the upward trend continues, dropshipping’s market size will surpass $500 million by 2027.
The popularity of dropshipping
As Statista shows us, dropshipping’s market value is forecasted to continue growing globally in the years to come. The dropshipping business model will keep maintaining its popularity among entrepreneurs mainly because of its affordable startup costs.
Another advantage is that dropshipping is easier to manage because a dropshipper can operate without having any inventory. They only sell goods online and then forward purchases to suppliers, who will then handle order fulfillment and shipment to the buyer. Dropshippers act as a middleman and make money by adding markup costs on their products.
Can dropshippers make 6 figures?
It’s possible for dropshippers to make 6 figures per year. Dropshipping is a legitimate way to earn online and, when done right, can lead to a sizable income. Productive dropshippers can make up to 6 figures annually as they run their own dropshipping ventures. However, beginners should be warned that dropshipping is not an easy way to be rich. It requires time, money, and effort to establish a brand, gain online sales, and eventually earn dropshipping passive income.
Dropshipping success stories
There are a lot of amazing dropshipping success stories out there. For example, 14-year-old London boy Alex Philip made headlines in 2018 after dropshipping made him over $250,000 in a year. According to the teen, he sources products from Alibaba and then offers them to his Shopify buyers at higher prices. Over the years, he has bounced from selling Pokemon Toys to candy boxes. He eventually stumbled upon dropshipping and saw its huge potential. Alex then launched several ecommerce stores using free trials. “Even if you don’t understand everything clearly, think big and start small, which is what I am doing right now,” the youngster told Forbes.
San Diego-based Irwin Dominguez likewise hit the big time despite being a first-time ecommerce retailer. Despite his lack of knowledge and experience, he reached $1 million in sales within his first 8 months of starting his own dropshipping store. Taking inspiration from a friend who also does dropshipping, Irwin turned to Google to learn about the business model. He later created a Shopify account and began using ecommerce platform Oberlo. “I can’t find a reason why people shouldn’t give ecommerce entrepreneurship a try,” he said in an Oberlo interview. “With all the technology out there, it costs no money to get started and it couldn’t be any simpler. You literally have nothing to lose.”
Meanwhile, in a Quora thread, Maxim Godin shared his experience starting an ecommerce business without cash and experience. Within three years, he grew it into a $4.5 million-revenue company. According to Maxim, the secret is to make at least $10,000 monthly.
Of course, it bears repeating that despite these remarkable success stories, dropshipping is not a guaranteed way to be wealthy. The business model has its drawbacks and many also fail while doing it. In fact, dropshipping has a very low success rate.
What is the average dropshipping success rate?
The average dropshipping success rate is only 10% to 20%. According to data, around 90% of dropshipping business owners fail within the first year of operation. Some of the common reasons dropshippers give up early on is that they picked the wrong niche or are not gaining enough exposure to their target market.
In a Reddit thread, one commenter emphasized that the dropshipping business model “will not get you rich overnight.” The user also adds, “You need to work hard and be passionate about e-commerce, and, in time, your business can be profitable and successful.”
Average income on different dropshipping models
The average income on dropshipping may differ from platform to platform.
Amazon Dropshipping
Dropshippers can earn anywhere from $1,000 to $50,000 per month on Amazon. With over 300 million active users and around 34% of overall Amazon sales fulfilled through dropshipping, the platform can indeed be profitable for drop shipping business owners.
Take note, however, that competition can be fierce. According to estimates, there are over 5 million active Amazon sellers, with around 3,700 new sellers joining daily. The key, of course, is to sell winning, high-demand products that are currently low in competition.
eBay Dropshipping
eBay has an estimated 187 million users and about 62 million mobile app shoppers across the world. On average, 25% of eBay dropshippers make $2.67 profit for every sale, which can translate to a monthly income of over $1,000. Meanwhile, top performers on the platform earn as much as $7,731 per month or almost 6 figures each year.
Facebook Marketplace
Facebook remains as the king of social media with over 2.989 billion and now dropshipping entrepreneurs are using it as well.
In a feature, eBay dropshipper Paul J Lipsky shared how he made over $600 in a week by selling Amazon products on Facebook Marketplace. “$668 isn’t going to make us rich, but it’s not chump-change either,” he said about the experience. “I mean, who wouldn’t want an extra $35,000 a year?”
Shopify
Cloud-based ecommerce platform Shopify has over 4.3 million users and is one of the top picks for dropshipping today. Shopify stores typically make $1,000 to $2,000 a month, although some earn as much as $100,000 or more on a monthly basis.
Dropshipping income versus other online businesses
In dropshipping, average monthly income is at $1,000 to $3,000 for the first year. So how does dropshipping income compare versus the income from different online businesses? Let’s look at some figures.
Affiliate marketing
In affiliate marketing, you will promote third-party products and services on your online platforms (such as a blog, YouTube channel, or a podcast show). You then earn a commission each time potential customers click the ads and purchase something. According to an Ahrefs post, most affiliate marketers today earn around $30,000 to $50,000 per year.
You can check out legit affiliate marketing platforms such as Amazon Associates, CJ Affiliate, ClickBank, Constant Contact, eBay Partner Network, Rakuten Advertising, and Share A Sale.
Blogging
With blogging, earnings usually range from $100 to $2,500 per month, depending on your niche, page views, and monetization strategies. You can make money from Google AdSense, sponsored posts, or by selling products or services.
Digital marketing
Digital marketers help brands boost their presence online through paid ads, social media marketing, and more. According to experts, the digital marketing industry is expected to hit $807 billion by the year 2026. These days, digital marketing professionals can earn anywhere from $39,000 to $52,000 per month.
YouTube Automation
YouTube automation allows you to have a YouTube channel without appearing on your videos. For the most part, you will be outsourcing freelancers to do content creation (scriptwriting, thumbnail design, video editing, voice over, etc) and channel management. As with blogging, you can make money in this business model affiliate marketing, ad revenue, and brand deals. In general, YouTube automation channel owners earn about $10,000 per month after 2 or 3 years of running a successful channel.
To increase your earning opportunities on the platform, go look up our article on top YouTube niches with low competition.
Related Articles on Dropshipping
Conclusion
While dropshipping can be profitable, local lead generation is way better as a business model. With lead gen, you won’t have to rely on monthly sales for your income. You won’t have to spend so much time and money marketing your products to new online shoppers all the time.
Instead, you will only need to build location-specific business websites, rank them on search engines, and then rent them out to interested business owners. As you attract organic traffic for your sites, you can help startups increase their potential leads and customers. In return, you get paid by your clients on a regular basis. No need to sell any products or worry about product returns and delayed shipments!
Furthermore, lead generation is not as time-consuming as maintaining a dropshipping business - especially once your site hits Google’s first page. Competition isn't as fierce either since you're only hoping to surpass the search engine presence of, say, 20 to 30 niche businesses in a given area. As you outrank competitors, your sites stay on the top spot for months with little or no additional work on your end. This makes the lead generation business model a good way to generate passive income.
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