Unlike other businesses, dropshipping is a fantastic way to build a business & generate $$$.
Because of many reasons, including the low barrier to get started & fewer capital requirements.
But exactly how much money is needed to start a dropshipping business?
The answer is subjective and it is recommended to have at least $500 – $1000 with you before jumping into it. Expect to burn & lose at least $500 before you see money pouring in.
After all, Money makes Money right.
Of course dropshipping can be done merely below $500 but in order to craft an effective strategy & sustainable business, you need at least $500 or more than that.
There are people or Gurus (to sell their course) who might say you don’t need much money to start a dropshipping business, you just need a little money and you are good to go. I am completely against this statement.
Starting with a low budget not only makes your strategy ineffective but also makes you more demotivated in the end – if your campaign doesn’t work out as expected.
This is because a stringent budget does not allow you to utilize dropshipping to the fullest & you end up thinking dropshipping is dead.
For example, with a low budget, you cannot test a product to the fullest, you cannot outsource the work to an FB ad expert to make the campaigns work out, you cannot order product samples to create advertisements & marketing assets (product photography, videography, etc)
Coming to the point, let us look at various aspects of dropshipping and how much money you’d need to get started with it:
To run a website, this is an obvious & upfront investment.
A domain name gonna cost you somewhere around $14. You can purchase it from any trusted domain name provider like Hostgator, Hostinger, or BlueHost.
eCommerce Platform for Store Building
This is another upfront investment like the domain name.
You need to decide on what eCommerce store building software you’d like to use to build your store.
Two of the popular options are 1) Shopify & 2) WooCommerce by WordPress.
I recommend starting with WooCommerce by WordPress & not Shopify as a beginner because WordPress not only teaches you a lot but also going to cost you less in the short as well as long run.
Let’s understand the costs associated with each of these eCommerce website builders:
Shopify is an easy-to-use eCommerce store-building tool that allows you to create your store as well as host it – you don’t need to purchase hosting when using Shopify.
All you need to do is sign up with Shopify, connect your domain name & start building your store.
Shopify is extremely easy to use & it comes with everything that you need for eCommerce – extra features might cost you more with Shopify.
What’s good with using Shopify is that you don’t need to worry about the technical aspects of managing an online store – such as website hosting, security & more.
Costs Associated with Shopify
1) Shopify Subscription
To get started with Shopify, you can sign up for a 14-day Free trial wherein you can only set up your store.
In order to make your store public & start accepting orders, you need to subscribe to the Shopify premium.
As shown below, there are three main subscription plans to choose from on Shopify:
- Shopify Lite: $9 a month (You won’t get a hosting space with this plan & cannot use shop builder | In short, with this plan you need a website as well before selling)
- Basic Shopify: $29 a month
- Shopify: $79 a month
- Advanced Shopify: $299 a month
For drop shipping beginners, the Basic Shopify plan costing $29 a month would definitely suffice your needs.
2) Third-Party Apps
Some things cannot be achieved without adding extra features to your Shopify eCommerce stores.
Just like Plugins on WordPress adds extra features to the website/store, there are tons of Shopify apps you can use to add the extra features.
However, the cost of third-party apps on Shopify is something you should be concerned about – because they are costly as compared to plugins on WordPress.
You should be concerned about these costs because as you start building your store & learn more about eCommerce, you would come across several additional features that you might need to boost your dropshipping business sales.
These are features like:
- Countdown timer on the sales page to boost scarcity & create FOMO
- Cart Abandonment feature to get back potential customers
- Product review apps to display visually appealing reviews & ratings
- Upselling & Cross selling feature
- Adding Guest checkout feature
These features are going to cost you much more in Shopify when compared with WordPress.
Frankly speaking, the amount that you pay monthly on Shopify apps can alternatively be used on WordPress to hire a WordPress developer & get the features for a lifetime for free -because WordPress is open source 🙂
The same can be done with Shopify too, but Shopify developers are expensive and Shopify is closed-source – which means, you cannot customize Shopify to the fullest even if you hire developers.
3) Transaction Fees & Credit Card Processing Fees
When you use Shopify, they charge you some fees on credit cards & other transactions – if you don’t use Shopify Payments – which is Shopify owned payment gateway.
Below is the pricing table for transaction fees on Shopify:
With Shopify, you get 10 free themes only – if they are not fitting well with your design & UX expectations, you would need to spend somewhere between $150 – $300 for premium ones.
2) WooCommerce by WordPress
You might know WordPress is one of the most popular Content Management Systems / Website building tools to build websites of any kind. When it comes to building an eCommerce website using WordPress, you’d need to use the WooCommerce plugin – that adds eCommerce features & functionalities to your website.
If you ask me what path to choose, I’d recommend using WooCommerce since the costs are comparatively low & possibilities with WordPress are limitless – even if you’re not much technical.
Also, when you wish to do some customizations or when something goes wrong, Shopify developers are going to cost you much higher than WordPress developers.
Also, WordPress is a skill that you should have because it helps you understand how actually a Content Management System / Website building tool works.
On the other hand, Shopify is easy to use – with less learning curve.
Another reason to choose WordPress over Shopify is that features extensions on your eCommerce store can be done with Free plugins with WordPress – and Shopify apps are pretty much costly as compared.
The decision is up to you on what store-building software you wish to choose.
Costs Associated with WooCommerce by WordPress
1) WooCommrece is Free; You Need to Invest in Hosting
Using WooCommrece by WordPress requires a hosting space to run your eCommerce store, whereas, with Shopify, you do not need hosting because Shopify itself hosts your eCommerce store.
However, this investment shouldn’t be of concern because by purchasing a website hosting space, you can host more than one website; with Shopify, you can only host one.
A typical shared hosting would cost you around $12, while costs for dedicated hosting are on the higher side.
A few of the good hosting companies are Hostgator, Hostinger & BlueHost.
Just like we have “apps” on Shopify for extended features – which are a must for any website to boost sales & conversions – WordPress has “plugins”
What’s good with WordPress is that most of the time, Free plugins are adequate for basic needs, however, sometimes, you might need to pay for plugins for advanced features extension to the store.
As compared to Shopify, there are tons of themes to choose from.
However again, if free themes do not meet your expectations – you might need to invest in a premium theme. One thing to note is that you can get a premium WordPress theme between $30 – $60, whereas, with Shopify, this scale amounts between $150 – $300.
Dropshipping is an easy (but not so easy) business to start with. That’s because you won’t have to involve with product manufacturing.
You can literally start without having to touch the product – as you already know.
However, that should not mean you don’t need to engage with the product physically. When you’re serious about your dropshipping campaign, it is recommended to order a product for sample & test it – if it is worth selling & risking your money/efforts.
By ordering a product sample, you not only test the product quality but can also use the sample to generate awesome creatives/assets (images for ad creatives, product photographs, mockups, model shooting, videography, etc) for marketing, branding & advertising.
Product Photography / Mockups / Videography
Spending money at this part is completely optional – as this can also be done by yourself for free – better if you have product samples already.
To make your product page appealing & convertible, you need appealing product assets (product images, mockups, video) to display to users & use in ad creatives.
Creating those assets like product mockups requires designing skills & preferably, you should outsource & get it done by professionals – only If you have some money to invest in your dropshipping business.
However, If you’re low on budget, you can avoid spending on product mockups or videography & do it all on your own.
When choosing the free path – you might get some product images from the vendor, but those images are generally not so much appealing.
If you don’t have the product sample, & only have images provided by vendors, it would be hard to edit & enhance those images.
Ad Creatives & Copies
This is another investment you should keep in mind if you are not well versed in creating assets for advertisements. If you’re a complete beginner with running adverts, it is recommended to outsource the work to experienced professionals.
Don’t try to make it work when you don’t have the necessary experience.
Because creating assets (images, videos, title, short description) for advertisements differs a lot from creating assets for social media posting.
Of course, you can create advert assets on your own as you might have some designing skills, but, getting it done by a pro will bring you a much higher return on investment.
When creating assets for adverts, you should keep in mind what image, heading, video will perform better in terms of Click Thru Rates.
Whichever be the case, you should be aware that adverts with improved CTR perform better.
One recommendation is to test video ads in dropshipping because video ads are performing better
Advertising & Marketing – FB Ads, Video Ads, A/B Testing, Remarketing
This is another upfront dropshipping startup cost that you cannot avoid.
In order to bring in some sales, you need to pay to get traffic. Of course, you can get organic traffic as well – but the journey will be long, hard & probably you won’t sustain as a beginner.
There are several popular advertising channels like Facebook Ads, Instagram Ads, YouTube Video Ads where you would have to burn money to get traffic.
Not only you’ll have to run a few campaigns, but to yield results – you need to work on ads optimization, A/B Testing, Remarketing & more – that definitely takes money to make it work.
As a beginner to start with, consider spending somewhere around $5 – $10 a day on a single ad campaign that you run – which accounts for $300 a month or more.
Product Sourcing & Fulfilment Software
Gone are the days when people used to manually search the marketplaces & source them to their dropshipping store one by one.
Now is the time of tools & automation.
There are now tools, services & software – that help you browse through popular & quality products (fetched from marketplaces) whilst enabling various dropshipping business operations such as product importing, orders syncing/fulfillment & much more.
Such software directly integrates with your eCommerce store so you could one-click import the products to your store – and you don’t have to do it manually.
One such software/service is the Spocket – which is a dropshipping tool cum marketplace that offers high-quality products from the US and EU suppliers. Once your store is integrated with Spocket, you can browse through quality products & one-click import them to the store. Spocket also comes with features to automate many dropshipping tasks like inventory syncing, orders management, orders fulfillment & more.
Quick Note: Spocket premium also offers a “branded invoicing” feature to help you boost your business branding efforts – by including your business logo/name in the invoice.
When you’re dropshipping, it is recommended to use these tools/software so you focus your energy & time on the important things – and not on unnecessary tasks like – manually uploading products, inventory management/tracking, manual orders fulfillment, etc.
Product Research, Competition Analysis or Other Similar Tools
There are many dropshipping product research methods & tools you’d come across over time.
While some of the methods & tools are free, you might want to invest in some tools like Sell The Trend, Ecom Hunt, Niche Scraper – to help you with competition analysis, product research & more.
Investing in these tools is completely optional, but having these premium tools will definitely boost your dropshipping efforts & profitability.
Some Freuquenty Asked Questions About Dropshipping Startup Costs
You can dropship for free on third-party eCommerce marketplaces like Amazon, eBay. However, to be more scalable, flexible & controllable, you need to have your own store for which the two upfront investments are – domain & hosting (or eCommerce store builder like Shopify).
It is recommended to have at least $500 – $1000 with you before jumping into it. Expect to burn & lose at least $500 before you see money pouring in.