August 1, 2019 - by
A decade ago, there wasn’t much attention to dropshipping not until Amazon proved that the dropshipping model can be highly lucrative for eCommerce merchants. In 2011, Amazon obtained 34% of its product sold from drop-shipped products alone.
Dropshipping is a pretty tempting eCommerce model because of its low start-up costs. But, while dropshipping provides you with substantial savings at first, other necessary expenses will be incurred.
Today, you’ll learn the true dropshipping cost involved in starting a highly functioning online store. We’ll also give you insider marketing tips on how you can effectively create a highly attractive and converting dropshipping business.
More importantly, we’ll provide a budget template to minimize your dropshipping costs.
This will allow you the flexibility to plan your budget accordingly without sacrificing the overall functionality of your dropshipping store.
Dropshipping is an eCommerce business model where you sell products online without carrying your inventory and handling the shipping or fulfillment. When a customer orders on your online store, the order is forwarded to your dropshipping partner — normally a manufacturer or a wholesaler — which will ship the product directly to your customer.
In a nutshell, you’re a product middleman. Your main role is to look for customers who will purchase products from your dropshipping store. Dropshipping is perfect for a lot of aspiring online merchants without huge capital at hand.
Sounds promising, right? But, is it really true that you won’t be shelling out money as a lot of people are talking about? The reality is, like any other business, not everything is free. As you read along, you will see that there are some basic expenses to cover to build an up-and-running dropshipping store. Then, you will also incur additional dropshipping costs along the way.
Let’s start by looking at the list of all the necessary costs that you must incur to set up a functioning online website. With these basic elements, you can already receive and process orders as soon as possible.
An eCommerce platform, also known as shopping cart solutions or an eCommerce website builder, is a software that powers a website to sell products online. This is essentially what you need to process orders, organize inventory, manage contents, calculate taxes, and all necessary functions to fulfill orders.
There are many eCommerce platforms out there but basically, you have to decide between a self-hosted or hosted platforms. Let’s see their differences:
These are open-source applications that need a separate web hosting service to function properly. If you self-host, you have more flexibility to customize your dropshipping store. However, it also means that you’ll have more technical work to do.
Popular self-hosted eCommerce platforms to choose from:
WordPress: an open-source software more popularly known for blogging. But, you can transform this by simply enabling a free eCommerce plugin such as WooCommerce. This self-hosted platform is SEO friendly and available in more than 70 languages. Plus, you own all your data — your website, your content, your data.
Magento: Consider this platform if you want to scale your dropshipping business into an enterprise. You may have a developer on call to help you with technical issues. It comes with an optimized front-end and back-end performance, image optimization, own isolated server environment, PCI compliance, and technical support.
Price: $0 for Magento Community only
Opencart: It’s lightweight and easy to use. It’s recommended for budding entrepreneurs who don’t have much time in customizing their website from scratch. It supports unlimited products and you can create unlimited categories. It’s also responsive and SEO friendly. Plus, you can choose from 36 payment methods that come integrated with OpenCart.
All-in-one eCommerce software solutions that already include web hosting, security, inventory administration, order management, and all you need to create a ready-to-sell dropshipping website. Hosted eCommerce platforms are recommended for merchants who want to have more time selling.
Popular hosted eCommerce platforms to choose from:
ShopBase: Perfectly designed for eCommerce businesses that want to have a cross-border presence. ShopBase includes secure, unlimited eCommerce hosting on all plans, so you don’t need to pay for a web host and security service. You’ll also enjoy SSL certificate and unlimited bandwidth for free.
Price: Starts at $19 per month.
Shopify: Highly suggested for online stores that need multichannel selling and built-in marketing features. The basic plan includes web hosting, free SSL certificate, PCI certified, unlimited products, abandoned cart recovery, unlimited bandwidth. and third-party calculated shipping rates.
Price: Starts at $29 per month
BigCommerce: Paid-for hosted eCommerce solution with an awful lot of built-in features to help you build a complete dropshipping store easily. The standard plan includes web hosting, unlimited products, file storage, and bandwidth. Plus, you’ll also get real-time shipping quotes, free sitewide HTTPs, and dedicated SSL.
Price: Starts at $29.95 per month
Web hosting service companies rent out their server that your website can host on. Once your website is hosted, users can already access your dropshipping store. Take note that some web hosting services already include domain and security services.
For those planning to get a hosted eCommerce platform, you can skip this part. Meanwhile, if you choose a self-hosted platform, a web host is another dropshipping cost to include. There’s a variety of web host services to choose from. Here are the most popular types of web hosting:
Popular hosting service providers
BlueHost – dubbed by WordPress as “the ultimate WordPress platform”. It offers multiple hosting solutions: shared hosting, VPS hosting, and dedicated hosting, and WooCommerce hosting.
SiteGround – high-performance hosting solutions: web hosting, cloud hosting, dedicated hosting, enterprise hosting, reseller hosting, WordPress hosting, and WooCommerce hosting.
DreamHost – the highest rated 2017 web hosting service by PCMag.com. It offers a variety of hosting services including shared hosting, VPS hosting, dedicated hosting, cloud hosting, and WordPress hosting.
A domain name is a URL that links your website to your visitors, such as www.boostflow.com. Hosted eCommerce platforms often provide you with a free domain name. For example, Shopify comes with a free domain name. However, its default domain is written as examplestore.myshopify.com.
If you want a custom domain name or you’ve already bought a domain, you can still use that domain name for branding services and easier recall. You can purchase your domain names from domain registrars.
Popular Domain Registrars
GoDaddy – it’s the world’s largest domain name registrar with more than 18.8 million customers worldwide and more than 78 million domain names under their belt.
Gandi – manages more than 2.4 million domain names from 192 countries. Each domain name registration comes with a free 1-year Standard SSL certificate.
Domain – this is one of the world’s top players in domain registration. It boasts affordable domain name pricing with superior support and free SSL encryption.
When considering to purchase hosting or domain services, check if security protocols, such as SSL certificate, are already included. For example, hosted eCommerce platforms, such as Shopify, already provide free SSL certificate on their package.
If not, you will need to purchase a separate SSL certificate. This is required so that you can securely transfer customer data such as credit card information, usernames, passwords, etc.
Top-notch security authorities:
Comodo – it manages high levels of SSL security: 2048-bit digital signatures and up to 256-bit encryption. It also comes with free 24/7 technical support via phone, email, and live chat.
RapidSSL – it’s a fast, standard SSL with 128 / 256 bit SSL and 2048 bit CSR encryption. It includes a fully automated domain validation method and free unlimited reissue.
GeoTrust – you can have up to 256-bit encryption with a 2048-bit root. It comes with extended validation, automatic authentication, and issuance process
This part is essential so you can accept your customers’ payment method of choice. A payment gateway is an app that licenses credit card or direct payment for online business. Your payment gateway will take charge of encrypting sensitive information, such as credit card numbers, ensuring safe transactions between you and your customer.
Depending on your chosen eCommerce platform, these apps usually come with free integration. You will only pay for what you use. Here are popular gateways:
Top payment gateways
To start a successful dropshipping business, looking for the best products to dropship is a critical step. Now, as for the cost, it’s true that you won’t purchase products upfront. However, some dropshipping wholesalers and suppliers require per month fee as you go along.
While there’s no sign-up fee, there are certain limitations when using a dropshipping partner. Some wholesalers and suppliers will provide a product cap. Once you consume that, you’ll pay a per-month fee from thereafter.
If you cover the first 6 dropshipping costs, you can already start selling online. But, it won’t guarantee you any sale at all. This is why the following costs, while optional, are crucial to be successful in the dropshipping business.
The following costs are essential in building a highly branded dropshipping store. This will help you attract potential customers, establish your online presence, and assure your legitimacy as a dropshipping business. Depending on your budget, you can adjust these optional dropshipping costs accordingly:
The first optional cost that you’ll encounter deciding if you’ll use a free or premium theme. If you opt for a premium theme, you will have to pay for an additional cost. Should you be economical and just use a free theme then?
Well, while keeping your expenses down is necessary, it’s actually recommended to stay away from using free themes. Your website’s theme is responsible for establishing your dropshipping store’s appearance. Your appearance has the ability to attract, distract, or repel any potential customers.
Plus, most often than not, free themes look the same so you can’t really stand out and brand your dropshipping store. They also have limited functionalities. In the long run, this might hurt your conversion.
The cost of a theme varies from one eCommerce platform to another. Here’s the range from different platforms:
While either hosted or self-hosted eCommerce platform is already functional, you can still expand your business by using apps. Extensions or apps will help you extend the functionality of your website.
All of the eCommerce platforms are very flexible and easy to customize. What you need to do is choose the right app to install. You have access to both free and paid apps. But, if you’re really serious about growing your dropshipping business, we recommend investing in paid apps so that you can enjoy all their functionalities without limits.
The cost of these paid apps also depends on your eCommerce platform. Let’s take a look at a sample list of extensions that are highly recommended to invest in:
Now, we can tally the potential cost of starting a dropshipping business. You’ll see that we’ve divided the cost for self-hosted and hosted eCommerce platforms. The figures include a range of minimum and maximum cost per category. Zero figures mean that you have free options for this category.
Dropshipping Cost (Initial Expense)
*SSL Certificate: Some domain or eCommerce platform services already include SSL certificates.
**Extensions: This is a sample computation containing 7 different apps.
If you see the table above, it means that you can essentially create a functioning dropshipping store for as low as $32.49. This is because some of the tools that we mentioned offer free installation or free trials. Some tools also have free basic plans that would only require you to pay for the upgrade as needed.
It could go as much as $600 if you want to scale and expand your dropshipping business along the way. You just need to work around these different dropshipping cost category and see where you can minimize your spending. The key is to evaluate your needs to know which area to invest more on.
While you may be tempted to include everything, you don’t really have to. It’s good to invest in necessary factors and cost-cut on items that are just good-to-have. You want to minimize your costs as much as possible.
Here are some tips to you can further reduce your dropshipping cost:
Now, you don’t have to buy and install all of the apps we recommended. What you need to do is to understand your business needs and your goals. We suggest getting at least three most essential apps on your launch. Alternatively, you can also mix paid and free apps. Just remember to watch out for the developer’s reputation and reviews.
Your eCommerce platform of choice will already carry some of the dropshipping costs that we’ve mentioned. Don’t be discouraged by how expensive an eCommerce platform may seem like at first. Most often than not, it’s jam-packed with features and functionalities that you will have to purchase separately in the future.
Related to our above statement, consider buying bundled solutions. For example, there are all-in-one marketing extensions that you can purchase. These already include all amazing and essential apps that you can implement to help you scale your dropshipping business. They often come at a discounted price so you get more apps for a lesser price.
There are many domain registrars out there with varied pricing strategy. What you need to do is conduct thorough research before purchasing a domain. You don’t have to shell out a lot of money for a domain that you can probably get for a cheaper price elsewhere.
Be a smart shopper. Just like anything that you buy or commit to, always read the fine print. Is it a one-time, per month, or yearly payment? Some pricing strategy will lure you at first with a super low cost but in the end, you’ll end up paying for a higher price in the long run. Look out for license warranty and return policy as well.
The true cost of setting up a dropshipping store will still heavily depend on your immediate needs as a business. You should also take into account your budget restrictions and any future plans. You must find that equilibrium of investing for your future and spending within your means.
In the end, you want to build a dropshipping business that is highly functional so you can’t be too frugal to the point of sacrificing the quality of your store. But, any dropshipping cost must be carefully researched and justified accordingly. You want every penny to be worth it.