How to Make Money Dropshipping

I’ve run a couple of dropshipping businesses and want to share strategies (that aren’t generic) to help you make money.

I’ll first provide steps to create a dropshipping business. If you already have a business, check out those steps anyway to see if there’s any strategies that you aren’t using. Afterward, I’ll explain how to improve your store’s margins.

And finally, I’ll talk about unavoidable fees and potential ways to mitigate them.

Let’s dive in.

Key Takeaways

• A hyper-focused niche boosts conversions, lowers ad costs, and establishes expertise.
• Competitive research uncovers product gaps, pricing strategies, and marketing opportunities.
• The right supplier impacts your profit margins, product quality, and customer satisfaction.
• Strategic marketing, including SEO and social media, drives sales cost-effectively.
• Minimizing expenses, negotiating prices, and scaling operations maximize your dropshipping profits.

7 Steps to Start a Dropshipping Business

To make money dropshipping, you’ll need to start a business first with these steps:

1. Find a Niche: Target a passionate audience with specific needs for easier marketing.
2. Competitive Research: Analyze existing players to find gaps and identify winning strategies.
3. Find a Supplier: Partner with a reliable supplier for quality products and fast shipping.
4. Build a Brand: Develop an identity that resonates with your target customer.
5. Figure Out Your Business Structure: Choose a legal structure that suits your goals and risk tolerance.
6. Figure Out Your Finances: Track income and expenses to make informed financial decisions.
7. Build a Marketing Plan: Craft a focused strategy to reach your ideal customers.

I’ll provide examples of tools to use (when applicable), strategies to achieve each step, and additional information to help you succeed.

Before starting, you’ll need to know what platform you’ll use. Here are guides that further illustrate dropshipping on these platforms:

• Amazon
• Walmart
• TikTok
• Shopify
• Shein
• Wayfair
• Facebook Marketplace
• Instagram
• X (aka Twitter)

Let’s dive in.

1. Find a Niche (That Isn't Generic)

Free niche finding tools

• Google Trends: Track search interest over time
• Reddit: Explore niche communities
• Social media: Search relevant hashtags

Paid niche finding tools

• Dropshhip.io: View real-time product data
• Sell The Trend: Curated product research
• Niche Scraper: Analyze data from Shopify stores

A hyper-focused niche targets a very specific audience with shared passions or needs. This makes marketing easier, since you already know where to find those potential customers and what motivates them.

It also reduces competition, as you won't be going head-to-head with giant online retailers.

Here are some examples:

• Eco-conscious yoga gear: Focus on sustainable materials (bamboo, recycled plastic), minimalist designs, and partner with yoga instructors for brand exposure.
• Portable work-from-home accessories: Offer ergonomic laptop stands, blue-light-blocking glasses, and travel organizers—target the remote worker demographic.
• Victorian Goth Fashion: Think lace blouses, velvet skirts, antique-style jewelry—appeal to a passionate subculture.

Validate your niche idea by finding relevant online communities (subreddits, Facebook groups). Are people discussing problems your products can solve?

Say you’re browsing the subreddit, r/gothfashion for inspiration and find the following quote, "It's impossible to find affordable, high-quality Victorian-inspired pieces.”

There’s the pain point. At which, you would partner with a supplier offering classic Victorian Goth styles at accessible price points.

Not the results I was hoping for, but this is an example search term.

Still need help finding products? Here’s a video for you to check out:

By understanding these problems, you tailor your dropshipping store's messaging and product selection directly to your target audience's needs. Increasing your relevance and boosting their likelihood to buy.

Summary: A hyper-focused niche increases conversion rates, lowers advertising costs, and establishes your dropshipping store as the go-to expert.

2. Perform Competitive Research

Free Tools

• Google Search (search for similar products, check reviews)
• Social Media (monitor competitor accounts)

Paid tools:

• Dropship.io
• Ahrefs / SEMrush (analyze competitor websites and backlinks)
• SimilarWeb (traffic insights)

Examine their website design, customer reviews, and social media presence to learn what sets them apart.

You’ll need to search in areas like:

• Price optimization: Analyze your competitors' pricing to find the sweet spot between competitiveness and profitability.
• Product gap discovery: Identify trending, high-demand products that your rivals might be missing out on.
• Improved marketing: Understand what marketing messages resonate with your audience by studying your competitors' successful strategies.

This isn’t a direct method to improve profits, and seems like common sense. However, you may not have known what exactly to search for.

Summary: Competitive research boosts dropshipping profits by optimizing pricing, uncovering product opportunities, and enhancing your marketing strategies.

3. Find a Supplier

Here’s how to find a good supplier:

• Contact manufacturers: Reach out directly to manufacturers of products you're interested in.
• Supplier directoriessome text
  • Free:some text
    • AliExpress
    • Social media search: Use hashtags like #dropshipping or #wholesaler on platforms like Instagram to identify potential suppliers.
  • Paid:some text
    • Doba
    • Sprocket
    • Jungle Scout
• Attend trade shows: Meet potential suppliers face-to-face, compare offerings, and build relationships.

There’s a lot more that goes into finding a good supplier. We have a separate guide that’ll provide a lot more information.

Then you’ll need to order samples. Use an address or name that isn’t yours to prevent the manufacturer from sending you a sample that’s different from what your customer would receive. This prevents potential scams that could ruin your business.

You’ll also need to discuss minimum order quantities (MOQs), payment options, and shipping terms. And ensure you search for reviews (that aren’t fake) to determine your vendor’s legitimacy.

Summary: Finding the right supplier improves profits through lower costs, reliable shipping, and quality products.

4. Create a Brand

Free brand-building tools

• Business Name Generator (Shopify)
• Canva (logo and graphic design)
• Pantone Color Finder

Paid brand-building tools

• Looka (AI-powered logo generator)
• Tailor Brands (branding suite)
• Professional copywriter (for crafting brand voice)

A strong brand fosters loyalty, boosts perceived value, and can make marketing much easier. Think of it as the reason why someone wouldn't just buy a cheaper version of your product from a competitor.

There’s a lot to building a brand, but here are general strategies:

• Define your mission: Why does your store exist beyond making money?some text
  • Tap into values (e.g., sustainability, inclusivity).
• Know your ideal customer: Create a detailed profile of their demographics, interests, and pain points.
• Choose a memorable name: Make it relevant to your niche, easy to say, and available as a domain name.
• Craft a unique visual identity: Pick colors (using tools like Pantone color finder), fonts, and an eye-catching logo.
• Develop a consistent voice: How does your brand "talk" in product descriptions, social media, etc.? (e.g., is it friendly, authoritative, playful?)

Don't try to be everything to everyone. Focus on what makes your brand special and communicate that consistently. Even if you are truly in it “for the money,” you need to convince your customer that’s not the case.

Unless your brand identity is to be the Monopoly Man.

Ready to make your dropshipping business official?

Summary: Building a strong brand attracts loyal customers and distinguishes your dropshipping store.

5. Figure Out Your Business Structure

Choosing the right business structure for your dropshipping venture has big implications for taxes, legal liability, and your level of control.

Don't rush this decision, as it's changeable, but harder to do later on. Consider factors like your expected revenue, how much risk you're willing to take, and whether you plan to go solo or bring in partners.

Here are common business structures (in the US):

Sole Proprietorship: Simplest option, you and the business are one entity.

• Pros: Easy setup, full control.
• Cons: Unlimited personal liability, harder to raise capital.

Limited Liability Company (LLC): Protects personal assets from business debts.

• Pros: Flexibility, pass-through taxation (avoids double taxation).
• Cons: More setup paperwork than sole proprietorship.

Corporation: Separate legal entity from owners.

• Pros: Strongest liability protection, attractive to investors.
• Cons: Complex setup, double taxation potential.

Available business structures will vary by country. See what your local government offers. Also consult an accountant or lawyer for advice tailored to your situation.

Consider your long-term goals—if you plan on scaling rapidly, an LLC or corporation might be a wiser early choice.

It’s time to get your finances in order.

Summary: Choose the business structure that aligns with your dropshipping goals and risk tolerance.

6. Figure Out Finances

Free finance tools:

• Google Sheets or Excel
• Wave Accounting (limited free features)

Paid finance tools:

• QuickBooks
• Xero
• Bench (full-service bookkeeping)

Start with a clear picture of startup costs like website fees, inventory, and marketing expenses. Don't forget "hidden" ongoing costs such as payment processing fees, subscription software, and any outsourcing you plan on. 

Track income and expenses to make informed decisions about where to invest for growth or cut back if needed.

We aren’t financial advisors, but can provide general information to help you get started:

• Set realistic financial goals: What do you consider "success?"some text
  • Define this in terms of revenue targets and profit margins.
• Create a detailed budget: Break down all expected costs, one-time and ongoing, for a clear roadmap.
• Open a separate business bank account: Maintain a clear division between business and personal finances.
• Choose the right accounting system: Track income and expenses diligently, whether it's with spreadsheets or dedicated software.
• Consider funding options: If needed, explore business lines of credit, small business loans, or crowdfunding for expansions.

Revisit your budget regularly and adjust as needed. Seek guidance from an accountant if taxes and financial regulations feel overwhelming.

Ready to turn those profits into customers?

Summary: Careful financial planning is essential for a successful and sustainable dropshipping venture.

7. Build a Marketing Plan

Free marketing tools:

• Mailchimp (email marketing, limited features)
• Hootsuite (social media management, limited features)
• Canva (graphic design)

Paid marketing tools:

• Ahrefs or Semrush (keyword and competitor research)
• ManyChat (chatbot marketing)
• Klaviyo (advanced email marketing)

Start with understanding your ideal customer inside and out—what are their pain points, where do they hang out online? This focus guides your choice of marketing channels, messaging, and helps avoid wasting money on ineffective strategies .

It's also important to set measurable goals to track your success and adjust your plan over time.

Here are marketing strategies to consider:

• Content marketing: Create blog posts, videos, or infographics that attract your target audience organically.
• Social media: Build a presence on platforms where your customers spend time, share engaging content, run ads.
• Email marketing: Collect customer emails and nurture relationships with personalized offers and valuable content.
• Influencer marketing: Partner with micro-influencers in your niche to reach their loyal audience.
• Paid advertising: Target potential customers on platforms like Facebook Ads or Google Ads with laser-precision.

Start with a few channels and master them. Track your results to identify the most cost-effective strategies for your dropshipping store.

I’ll provide more examples of marketing with social media and Search Engine Optimization (SEO) later in this guide.

For now, it’s time to discuss ways to improve your margins.

Summary: A strategic marketing plan converts visitors into loyal customers for your dropshipping store.

9 Tips to Improve Your Dropshipping Margins

Here are various areas to focus on to improve your margins and profits with dropshipping:

• Focus on Organic Traffic: Reduces customer acquisition costs, increasing profit per sale.
• Increase Your Prices: Boosts revenue per item without necessarily increasing sales volume.
• Leverage Upselling Opportunities: Increases average order value, maximizing revenue per customer.
• Social Media Marketing: Cost-effective way to reach targeted audiences, increasing sales.
• Minimize Expenses: Frees up capital for reinvestment in growth initiatives.
• Avoid Legal Battles: Prevents fines or business interruptions.
• Negotiate Prices with Suppliers: Lowers cost of goods sold, boosting your profit margin.
• Automate (When Possible): Reduces labor costs and improves operational efficiency.
• Consider Scaling Up: Unlocks volume discounts and streamlining potential, further reducing costs.

Each section will explain how these areas will improve profits, strategies to improve margins within these areas, along with free and paid tools to help.

Let’s dive in.

1. Focus on Organic Traffic

Free organic traffic tools:

• Google Keyword Planner (requires a Google Ads account)
• Ubersuggest
• Answer the Public
• Google Trends

Paid organic traffic tools:

• Ahrefs
• SEMrush

The greatest advantage of organic traffic is that it's free. You're not paying for ads, meaning you decrease your customer acquisition costs drastically. This translates into higher profit margins on each sale.

Also…

Customers who arrive at your store through organic search are usually further along in the buying journey. Their searches imply a greater need or intent to purchase, increasing the likelihood of conversion compared to paid ads.

Here’s what you’ll need to do:

Keyword research: Find keywords that your audience is searching for; ensure you match user intent.

On-page optimization: Make it easier for search engines to know what your pages are about.

• Header structure (H1, H2, H3): Organize your content for search engines and easy user readability.
• Internal linking: Connect your site pages to help users and search engines navigate your content.

Content creation: Establish yourself as an authority through blog posts and build product descriptions that match buyer intent.

• Blog posts: Create informative content relevant to your niche and target keywords, which attracts natural search traffic.
• Product descriptions: Optimize product descriptions with unique, keyword-rich content (avoiding copied supplier descriptions).
• Add categories/collections: Create and optimize category and sub-category pages for products that you’re selling (e.g., Espresso machines for category and super-automatic espresso machine for sub-category).

Backlink building: Helps build trustworthiness in search engines’ eyes when websites link to your store.

• Guest posting: Write articles for relevant blogs in your niche, including a link back to your store.
• Resource pages: Find resource pages relevant to your niche and suggest your store as a valuable addition.

Technical SEO: Ensure your site is fast, mobile-friendly, and free of technical errors that could hinder indexing by search engines.

I’d love to go into more details, but SEO is fairly complex and would require at least a 5,000-word blog post. Dive into the rabbit hole of links that I provided and use those to help you understand the basics of SEO.

Summary: Focusing on organic traffic through SEO, including content creation improves dropshipping profits by reducing customer acquisition costs, and increasing conversion rates.

2. Increase Your Prices (Subtly and Strategically)

Tools for monitoring competitors

Free:

• Manual price checking on their websites

Paid:

• Prisync (competitor price tracking)
• Price2Spy (price monitoring with alerts)

Even a small bump can boost margins. A few extra dollars per sale adds up quickly, and strategically raising prices can also enhance the perceived value of your products in the customer's eye.

However, sudden price hikes scare customers who can find better deals elsewhere. To win them over, consider value-adds like freebies, add-ons, or loyalty rewards that match competitor pricing. Meanwhile, monitor identical products that your competition offers and ensure you’re offering more value.

Here are some tips on subtly increasing your prices:

• Round up to psychological pricing: Use pricing ending in ".99" instead of whole dollars.
• Bundling: Create product bundles at a slightly discounted price (but one that still increases total profit compared to individual sales).
• Value additions: Offer small freebies, better packaging, or faster shipping options to justify a small price increase.
• Market testing: Raise prices incrementally on a few products and monitor conversion rates before making widespread changes.

Focus on providing exceptional overall value. Great branding, excellent customer service, and unique product descriptions can all make the pricing feel fair to customers.

Summary: Subtly increasing prices alongside value-added strategies boosts your dropshipping profits.

3. Leverage Upselling Opportunities

Free tools:

• Your store's built-in "related products" features

Paid tools:

• Zipify OneClickUpsell (Shopify)
• ReConvert (Shopify)

Upselling is the art of guiding customers toward a bit more expensive, upgraded, or complementary products. It boosts your average order value (AOV), and therefore your profit margins.

Here are some strategies to upsell:

• Personalized recommendations: Suggest items relevant to what's already in their cart. (e.g., If they buy a phone case, offer a screen protector or compatible charger)
• Bundle deals: Create pre-bundled product sets offering a slight discount. (e.g., A yoga mat bundled with yoga blocks and straps)
• Post-purchase offers: Use your "Thank You" page for an exclusive add-on offer. (e.g., Buy a pair of earrings, get 50% off a matching necklace)
• Tiered options: Clearly present different versions of a product ("Good, Better, Best"). (e.g., Basic coffee maker, upgraded version with more features, premium model)

Here’s an example:

If someone reads the first Harry Potter book, they may want to buy the other 6. Thus, bundling them at a slightly discounted price seems appealing and convenient.

Track your sales to see what’s working.

Summary: Upselling increases dropshipping profits by encouraging customers to spend more on offered upgrades or additions.

4. Use More Social Media Marketing

Free social media tools:

• Hootsuite (limited features)
• Creator Studio (for Facebook/Instagram)

Paid social media tools:

• Sprout Social
• Later

Social media’s precise targeting maximizes ad spend, while organic reach (through viral content and user shares) grows your audience for free. Meanwhile, direct customer interaction saves on support costs, boosting loyalty and repeat purchases.

Use these strategies to improve your social media marketing:

• Find your niche platforms: Pick 2–3 platforms where your ideal customers spend their time (e.g., Instagram for fashion, Pinterest for home décor).
• Stunning visuals: High-quality product photos and videos grab attention.
• Engage with your audience: Respond to comments, host giveaways, ask questions to keep your followers involved.
• Harness user-generated content: Repost customer photos featuring your products for authentic social proof.
• Partner with micro-influencers: Tap into smaller, niche audiences with higher trust and engagement rates.

There’s a lot more to maximizing your reach in social media. But this information should help you get started.

Summary: Strategic social media marketing slashes customer acquisition costs, enhancing your dropshipping profit margins.

5. Minimize Expenses

Less spent on unnecessary things means more money to fuel your growth. It makes your business stronger, letting you offer better deals, run more effective marketing campaigns, and weather any bumps in the road.

Here are some strategies to minimize expenses:

• Negotiate with suppliers: Ask for discounts on larger orders or see if they offer loyalty programs.
• Streamline subscriptions: Audit what software you're paying for—cancel anything you don't use or find cheaper alternatives.
• Prioritize free marketing: Build an audience on social media with engaging content and use email marketing (which often has free plans).
• Automate: Use tools to schedule social media posts and handle repetitive tasks, freeing up your time for strategy.
• Outsource wisely: If you lack a skill (like logo design) and can afford it, hire a freelancer on sites like Fiverr instead of spending hours learning it yourself.

There’s not much else to explain here. Let’s move forward.

Summary: Cutting dropshipping expenses increases your profit margin on every sale.

6. Don't Get in Legal Trouble

Lawsuits and fines eat away at your bottom line. Worst case, you might have to shut down altogether. Avoiding these pitfalls safeguards your revenue, allowing you to reinvest it back into your store's growth and secure those bigger profit margins.

Here are some strategies that may keep you out of trouble with the law:

• Respect intellectual property: Never sell products with trademarked logos or copyrighted images without express permission.
• Use clear and honest marketing: Avoid false advertising or misleading product descriptions that could trigger lawsuits.
• Choose suppliers carefully: Partner with reputable suppliers who prioritize product quality and ethical sourcing.
• Offer a clear returns policy: Honor your return policy, and make it easy to find on your dropshipping store.
• Get legal advice: Consult a lawyer when in doubt, especially if dealing with high-risk products or regulations.

You’ll need to invest a bit of extra money and time upfront for legal advice and to ensure you aren’t breaking any laws. But this may protect you in the long run from the law.

Summary: Understanding basic legal principles and proactive risk mitigation save you money and protect your dropshipping business's long-term health.

7. Negotiate Prices With Sellers

Every dollar saved at the wholesale level translates to a greater profit margin when you sell. This compounding effect allows you to undercut competitor prices to win more sales or pocket more profit.

Both give you the flexibility to reinvest in your business growth.

Here are some tips on negotiating with your supplier:

• Build relationships: Don't treat suppliers as faceless vendors—develop a rapport for more leverage long-term.
• Order in bulk: Suppliers are more willing to offer discounts if you commit to larger order quantities.
• Start small: Test with a smaller order and emphasize your potential for bulk orders in the future.
• Compare suppliers: Get quotes from multiple suppliers to identify who offers the best initial price point.
• Look beyond price: Consider shipping terms, payment options, and supplier reliability when making your decision.

If negotiation isn't your strong suit, consider outsourcing the task to a professional. A skilled negotiator with product sourcing experience can save businesses 15–20% on procurement costs [1].

It’s an upfront investment, but can save you a lot in the long run.

Summary: Negotiating with your suppliers gives you control over your dropshipping profit margins.

8. Automate When Possible

Think of automation as hiring tireless robots to handle repetitive, time-consuming tasks. Fewer time-wasters mean more time to optimize marketing or source new products—activities that boost sales and your bottom line.

Automation also minimizes the risk of errors, leading to happier customers and less need for costly fixes.

Here are some areas you could automate that’ll make the biggest impacts:

• Order processing: Automate forwarding orders to suppliers, tracking shipments, and updating customers (Free: Zapier, Paid: Oberlo)
• Inventory management: Sync stock levels across platforms to prevent overselling (Free: Stock Sync, Paid: Skubana)
• Customer support: Use chatbots for initial inquiries, freeing up time for personalized support (Free: Tidio, Paid: ManyChat)
• Email marketing: Create automated sequences for abandoned carts and post-purchase follow-ups to drive more sales (Free: Mailchimp, Paid: Klaviyo)

Start automating gradually to avoid overwhelm. Prioritize areas where errors are costly or where your time is best spent elsewhere.

Summary: Automation slashes labor costs and unlocks new growth potential for your dropshipping business.

9. Consider Scaling Up

As you grow, you gain leverage to negotiate better supplier prices, streamline processes, and invest in tools that automate tasks. This means each new sale is more profitable than the one before.

Where do you start?

Here are some suggestions:

• Marketing spend: As you prove a winning product-ad combination, confidently increase your ad budget for wider reach and higher returns.
• Product offerings: Expand into complementary products to increase the average order value from existing customers.
• Outsourcing: Delegate time-consuming tasks (e.g., customer service) to freelancers or specialized services, freeing you up for strategic growth.
• Bulk orders: Secure even deeper discounts from suppliers due to your increased order volume.
• Customer retention: Focus on loyalty programs, exceptional support, and personalized email marketing to turn one-time buyers into repeat customers.
• Building a brand: Shift from selling products to selling a lifestyle or experience that resonates with your target audience. This cultivates loyal followers less sensitive to price competition.
• Partnerships and collaborations: Join forces with complementary businesses or influencers in your niche to tap into new audiences.

The 'best' scaling strategy depends on your specific dropshipping business. Analyze your current data to identify bottlenecks or untapped opportunities within these broader categories.

Learn the hidden costs lurking in your business...

Summary: Scaling your dropshipping venture unlocks cost savings and drives higher profit margins.

Unavoidable Fees & How to Mitigate Them

Let’s discuss the elephant in the room—unavoidable fees:

Platform fees: Shopify, BigCommerce, etc., charge monthly subscriptions or take a cut of each sale.

• How to mitigate: Factor these into your pricing strategy from the start, consider platforms with fee structures that fit your model (transaction-based vs. fixed monthly).

Payment processing fees: Services like PayPal charge a percentage of each transaction.

• How to mitigate:

• Shop around for the best rates.
• Pass costs to the customer (transparently).
• Offer discounts for payment methods with lower fees (e.g., direct bank transfer).

Taxes: Sales tax and potentially income tax are non-negotiable.

• How to mitigate: Consult an accountant about your tax obligations, use sales tax calculators for your target regions, and price accordingly.

Shipping costs: Suppliers charge varying amounts for shipping which impact your bottom line.

• How to mitigate: Offer "free shipping" by building the average cost into your product prices, negotiate bulk rates with carriers, or incentivize larger orders to reduce per-unit shipping costs.

Import duties/tariffs: These may apply if sourcing products from overseas.

• How to mitigate: Research potential tariffs beforehand, factor costs into pricing, or source locally manufactured products to avoid these fees.

Returns/refunds: Even with a clear policy, some returns are inevitable.

• How to mitigate: Build a small reserve into your pricing to cover occasional returns, and prioritize excellent customer service to reduce their likelihood.

Research ALL potential fees before launching your dropshipping store, ensuring that your pricing strategy leaves a healthy profit margin.

Read our frequently asked questions to learn more.

Summary: Dropshipping comes with unavoidable fees that must be factored into your pricing for sustainable profitability.

FAQs for Making Money From Dropshipping

Here are some frequently asked questions surrounding making money from dropshipping.

Why Are Dropshipping Margins So Low?

Dropshipping margins are often low because the supplier has already factored in their profit, leaving a smaller cut for the dropshipper. Also, the high level of competition in the dropshipping market forces sellers to keep prices low to remain competitive.

What's a Good Profit Margin in Dropshipping?

A profit margin above 20% is considered good in dropshipping. The average profit margin is between 15% and 20%.

Conclusion

Starting a dropshipping business takes research, strategy, and ongoing optimization. Focus on a profitable niche, strong branding, and smart marketing. By keeping costs low and scaling strategically, you'll unlock sustainable dropshipping success.

Learn more about starting a successful dropshipping business through our courses. If you’re looking for a tool to find high-performing products, see how we can help.