Dropshipping looks simple on paper: find a supplier, mark up the price, keep the difference. But the real profit calculation for dropshipping has six or seven cost components, and new dropshippers routinely forget at least two of them. The result is stores that look profitable based on gross margins but generate little or no net profit when all costs are properly accounted for.
This guide walks through every cost involved in dropshipping profitability, provides real examples across different niches, and shows you exactly how to use our free calculator to validate any product before you start advertising to it.
Every Cost in Dropshipping
1. Supplier Cost
This is the price your supplier charges per unit — your COGS. With AliExpress or Alibaba dropshipping suppliers, this is typically 20–40% of what you plan to charge retail. For domestic suppliers (US/UK), supplier costs are higher but shipping is faster and return rates tend to be lower. Your supplier cost should already include the goods landed at the supplier's warehouse — you are not arranging shipping yourself in most dropshipping models.
2. Shipping Cost
Depending on your model, shipping is either charged to the buyer (who sees it as an additional cost) or built into your product price (and you absorb it). ePacket from China typically costs $2–$5 per shipment with 10–20 day delivery. Domestic US fulfillment centres cost $5–$12 per shipment but ship in 3–5 days. For most general product dropshipping, expect $3–$8 in shipping cost per order.
3. Shopify / Platform Fee
Most dropshippers sell through Shopify. The Basic plan costs $39/month. Payment processing on every sale costs 2.9% + $0.30. At 100 orders/month, the $39 subscription adds $0.39 per order; at 500 orders it's $0.08 per order — negligible. The 2.9% + $0.30 Shopify Payments fee applies to every transaction regardless of volume until you upgrade to a higher plan.
4. Advertising Cost Per Sale (Most Critical)
This is the cost most new dropshippers dramatically underestimate. Unlike Etsy or Amazon where buyers come to the platform naturally, Shopify dropshipping requires you to generate every visitor through paid advertising. Your ad cost per sale = total ad spend ÷ number of orders from ads.
If you spend $200 on Facebook Ads and get 8 orders, your cost per purchase is $25. If your product sells for $49, $25 of that $49 is gone to advertising before you've subtracted supplier cost, shipping, or Shopify fees. This single number — cost per purchase — determines whether a dropshipping store is profitable or not.
5. Returns and Refunds
Dropshipping return rates vary significantly by niche. General merchandise: 3–8%. Clothing: 15–25%. Electronics: 8–15%. When a return happens in dropshipping, you typically issue a refund to the buyer and often cannot return the item to your supplier economically (especially with overseas suppliers). Budget a returns buffer of 3–5% of revenue as a real cost.
6. Chargebacks
Chargebacks (when buyers dispute charges with their bank) are a reality in dropshipping, particularly when delivery times are long. Budget 0.5–1% of revenue for chargebacks. Shopify charges a $15 dispute fee in addition to the refunded amount when a chargeback is lost.
Complete Example: $55 Fitness Product
A Shopify dropshipping store selling a resistance band set priced at $55 with free shipping:
- Selling price: $55.00
- Supplier cost (AliExpress): $9.50
- Shipping (ePacket): $4.20
- Shopify Payments (2.9% + $0.30): $1.90
- Facebook Ads (cost per purchase at $22): $22.00
- Returns buffer (4%): $2.20
- Shopify subscription (allocated at 150 orders/month): $0.26
- Total costs: $40.06
- Net profit: $14.94
- Net margin: 27.2%
27.2% is a workable dropshipping margin — but notice that advertising alone ($22) is 40% of your revenue. If your Facebook Ads cost per purchase rises to $30 (which happens as ad account optimisation worsens or markets become more competitive), your net profit falls to $6.94 and your margin collapses to 12.6%. This is why monitoring your cost per purchase daily is the most important operating metric for any dropshipping store.
Profit by Dropshipping Model
General product / winning product stores
These stores test many products rapidly, scaling winners through paid social. Net margins typically range 15–25% due to high CPMs and competitive advertising markets. The model works but requires constant product testing, precise ad optimisation, and high ad spend discipline. Best suited to sellers with prior paid advertising experience.
Niche stores
A store focused on one category (pet accessories, home organisation, gardening tools) can build SEO traffic and email lists that reduce advertising dependency over time. Net margins of 25–40% are achievable once organic channels contribute meaningfully. Takes longer to establish but far more sustainable than general product stores.
High-ticket dropshipping
Selling products priced $200–$2,000 (furniture, gym equipment, business equipment) with domestic suppliers. Advertising cost per purchase might be $50–$150, but on a $500 product this represents 10–30% of revenue rather than 40%. Net margins of 20–35% are common. Requires customer service capability and more careful supplier vetting.
Print on demand
Products (t-shirts, mugs, prints) are manufactured and shipped after each order by print-on-demand services like Printful or Printify. No inventory risk, no minimum order. Net margins typically 20–35% — supplier costs are higher than standard dropshipping but you carry zero inventory risk and returns are rare for personalised products.
How to Calculate Dropshipping Profit
Use our free calculator with the Shopify preset (2.9% processing fee). Enter:
- Selling price: your retail price
- Product cost: your supplier's price per unit
- Shipping: what you pay your supplier or shipper per order
- Ad spend: your current average cost per purchase from ads
The calculator shows your net profit and margin instantly. Run this calculation before you launch ads on any product — if the margin is below 20% at a realistic CPA, the product math doesn't work and advertising will only accelerate losses.
Validate your dropshipping product profit right now
Enter your supplier cost, shipping, and target CPA into our free calculator to see your real margin before you spend on ads.
Use the Free Dropshipping Calculator →Frequently Asked Questions
What profit margin should I target for dropshipping?
Target a minimum 20% net margin for any dropshipping product. This means after supplier cost, shipping, Shopify fees, advertising, and returns buffer, you keep at least 20 cents of every dollar in revenue. Below 20%, there is no buffer for advertising cost fluctuations, return rates, or supplier price changes.
How much do dropshippers make per month?
Earnings vary enormously. A beginner testing products might make $0–$500/month. Established stores with optimised ad accounts generate $2,000–$15,000/month in net profit. Large-scale operations run by teams can generate $50,000+/month. The key variable is not revenue but net margin — many $100,000/month revenue stores have thin margins and make less profit than smaller stores with better unit economics.
Is dropshipping from AliExpress still profitable in 2026?
AliExpress dropshipping remains viable in 2026 but has become more challenging. Shipping times of 15–25 days from China create customer service burden and return rates. Many successful dropshippers have transitioned to domestic or faster suppliers (e.g. CJ Dropshipping, Spocket for US/EU products) to improve delivery times and reduce returns. The margin calculation doesn't change — you still need 20%+ net margin to be viable.
Should I use Shopify or Amazon for dropshipping?
Shopify is the standard choice for dropshipping because you control your store, own your customer data, and pay lower per-sale fees (2.9% vs Amazon's 15% referral fee). Amazon dropshipping is possible but subject to strict rules — you cannot list as your store if the product ships from another retailer with their branding. Most dropshippers start on Shopify and potentially expand to Amazon as a secondary channel later.