Knowing how much to charge is one of the most important skills for any entrepreneur. Prices that are too high can scare away customers, but your time is valuable, and your pricing has to make running your store worth it. Learning how to price dropshipping products isn’t rocket science, but there’s an art to it.
How Do You Price Dropshipping Products To Make Money?
If you’re struggling with pricing and profitability for dropshipping, you’re not the only one. Developing a pricing strategy that works for your Shopify store takes time and practice. These factors can guide you to the right decision.
1. Profit Margins
You’re in business to make money, so selling products at a loss is a nonstarter. Whether you sell five items or 500, you should turn a profit for every one.
What is the average profit margin for dropshipping? It depends on the products. Household goods and clothing see average margins of about 50% per item.
2. Competitor Pricing
It’s helpful to check out other stores when setting prices for your goods. You don’t have to copy their prices, but what you learn gives you a rough idea of how much shoppers are willing to pay.
Browse stores in your niche that sell similar products and have a good reputation. Ignore huge marketplaces like Walmart and Amazon where sellers race to the bottom.
3. Minimum Price
Always set a baseline for your goods. You need to know the lowest price you can sell the item for and still make money.
Let’s say you normally sell dropshipped tees for $30. The total costs are $20, leaving you a $10 profit. Your minimum price cutoff could be around $23.
This means that, no matter what, you always make at least $3 in profit per shirt. Having a baseline helps you avoid hurting your income when you run store promotions and seasonal discounts.
4. Type of Product
Some dropshipping categories have more competition than others. If you’re competing directly against “fast fashion” sellers, prices are usually going to be lower. On the other hand, print-on-demand products with custom designs let you set higher prices because the goods are unique.
5. Pricing Strategy
The basic cost markup formula is fast and simple, but it’s not the only pricing option:
- Flat markup: Adding a flat dollar amount (e.g., $20 profit for every item in your store)
- Tiered product markup: Setting different profit margins for big-ticket items vs. less-expensive items
- Premium pricing: Charging higher prices for popular, trending, or “exclusive” items
- Dynamic pricing: Changing profit margins depending on demand or the time of year
- Cost multiplier pricing: Multiplying product costs by 150%, 200%, or 300%
If you only offer a handful of products, it’s easier to take your time calculating the perfect price point. Sellers with thousands of dropshipping items need a pricing method that works quickly and automatically.
6. Niche and Audience
In many niches, people are happy to spend $100 or more for a high-quality, custom-made item. If your customers are impulse buyers, try adding some products with lower profit margins but higher sales volumes.
How Do You Calculate the Price for Dropshipping Products?
Following the basic cost formula makes it easy to calculate product prices quickly. Here’s how:
- Add up your product costs: This includes base item costs, transaction fees, shipping fees, and any handling charges. For this example, the total cost of goods sold is $15.
- Set your preferred profit margin: Many sellers use the same profit margin for all dropshipping items, such as 25% across the board.
- Subtract your profit margin from 1: For a 25% margin, this looks like 1 – 0.25 = 0.75.
- Complete the formula: Divide your total product costs by the final profit margin result, or $15 ÷ 0.75 = $20. Your new sales price would be $20.
Don’t forget to consider all of the costs of running your store when calculating pricing. This includes your Shopify plan, taxes, and advertising costs.
How Much Are Your Customers Willing To Pay?
Now you know the mathematical formula for pricing dropshipping products on Shopify, but that’s not the whole story. Customer psychology can throw regular price expectations out the window.
Cheaper Isn’t Always Better
For some products, prices that are too low can backfire. Shoppers often think cheap products mean low quality. If you offer high-quality goods, make sure your prices reflect it.
Value Matters
Customers often accept higher prices if they think the item’s value is worth it. That’s why it’s important to choose a dropshipping supplier with a good reputation.
Consumers Support Brands They Like
Once you build a group of loyal customers, you have more flexibility for pricing. It’s worth investing in customer-friendly store features like videos, image carousels, and interactive size charts. Above all, give your brand a personality that stands out.
Nine Is the Winning Number
Shoppers prefer odd numbers in product prices. Almost 90% of prices end in the numbers five or nine. Going with $49.99 instead of a flat $50 can boost your sales by around 30%.
How Can Pricing Strategies for Dropshipping Make Your Store More Profitable?
Almost 75% of U.S. consumers look for deals and coupons when they shop online. But don’t discounts cut into your bottom line? Not when you use smart pricing strategies.
There are several ways to grab attention and offer incentives while enjoying healthy profit margins:
- Bundles with two or three items
- Volume-based discounts (like “Buy Three, Get One Free”)
- Price packages (e.g., “Basic,” “Intermediate,” and “Ultimate”)
- Lower-margin sale items to attract attention to full-price new releases
One of the most important factors for success is showing customers how much they save. Don’t wait until checkout to add the discount. Use Shopify apps that display the sale price or upsell offer while customers are browsing.
Master the Art of Pricing Dropshipping Products on Shopify
Pricing products for dropshipping is like riding a bike. Getting the hang of things takes time, but any Shopify store owner can learn how. At StayTuned Digital, our friendly team has easy-to-use app solutions for pricing, deals, and bundles. Contact us to learn more.