Shopify Dropshipping Pricing Guide [A Systematic Approach]

Shopify Dropshipping Pricing Guide [A Systematic Approach]

October 31, 2023

Shopify dropshipping has been a hot topic amongst many would be entrepreneurs and established business owners for a number of years now, with the idea of starting an ecommerce business being a likely to attractive proposition for many. 

This sentiment has become even stronger since the emergence of the Covid-19 pandemic and many workers experiencing lockdown conditions. 

With Dropshipping being a new challenge, which offers the sought-after work-life balance, facilitating time with the family whilst also providing the opportunity to scale up income, there is an abundance of individuals looking to jump into the fray. 

Shopify is a popular platform choice for this now and as there is no inventory to keep track of and no packages to ship, you can focus on selling your products, making sales, and investing your valuable time and resources into building your company. 

This sounds like the ideal business setup, however, a word of caution…whilst dropshipping provides a brilliant opportunity to set up a successful business, it isn’t a get-rich-quick scheme!

Because you can’t expect a full bank account overnight. It’s a good idea to start with a part-time business and work your way up to full-time. This will require a solid strategy with functions such as price tracking, dynamic pricing, and your choice of platform to use.

So, why should you choose the popular Shopify dropshipping model if you’re thinking about beginning an ecommerce business?

What Is Shopify?

Shopify is a popular ecommerce platform that enables aspiring entrepreneurs to open an online store, sell things, and accept payments. 

It’s easy to use even if you don’t have any technical knowledge. The support and tutorials supplied are comprehensive enough to assist you if you get stuck using any of their many themes or apps.

What Is Dropshipping?

Dropshipping is a business fulfillment model in which a store does not stock the items it sells. Instead, the retailer buys the item from a third-party vendor and has it delivered to the buyer directly. As a result, the seller is relieved of direct product handling.

The most significant distinction between dropshipping and traditional retail is that the selling merchant does not own or stock inventory. Instead, the seller fulfils orders by purchasing goods from a third party—usually a wholesaler or manufacturer—as needed.

Why Should You Use Shopify If You’re Dropshipping?

So, now that you’ve mastered Shopify and the dropshipping concept, what is it about the two of them that makes them function so well together? 

A Shopify store, on the other hand, is simple to set up. Thanks to its seamless integration with the dropshipping concept.

Dropshipping with Shopify is an excellent alternative if you don’t have the capacity to manage manufacturing, supply, and fulfillment. Shopify is one of the simplest and most popular systems for creating and running your store.

It’s Dropshipper Friendly

Shopify is a huge supporter of the dropshipping concept. There are a slew of dropshipping-specific solutions that work smoothly with the platform. This makes things a lot easier for you when you’re first starting off.

Has A Wide Range of Design Options

Shopify has a lot of tools that allow you to build an ecommerce business instead of just a website. Therefore, it’s great for beginners! 

You can use the online store builder to create your business and set up all of the aesthetics. 

You’ll have access to a variety of free and paid design templates. As well as other useful features that make managing your sales, marketing, and payments a breeze.

It’s Easy To Use

Shopify is one of the most user-friendly platforms on the market. Even though it has a lot of features and functions, it’s easy to use and understand. 

The tutorials are simple to follow and do an excellent job of teaching how to use the software. 

You can also have many users. This means that when your store expands, and you require additional assistance, you can quickly add new team members.

Shopify Dropshipping Price Overview

So, to understand the basis for Shopify dropshipping, it is essential to understand the best way to price your products. So that you can make your business as successful as possible.

Because it affects practically every area of your business. Pricing your products is one of the most important decisions you’ll ever make for your business. 

Everything from your cash flow to your profit margins to which expenses you can afford to cover is influenced by your pricing.

That’s why it’s all too easy to become stuck on your pricing plan when launching a new business or product. However, it’s critical not to allow the decision to deter you. 

You’ll receive the best pricing data by launching and testing with real consumers, but you’ll still need to start someplace, with a price that works. 

How Should I Price My Products? 

It is important to remember that pricing your product is not a one-off event. But will require a flexible approach, which will need to be monitored and may even require you to undertake dynamic pricing. 

Product pricing is a key strategic decision that you will need to make for your business. As your business develops and evolves, it will require more advanced solutions. 

However, starting is much simpler!

Shopify Pricing: Starting Point

There is a relatively quick and simple technique to set a starting price for your product if you’re looking for one. 

Remember that just because you used certain pricing to debut doesn’t guarantee you’ll utilize it indefinitely.

To figure out your first price, total up all of the expenses associated with bringing your product to market. Then, add your profit margin on top of that. 

Why Does This Pricing Strategy Work?

The above step may seem simple, but it is an effective and fundamental step.

The most crucial aspect of your price is that it must be sufficient to keep your firm afloat. It will be difficult to build and scale your business if you price your products at a loss or at an unsustainable profit margin.

Other essential elements to consider when setting your pricing include how you compare. It is about your competition, what your pricing tactics entail for your business, and your customers’ expectations. But before you can think about that, you need to make sure you’ve established a stable base pricing.

What Should You Charge For Your Product?

  1. Total up your variable expenses (per product)
  2. Incorporate a profit margin.
  3. Account for all fixed costs.
  4. Run price checking software to see how you measure against competition.

Calculating a sustainable pricing for your product may be broken down into three simple steps.

  1. Step A: Calculate Your Variable Cost Per Product

    First and foremost, you must account for and understand each and every cost associated with taking each product to market.

    When you order your products, you’ll know exactly how much each unit will cost you, which is your cost of goods sold.

    If you produce your own products, you’ll have to dive a little further and examine a stack of raw materials. What is the cost of the package, and how many goods can you make with it? This will give you a general idea of your per-item cost of goods sold.

    However, don’t forget that the time you spend on your business is also precious. Set an hourly amount you wish to earn from your business and divide it by the number of things you can manufacture in that time to price your time. Make careful to include the cost of your time as a variable product cost when determining a sustainable price.

  2. Step B: Introduce An Acceptable Profit Margin

    It’s time to factor profit into your price once you’ve calculated your total variable costs per product sold.

    Let’s imagine you want to make a 25% profit margin on your products after factoring in your variable costs. It’s critical to keep two things in mind when deciding on this percentage.

    You haven’t factored in your fixed expenditures yet, so you’ll have expenses to cover in addition to your variable expenses.

    You must evaluate the general market and ensure that your price with this margin is still within the market’s overall “acceptable” price range. Depending on your product category, if you charge twice as much as your competitors, sales may become difficult.

    Take your total variable costs and divide them by 1 minus your target profit margin, stated as a decimal, whenever you’re ready to compute pricing. That equals 0.25 for a 25% profit margin, therefore, divide your variable costs by 0.75.

  3. Step C: Account For Fixed Costs

    It’s critical to keep in mind that variable expenditures aren’t your only expenses.

    Fixed costs are expenses that you will pay regardless of how many things you sell, and that will remain the same no matter how many products you sell. 

    They’re an important component of running a business, and the idea is for your product sales to cover them as well.

    It can be difficult to figure out how your fixed costs fit into a per-unit price while you’re deciding on a per-unit price. 

    Using the information regarding variable costs you’ve previously obtained through a break-even calculator is an easy method to go about it. You can use the Breakeven Analysis Calculator to help you. 

    It’s designed to let you view both your fixed and variable costs in one spot, as well as how many units of a single product you’d have to sell to break even at your selected pricing. 

    These estimates might assist you in making an informed decision about how to strike a balance between covering fixed costs and establishing a realistic and competitive price.

  4. Step D: Use Price Checking Software

    Once you have an accurate overview of your break-even point and the price you want to go to market with, use comprehensive price checking and comparison software to look at the latest market prices and stock availability information.

    This will give you a great idea of how competitive you will be upon entering the market, whether you will require fast adjustments, and who your main competitors will be. 

    But even if you see some other more established businesses operating at lower prices, don’t be afraid to launch, as you can always revise prices later on. 

Final Words

By using price tracking software, you can stay in control of your pricing strategy by receiving daily reports and price change notifications to help you stay on top of your master pricing plan.

After having followed these steps, you can proactively employ new dropshipping pricing strategies such as:

  1. Low-Ticket Product: This is selling cheap products using a high price margin – usually between $0 – $10.
  2. Fixed Dollar Markup: Markup refers to the value that a drop shipper adds to the cost price of a product. The value added is called the markup. The markup added to the cost price usually equals the retail price.
  3. Fixed Percentage Markup: This is a simple pricing method where a fixed percentage is added on top of the production cost for one unit of product (unit cost).
  4. Free Plus Shipping Strategy: A free plus shipping offer is a product you sell for $0.00, and only charge the customer for shipping costs.
  5. Medium-Ticket Product: This is selling medium-priced products using a high price margin – usually between $10 – $50.
  6. Cost-Based Pricing: This is the practice of setting prices based on the cost of the goods or services being sold.
  7. Bundle Pricing: This is a strategy that retailers use to sell lots of items at higher margins while providing consumers a discount at the same time
  8. High-Ticket Product: As with low and medium, this relates to products in the high range – as dropshipping is usually not used to high-end products costing thousands, this would usually be around $100+.
  9. Perceived Value Pricing: This is the value that customers are willing to pay for a particular product or service based on their perception of the product.

1 Comment
  1. Nisha Garg
    August 30, 2021

    Drop shipping is the latest trend in eCommerce and its is proving to be usable among many businesses especially during the Covid outbreak. Many businesses doing drop shipping work in the affiliate business field which is economically profitable to use eCommerce as a form of promoting their businesses.

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