When you dropship, you set your own prices. The supplier's price is only what the product costs you. Your price has to cover that, the delivery, the card fee and the cost of running your shop, and still leave you something for your time.
This guide takes you through working out a price, step by step, with one product as the example.
1. Start with what one sale costs you
For every sale, add up three things:
- What the supplier charges you for the product.
- What the supplier charges for delivery to your customer. Check this for the UK, not just the product price.
- The card fee taken when your customer pays you. Our guide to card fees shows what each shop website charges.
Say a product costs you £12.00 from the supplier, and £3.50 to deliver. If you sell it for £29.99 on Shopify's Basic plan, the card fee of 2% + 25p comes to £0.85. That leaves you £13.64 from the sale.
2. Take off VAT, if you are registered
If you are registered for VAT, a sixth of a price that includes VAT is VAT, which you pass on to HMRC. On a £29.99 sale that is £5.00, which would leave you £8.64. If you aren't registered, you don't charge VAT, but keep an eye on your sales: you must register once they go over £90,000 in twelve months. Our guide to VAT explains it.
3. Allow for returns
Some customers will change their mind, and the refund comes from you. Wix and WooPayments, for example, say they don't give back the card fee on a refund. So what you keep from each sale also has to cover the orders that come back. Our guide to returns explains what customers are owed.
4. Cover your running costs
Your shop website, your supplier app, your email and your web address cost the same each month however much you sell. Divide those monthly costs by what you keep from one sale, and that is how many sales you need each month before you make anything. Our break-even calculator does this for you.
5. Check your price against other shops
Search for the same product and see what other shops charge. If they sell it for less than it costs you, look for a cheaper supplier, a better product or a reason for customers to buy from you, such as faster delivery from a UK supplier.
Small prices are the hardest
The few pence fixed card fee and the delivery cost stay much the same whatever the product costs, so they take a bigger share of a cheap sale. That is why many dropshipping shops find it easier to make money on products that sell for more.
Work out your profit on each sale → How many sales cover your costs? →
