Profit margin is a phrase you’ll hear a lot in many kinds of businesses. Many people will tell you that the best businesses have the biggest profit margins.
But is this true? And what are the high-ticket dropshipping profit margins?
We’ll answer both those questions for you in today’s post. As a bonus, we’ll be sharing a secret tip for how you can boost the money you make every month.
Stay tuned for the end of the article, where we’ll share this easy hack with you.
What Type of Profit Margins Can You Expect?
Here’s the million-dollar question: what kind of profit margins can you expect from high-ticket dropshipping?
Unfortunately, the answer to this question isn’t so simple.
The number varies, not just on an industry level, but with the supplier. You can have two suppliers selling the same product, and one might give you a 50% margin while the other will give you a 10% margin.
This is why we talk about not just sticking to one specific product, but thinking instead about an overarching view for how you want to make your store. That way, you can choose various product types and suppliers that sell those products.
You should cast a wide net so you can “catch” suppliers with different profit margins for you. Once you find the suppliers with the best margins, you can push for those suppliers.
Need a little more guidance on what types of products to choose? Check out our guide on 5 easy steps to make $10,000 a month dropshipping.
We’ve also done a podcast regarding high-ticket item niches that you can learn about that here: High Ticket Dropshipping Niches
Is Profit Margin Actually Important?
We realize that 10-50% is a huge range. It would be understandable if you were wondering whether or not suppliers at the lower end of that range are even worth your time.
To put it another way, how important is profit margin? We’re going to go with a bit of a clickbait-y response and tell you this: the answer may surprise you.
Truthfully, profit margin is not the end-all-be-all thing that you may think it is. If you think that sounds untrue, allow us to explain.
In one of our first stores, our profit margins were very underwhelming. But that didn’t matter in the end, and we were still able to sell the site.
Why? Because the things we were selling were so easy to keep on selling.
It didn’t matter that we were making 10% on each sale, because were making a handful of sales daily. If you’re interested in learning more about our opinion on buying Shopify stores, we suggest you read our case study on if buying a Shopify store is worth it.
Look at it this way: is it better to make a handful of sales daily at a 10% profit margin, or only a couple sales a month at a 50% profit margin?
Here’s the answer: it’s usually the former.
Beyond profit margin, you should also look at secondary factors, like working with each supplier.
Suppose a supplier offers you a generous 50% margin, but they’re constantly shipping damaged products. Are they still worth working with?
At the end of the day, we think the best metric to measure your dropshipping store by is not the profit margin, but the cost per conversion and how that factors in to the amount you make per sale.
Read Also: Dropshipping vs FBA
So What is Cost Per Conversion?
Now that we’ve used the phrase, “cost per conversation,” you might be wondering what that is. We’ll break it down for you.
In our businesses, we usually sell high-ticket items and we used Google ads to advertise for them. What this does is help us to reach people who are searching specifically for the items we sell and who are actually ready to buy them.
Cost per conversion refers to how much we need to spend on advertisements before a customer comes in and buys from us.
We’ll give you an example: if we make $100 selling an item, and it cost us $10 to advertise for that item, then our cost per conversion is $10.
That’s why we advise you to sell more expensive items. A larger price gives you extra padding for each sale.
Types of Products and Their Profit Margins
Let’s take a look at what kinds of items have high profit margins and what kinds have low profit margins. Again, the answer here is a bit surprising.
We think that you can’t really classify which types of items will have a high profit margin, and which ones will have low profit margins.
There are so many factors at play here which can affect those margins, like which suppliers you’re working with. In fact, we’ve even had variations in profit margins from the same supplier – one item may have a high margin, and the other might have a low one.
The only way you can find out what their margins are going to be is to actually reach out to the suppliers and work with them.
This might seem annoying, but keep in mind that making more sales can lead to items with low-profit margins making quite a bit of money for you.
Numbers from One of Our Stores Last Month
Before we get into that trick we promised you, we want to show you that we know what we’re talking about. To demonstrate, we’re going to share with you real numbers from one of our own stores.
In one month, we had one store make $120,000 in revenue, and $20,000 in profit. This is coming from one of our stores with a greater profit margin.
Something we hear a lot of people who are new to this saying is that you should try and get a massive return for your ad spend. In the beginning, people at conferences were telling us to bid lower on products, and we even had the same idea initially.
But after several years of experience with AdWords, we’ve found that spending more aggressively on ads gives us more consistent results. We see more and more traffic coming to our sites.
For comparison, consider our friend, whose site made $40,000 in revenue and $9,000 in profit one month. That’s about a 25% profit margin, but his site is not achieving these kinds of results every month.
We would rather have consistency.
Our Easy Hack for Extra Cash
As promised, we’re going to share with you one of our methods for making extra money every month. When you get to the level we’re at, which is having stores that make $3-4 million a year in sales, you start having to spend more money buying products to ship to the customer.
We’ve found that using a cash back credit card really adds up. We personally have a Capital One credit card with 2% cash back, so the more we sell, the more we make, and again, it really builds up over time.
Nowadays, we have more than one and we divide them between different things. We have a 2% cash back card on our products, and a 3% one on our ad spend.
On the 3% card, that cash back can be converted to traveling points, and it makes it possible for us to practically travel for free.
We’ll put it this way: consider what 3% of $4,000,0000 is. It’s $80,000 – that’s more than just a little pocket change.
If you’re thinking about getting started on dropshipping, and you know you can make more than one sale, consider going out and getting a cash back credit card. You won’t regret it.
Getting started doesn’t need to cost you a lot, either. In fact, you can click here for a free Shopify trial.
You don’t need to do it all on your own. We have an Instant Ecommerce Assets course designed to help beginners take their first steps into the world of ecommerce.
Not ready to pay for the course yet? That’s okay, too – you can read our completely free Online Assets Playbook.