Are you struggling to turn an online dropshipping site into a profitable venture? Have you been pouring money into ads that don’t seem to do anything to your conversion rate?
You might be surprised to find out that it could be what items you’re dropshipping.
In this guide, we’ll explain to you the differences between high-ticket and low-ticket items, and which type we use for our own seven-figure stores.
What is a High-Ticket or Low-Ticket Item?
Okay, so if you’re new to the world of dropshipping, you probably have no idea what a high-ticket or low-ticket item is. It’s a good starting point, so that’s where we’ll begin.
A high-ticket item is something that’s more expensive. We like to go with products that are around $500 on average, maybe even more than that.
When you dropship more expensive items, you’re going to make a larger profit with fewer sales. Sometimes, you can even recuperate your losses with only one or two sales a month.
Essentially, making a profit is much easier with high-ticket items.
Some people go online and look at lists of high-ticket niches to sell in their own stores. We have our reasons for believing that high ticket dropshipping niche lists are useless, though.
On the other end of the spectrum, low-ticket items are the cheaper ones. You basically pay the cost of the product, then you have to mark it up.
Let’s give you an illustration to help you understand. We’ll be optimistic here and assume you’re marking up a low-ticket item on the higher side – maybe around an 80% markup.
For instance, say you’re selling a $30 item on your site. That extremely generous markup of 80% only results in a $24 profit for you.
Compare that to a worst-case scenario of a 10% markup on a $500 item. One sale will earn you $50, which is twice as much as the best-case scenario of an 80% margin on a $30 item.
But with our high-ticket items, we don’t usually have to stick to the low 10% we mentioned. We actually have some items for $10,000 with a 50% profit margin.
So Why Do People Even Sell Low-Ticket Items?
Interestingly enough, businesses don’t sell low-ticket items to make money off of them.
So again: why do people even sell low-ticket items, if not to make money?
The main reason is to get you, the customer, into their backend. If you buy something affordable from them once, the hope is that you’ll keep returning to them or that you’ll add other things to your order.
The example we like to use is dog collars. Dog collars, in general, are pretty cheap, and you’re not going to make a profit selling them.
You can’t build the foundation of your business on dog collars (or any other cheap item). Your dog collars are just the gateway item that you use to get a list of customers who are dog owners.
Once you know they’re dog owners, you can keep marketing to them down the line, enticing them to buy other, more expensive items on your site.
What Kind of Back-End Do You Need for a High-Ticket Business?
Here’s another way to ask this question: what else do you need to do once a customer buys a high-ticket item from you? Do you need to have a complicated back-end scheme to keep them returning?
In short, the answer is no.
You don’t need to have a sophisticated plan where you keep trying to pull customers back, unlike with low-ticket dropshipping. That’s because, ideally, you’ve made enough from their first order that you don’t need to make them into a recurring customer.
We actually have some stores where we haven’t emailed customers at all further down the line after an order. Honestly, we probably should email them more, but we haven’t really needed to.
This doesn’t mean that you absolutely shouldn’t set up a well-designed back-end for your high-ticket stores. However, you don’t need to.
The first sale from each customer is oftentimes all you actually need.
Barriers to Entry: High-Ticket vs Low-Ticket
Let’s talk about the challenges you might face getting started with either high-ticket or low-ticket items.
There are definitely differences between the two when it comes to getting started. We’ll dive into the details for you.
Barriers to Entry for High-Ticket Items
For high-ticket items, the main barrier you’ll run into is having a legitimate business entity made first. That just means you have to have a business created, such as an LLC.
With most high-cost items, you can’t just start selling them without a legitimate business underlying it. However, forming an LLC isn’t necessarily difficult, and you can easily research how to do it online.
Because it’s a business, it’s important to have a good understanding of the legal risks involved, too. You can read our guide: Is Dropshipping Legal?
Any other skills that come with running a business, like advertising, building a good website, and researching trends are all things you can learn along the way. Because the best thing about dropshipping high-ticket items is that, even if your marketing strategy only works 20% of the time, you’re still making a large profit margin on each sale.
In other words, even if you’re messing up most of the time, getting a handful of sales means you can still make a profit while you’re learning. You’ll learn how to find good suppliers, design a website, and pick those niche high-ticket items along the way.
To prove that this is true, you only need to look at our story.
For our very first dropshipping site, we were complete newbies. We didn’t even know what the phrase “conversion rate” meant at the time.
But we were still making sales. Our first site wasn’t what you’d call amazing, and yet, people were still finding our site and buying from it.
Barriers to Entry for Low-Ticket Items
On the other hand, the barriers are bit steeper for low-ticket items.
Remember, you need to generate a lot more sales to get a good return with these types of products. That means you need to have possibly years of experience learning how to turn one-time customers into repeat buyers.
And the only way to get those years of experience is by spending thousands of dollars. Right from the get-go, you’re starting in the hole here.
To climb out of it, you’ll have to have a deep knowledge of ecommerce.
Another thing to factor in with low-ticket Aliexpress businesses is that you’re making the customer experience worse, too. Any customer will have to wait possibly several weeks to get something they ordered, which doesn’t make a great first impression.
This is starkly apparent when you compare an Aliexpress seller with an Amazon one. On Amazon, an order will arrive within a couple days as opposed to weeks.
Which do you think makes customers happier?
What Happens if You Fail with a High-Ticket Site or a Low-Ticket Site?
Now we’ll switch topics and discuss what happens when either a high-ticket venture or a low-ticket venture fails. You might be shocked at the differences in this aspect.
Results of a High-Ticket Failure
As crazy it sounds, you stand to lose extremely little when your high-ticket plan fails. Why?
Well, even if you’re only doing a small fraction of it right, you can at least break even. That’s because your items are more expensive, your margin of profit is larger, and you don’t need to sell nearly as much as you would need to with low-ticket items.
Make a handful of sales monthly, and you’ll recuperate your losses. The benefits here are obvious.
Then, since you’re at least not in the negative, you can make adjustments to your strategy. You could make tweaks like offering your customers coupon codes or changing your site up to recover a bit more.
It’s also simpler to tell what’s gone wrong. You know the price of the item, so you know what the minimum advertised price to sell it at is.
That means you can tell instantly if you’re selling it at a reasonable price.
And if you’re running Google ads, you’ll be able to see exactly what people are searching for. You can switch up your advertising strategy accordingly and make sure you’re keeping up with trends.
We talk about what we like to have on our sites in much more detail in our dropshipping course. Take a look at it if you want to see what’s worked best for us personally.
Results of a Low-Ticket Failure
Imagine that you’ve went all-in with your low-ticket products.
You’re chosen your audience, and you’re running Facebook ads, spending $5-10 daily. But nothing is happening.
No one is buying.
At that point, you don’t know what’s gone wrong. You’re dumping money into it every day, and all you’re doing is digging yourself deeper into the hole.
Again, this is because the number of sales you need to make with low-ticket items is significantly greater than with high-ticket ones. So if your campaign isn’t effective and you’re not making that high number of sales, then you’re out of luck.
Maybe you make some tweaks to your site and your ads, and you turn a few sales…but you’re still not going to make as much money back, just by virtue of your profit margin being much narrower.
Eventually, you’ll probably just give up.
Read Also: Dropshipping vs FBA
Selling Your Business
So what happens when you want to sell your low-ticket site or high-ticket site? Like with other aspects, there’s a difference here, too.
We’ll take some time to highlight what those differences are.
Selling a high-ticket store that’s powered with Google ads and maybe some SEO knowledge isn’t necessarily difficult. Everything is essentially built into it already.
You don’t have to continually make corrections to ad campaigns. Your traffic is likely consistent, unlike with Facebook ads that have a tendency to fade away.
If you want more information on a successful ad campaign, check out our interview with Jon Dykstra from Fat Stacks.
It makes more sense for a buyer to purchase something like that. There’s less worry and more stability, and like with you, they won’t need be as concerned about making high numbers of sales because each one will have make a sizable profit for them.
When you’ve put a bunch of time and effort into making your site, you don’t want it to sell for cheap.
The problem is, that’s what you’re getting with low-ticket Aliexpress sites. You can sell them, sure, but it’s not as lucrative.
You might find yourself selling one for a couple thousand dollars at the most. Maybe even only a couple hundred at the low end.
The reason for that is because you might have a great site with an amazing ad campaign and design, but you can’t really pass that to your buyer. You need to constantly be testing and restarting, so you can’t just hand the keys to your advertising and site over effortlessly.
There you have it – a comparison of high-ticket and low-ticket dropshipping, as well as an in-depth explanation as to why we prefer high-ticket.
If you’re looking for some more information, you can take a look at our Building Assets Online course. We lay out the exact same strategies we’ve used successfully for years in it, and we’re confident you can make them work for you, too.