Minimum margins for dropshipping (and your opinion if I should continue)

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I have a site that sells hand made hats from Italy.

When I first started, I was very excited because I saw these hats retailing for ~$50 and wholesaling at ~$15. I am getting about one order per day.

The BIG downside is that the shipping cost is borderline ludicrous. On my wholesale hat that is $15, the shipping is around $25. I have tried to bargain with the manufacturer, but to no avail. And the funny thing is that for the more expensive hats that aren't necessarily bigger, the cost increases (hat that costs me $100 would ship for around $100). I could mark up the retail price of the hat but it is a somewhat competitive market so I think higher price tags would hurt sales..

Today I received a $200 order from a customer and after all my shipping costs, I cleared about $20 which seems very unsustainable and not worth my time. Ideally, I would like to bulk order and store in a fulfillment house like Shipwire, but I don't think I am doing enough volume at this point.

I have also tried looking around for other manufacturers, but anyone who is willing to dropship seems to have already marked up the price OR has a big shipping price.

Thoughts? Is this a common pitfall of dropshipping? Where do I go from here? It would be such a great business if I had something like $10 flat rate shipping per product.
#continue #dropshipping #margins #minimum #opinion
  • Profile picture of the author ChoincStar
    That's often the unfortunate drawback with drop shipping. It's not to say that there aren't good margins on some products out there but most drop shippers will offer a decent price on the item and then gouge you for shipping. If you think it's an evergreen niche you've found, it's probably worth ordering in bulk (as long as you see a substantial savings on shipping). You could always store your stock in your house at first or even rent a cheap storage locker and then ship them yourself to customers 2-3 times a week. If your volume picks up then you could consider a fulfillment house.
    Good luck with your business!
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  • I investigated the notion of using dropshippers to start an ebay business but I found that everything I looked at was a non-runner as the items were already going on ebay for cheaper than I could get them wholesale!

    Obviously it is possible run a nice business using dropshippers but I think you need to have a specialist niche and a bit of luck in finding the right dropshipper.

    I would have thought your niche was pretty specialist birclore so perhaps it's a case of searching out a more cost-effective supplier?
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  • Profile picture of the author James Foster
    Why are you paying the shipping? On your site, why don't you simply pass the shipping fees on to your customers?
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    • Profile picture of the author CharlesClift
      @James - That's exactly what we do when customers place their order through WePay.com it automatically calculates shipping costs to their country. Makes things so much easier when fulfilling multiple sales orders every day. Cheers!
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    • Profile picture of the author birclore
      Originally Posted by James Foster View Post

      Why are you paying the shipping? On your site, why don't you simply pass the shipping fees on to your customers?
      A few reasons:

      1. It seems like their pricing is very sporadic and hard to predict (Italy has a terrible shipping infrastructure). I guess I could charge a flat rate and absorb some of the fluctuation.

      2. The shipping cost is outrageous, and I have a hard time believing any customer would pay it. ($20 for hat and $30 for shipping). The shipping is not flat rate either, $200 order would have a shipping cost of at least $150. I thought it was more marketable to increase retail price and offer free shipping.

      Seems like maybe I need to find a new product based in North America.
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      • Profile picture of the author pavv
        Originally Posted by birclore View Post

        The shipping is not flat rate either, $200 order would have a shipping cost of at least $150.
        This sounds like your supplier is ripping you off. If a $20 hat and a $200 hat are roughly the same size/weight then shipping should not change all that much.

        You should inquire on a much larger order of say 1000 units and see what they quote you.

        If you can sell a $30 hat for $200 then I think you're on a winner here (providing you you can make the numbers work with shipping)
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