Dropshipping sounds like a fail-proof business plan without investing anything. People usually assume that it is just about uploading and selling a product on a renowned platform without keeping an inventory. But let us tell you that it’s not as simple as it seems.
From displaying your product on a platform or running ads to reaching your target audience, everything needs investment, sometimes minimal or sometimes optimal. Moreover, dropshipping may come with various fees that might appear to be a surprise to you.
In this article, we share the details of the additional costs and expenses you might need to pay when starting your new online dropshipping business.
Dropshipping Fees Dropshippers Must Know of
Selling Channel Fee
Dropshippers often use various platforms to sell their products. The platform that allows you to start your dropshipping store charges some fee in exchange for the store.
The charges vary from $10 to $100, depending on the platform. For instance, if you have a smaller budget, you can go for the basic subscription plans of Shopify. It charges $29 with a 2.9% credit card fee and $0.30 per online transaction. For a custom domain, you will have to pay an extra $15 fee. Similarly, another platform may have a different cost to run your online business.
Listing Fee
A listing fee is the amount you pay directly to the platform for publishing your product. Some platforms charge a fraction of your product price as the listing fee, while others charge a fixed amount per product.
It solely depends on your selection. If you choose a running product, then the listing fee will be nothing in comparison to the revenue generated.
Shopify is the most popular platform among dropshippers; it offers different plans, from basic to advanced, but no listing fees. On eBay, there is a fixed insertion fee that allows you to upload 250 products for free. Afterward, you will have to pay $35 per listing. Like platform fees, listing fees differ from platform to platform.
Selling fee
Each platform charges a certain percentage of your product’s profit as a selling fee, which depends on the platform and your product’s pricing.
For example, if you are dropshipping on Wix and Shopify, they charge you a selling fee, which is the percentage of sales, which is 2.8% plus $0.3 per transaction.
In the same way, eBay charges a ‘final value fee’ that is 12-15% of your completed sale through the platform. At the same time, some platforms only charge for the product listing.
Numerous apps help automate your business and perform all these processes for you. Whether it’s product hunting or publishing with a detailed description, everything can be automated with special apps and, of course, AI!
Final value fees vary from product to product depending on the category and the sale amount. For example, the fee is generally higher for jewelry and watches. However, it can be as low as 3% for accessory items, parts, and tools.
International Selling Fees
Expanding your business globally and reaching out to international audiences is a great idea. But you will have to manage the expenses and keep track of the international selling fees and taxes associated with it.
International selling fees are mostly deducted from the sale proceeds, and the dropshipping platform you are using will calculate them automatically. Moreover, the total amount of sale includes the product price, shipping charges, sales tax, and other applicable taxes. So, dropshippers need to manage all these expenses.
Payment Provider Fees
You must direct a company to receive payments from customers, and for that, you will have to compensate the company, too. The payment provider charges a fee for processing your transactions and online payments from customers. The fees will vary from country to country, depending on the payment provider channel and also on the tax policies.
Paypal and Payoneer are the most widely used payment providers worldwide. They offer the smoothest transactions and guarantee customer satisfaction. When using a credit card on Payoneer, you will have to pay 3% of the total transaction amount.
At the same time, PayPal charges transaction charges of around 3% plus $0.3 on each US transaction, and for other country zones, it is 4.4% plus an added fixed fee. The fixed fee varies from country to country, depending on the currency.
Chargeback Fee
Chargebacks occur when a consumer returns the product for any reason. They interrupt the dropshipper’s cash flow and impact the overall ratings. As there is only a certain number of chargebacks allowed on each platform, an uncontrolled chargeback can eventually result in a ban on the dropshipper’s store.
That’s why, dropshippers always try their best to avoid chargebacks and provide maximal customer satisfaction. Moreover, the outcomes of cashback are long-lasting and hold the seller’s amounts and cash flow.
Recurrent chargebacks can cause a lot of trouble, especially when there is no critical reason and the dropshipper is providing the promised product. To avoid chargebacks, new dropshippers should always prioritize customer satisfaction and good quality supply.
Shipping costs/ Taxes
The last expense involved in dropshipping is your shipping cost, inclusive of taxes. This is the stage of delivering your product to the customer, and the responsible supplier will set it accordingly.
You can also add this fee to your product listing so that it won’t cost you much. Moreover, if the shipping is international, the shipping cost will be multiplied. The shipping cost and tax vary from country to country depending on how complex and simple the customs policies are. Duty taxes from 0 to 37.5% are also imposed if the products are being imported.
Conclusion
Dropshipping looks like an easy business model as you do not have to keep an inventory and sell online conveniently. However, it is not as simple as it looks. Dropshipping also requires investing money and may have other charges throughout. For example, selling channel fees, listing fees, selling fees, international selling fees, payment provider fees, and chargeback fees are some of the common costs associated with drop shipping. At the same time, you might also have to pay taxes on some products, especially if you are importing them. Thus, you must keep in mind that.
