How it works
How to calculate real dropshipping profit
Enter retail and supplier prices
Retail is what the customer pays. Supplier cost is what you pay your AliExpress/CJ/Spocket/Zendrop supplier, plus their shipping to the customer. Both matter.
Add your real ad spend per sale
Total monthly ad spend divided by number of orders. Not your ROAS, not your CPM. Just cost per actual order. This is the biggest expense that sinks dropshipping stores.
Factor in refunds and processing
Dropshipping refund rates run 3-8% depending on supplier quality. Processing is 2.9% + $0.30 for Shopify Payments, similar for Stripe. These kill margins quietly.
Why most dropshipping stores lose money
The promise is simple: high markup, no inventory. The reality is profit that evaporates into ads, fees, and refunds unless you track carefully.
Ad spend eats the markup
Facebook and TikTok CPAs for dropshipping are typically $8-25 per order. If your margin after supplier cost is $15, you have almost nothing left. Model the full cost stack before picking a product.
Refund rates are the silent killer
Supplier quality varies. A 5% refund rate doesn't just cost you 5% of revenue, you still pay the original ad spend, processing fees, and often return shipping. A refund can cost you more than the order was worth.
Payment processing compounds
Shopify Payments and Stripe charge 2.9% + $0.30 on every transaction. On a $30 order that's $1.17 gone before anything else. Over 1,000 orders a month, processing alone is over $1,000.
Know your breakeven CAC
The calculator shows your maximum affordable ad spend per sale. If your current CAC is close to this number, you're running on razor-thin margins. Push products up to 3-4x markup to give yourself room.
The 3-5x markup rule for dropshipping
Many dropshippers target 3-5x markup over supplier cost. A $8 product sells for $24-40. This leaves room for ads, processing, refunds, and still a healthy net margin.
Add reviews for higher pricing power
Dropshipping stores without reviews are forced to compete on price. Real customer reviews give shoppers a reason to trust the purchase, which gives you more room to hold your price. Reviews are a low-cost way to protect margins.
More free tools
All tools →- Profit margin calculatorMargin on every product, after cost, shipping and fees.
- Markup calculatorRetail price, profit per unit and margin from your cost.
- Psychological pricing toolSix price variants for one target price, with the reasoning.
- Discount calculatorSale price and savings for any percentage off.
FAQ
Questions, answered
15-30% net margin after all costs is considered healthy. Below 15% is risky, small changes in ad costs, refunds, or exchange rates can flip you to negative. Above 30% is rare and usually means a unique product with low competition.
Usually one of: ad spend per order is too high (above breakeven), supplier cost is too high for the retail price, refund rate is higher than expected, or processing fees eat the remaining margin. Run this calculator with your real numbers, the weak point will be obvious.
Meta and TikTok CAC for dropshipping products ranges $8-25 depending on category. Impulse/viral products trend lower ($5-12), solving-a-problem products trend higher ($15-30). Keep your CAC below 40% of your retail price for sustainable margins.
For sustainable businesses, yes. Price your time at $20-50/hour and factor in hours per week spent on ads, support, and order management. Many dropshippers show a 'profit' that disappears when their hourly cost is included.
Inventory gives you better margins (you buy in bulk at lower unit cost) but more capital risk. Dropshipping gives you flexibility but ad spend eats more of your margin. Run both scenarios here and decide based on your risk tolerance and cash.
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