What are some dropshipping product pricing formulas

The secret to the pricing of your products

Have you ever found a popular product and marketed it only to end up making no sales?

It's a nerve-wracking feeling that leads you to guess yourself.

Has my marketing strategy stalled? Did I choose the wrong product? Should I have got someone to check out my shop?

There are a number of factors that can negatively affect the financial success of your business.

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Fortunately, one of these factors is easy to fix: change your price.

If this is your first week, I am currently on a mission to build a new online shop from scratch.

In the first week, I picked the perfect dropshipping niche. I'm so excited to be selling a fun DIY product: letter boards.

The second week was all about sharing my step-by-step process for setting up a Shopify store for the first time and choosing the right theme for my niche.

In the third week of this series, I added products to my store and ordered product samples from my suppliers.

At the time week four rolled around me, product samples were arriving. And I was pleasantly surprised at the care suppliers put into the packaging of their products. My customers will love these letter boards!

In the fifth week a family member died and the whole project was completely derailed. But I still managed to shoot my own product photos for only $ 25.

Last week I focused on making the perfect product description, and about us page copy. I walked you through optimizing your product page for search and gave you some of my best copywriting tips. You also got a first look at my product page.

This week is all about the finishing touches. I will dig deep into product pricing as I have seen firsthand how important it is to the success of a business. I will also add return and shipping pages and put up my logo. And when that's all done, I can finally remove the password from my shop.

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Failures and victories

After running multiple online stores in the past, I've figured out what works and what doesn't. Before I dive into my strategies for properly pricing your product, I wanted to share some examples of my personal mistakes and profits so that you can make better pricing decisions.

A few years ago I was selling phone cases via print-on-demand, which is known for its expensive shipping costs. Of course, my abandoned cart rate was through the roof.

So I decided to add my shipping cost to my total product cost. Instead of selling a product for $ 19.99 plus shipping, I sold a product for $ 35.99 with free shipping.

Did it work?


I literally stopped getting sales. Not a single order.

For this particular product, the $ 19.99 price tag, despite paid shipping, still resulted in more sales than bundling free shipping into the product cost.

The reason I'm sharing this is because you need to experiment with product pricing. And it's important to know that even if you screw it up, the game won't end. You can change the price at any time.

I also got some important victories.

My first successful dropshipping store was selling yoga products. The product was $ 10 and I had a 3x markup that sold for $ 29.99.

I set the product's original price to $ 50 to show a 50% discount on the product. Some retailers sold the product for more than $ 50. Even if I left it at the original price, it would still be at market value.

The triple multiple allowed us to have a $ 10 marketing budget on our products which worked very well as it still resulted in a decent profit. Since I was selling below market value but was still in a profitable range, I was able to achieve high sales growth. And the product sold like hot cakes.

The best part about having the product rated this way is that I actually got a higher average order value as well. For example, if I sold at the market value of $ 50, we'd probably sell a product or two most of the time, as that's a higher price.

Instead, I was able to bundle the product together to sell more of the exact same product. In my first year in this business, I sold 10,998 products. I consider it one of the dropshipping secrets behind my success.

Things to Consider Before Pricing Your Products

costs: Before evaluating your products, you need to know what your business costs are. You need to determine what your total spending will be over the next few months. You should also consider unexpected costs. So you can increase your total costs by an additional 10%.

What do the numbers mean on the guys' Snapchat stories?

Here are some costs to consider:

    • Wholesale product cost
    • Shipping
    • Advertising / marketing costs
    • Recurring monthly fees (Shopify, Shopify apps)
    • Website fees (store theme, logo design)
    • Contractor / employee salaries / your salary
    • Emergency fund

advertising: How heavily does your niche depend on advertising? For example, I focused on influencer marketing at my phone case store and the influencer fee averaged only about $ 30. But with my yoga shop, Facebook ads played a bigger role. With direct mail, you also need to consider potential losses from failed or underperforming ads. Direct mail can be very rewarding, but it can be a drain on your budget at an early stage, before you've even made your first sale. While this isn't a perfect number, I usually estimate a $ 2000 advertising loss in the first few months as I refine my target audience. The exact number to consider will depend on your skills and your niche.

Competitor prices: When looking at competitor pricing, don't look at major retailers like Amazon, Walmart, or AliExpress. Instead, focus on competitors in your niche. Are there any online shops that only sell your product? How much do they charge for their product? How popular is your brand? For example, if you see a competitor selling their product for a certain price but only has 1,000, it can be difficult to know whether or not people are buying the product at their price. You want to make sure that the competitors you analyzed have a certain level of awareness.

Discount marketing: When pricing your products, you should consider what percentage discount you want to offer. In my most successful business, I mentioned earlier that we had a 50% discount which was still in line with market value. Offering too many discounts can damage a brand in the long run. However, if you start out trying to get a proof of concept, discounts can help you get your first few sales.

Profit margins: How much money do you plan to make? If you are using dropshipping products there is no benefit to breakeven. You have to make a profit. Some niches like electronics are known to have lower profit margins, while niches like fashion tend to have higher profit margins. So you need to consider industry standards for the products you sell. There is room for flexibility, however, especially when positioning yourself as a luxury brand.

Product price formulas

When I evaluate products in my store, I look at several factors: business costs such as advertising, product costs, profit margins, and market value. These pricing formulas don't necessarily work for every situation. So you can play around with the numbers a little.

Between $ 0.01 and $ 4.99 product price = $ 19.99 in retail

Between $ 5.00 and $ 9.99 product price = $ 29.99 in retail

Starting at $ 9.99, I usually add a 2.5-3x premium.

A post shared by Oberlo (@oberloapp) on Jun 19, 2018 at 6:05 am PDT

If your product is $ 19.99 (product cost and ePacket shipping combined), sell it for $ 59.97 and round it up to 0.99 cents.

Then you have to pay $ 19.99 for your product costs, $ 19.99 for your expenses, including advertising, and $ 19.99 in profit.

Remember, most entrepreneurs will put the $ 19.99 back into the business so you don't put money in your pocket.

The triple markup is not fixed, but offers flexibility. In the past, most of my prices usually end in 9s. For example $ 19.99, $ 29.99, $ 39.99. This is a psychological trick that many marketers use. If it's still within market value, you can raise your prices or lower your prices to round up or down to the nearest $ 9.99.

While this strategy worked very well for me, feel free to experiment with different prices based on your niche. For example, in womenswear, you could have a purchase of 2 for $ 25 that does better than a purchase of two for $ 29.99. Searching through competitors in your niche and monitoring how they're driving sales, product prices, and more can help you make more informed pricing decisions.

To be paid in USD

After adding prices to my store, it turned out that my prices were still set in Canadian dollars. How did I notice? In the backend I added my prices in x9.99 $ but the numbers I added have changed. You can see my product page showing the price as $ 38.61 USD. That is definitely not the price that I stated there!

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Under Settings> Payments> Shopify Payments it said that I still need to finish setting up my account.

For this shop, I plan to sell through the same two payment gateways that I always use: Shopify Payments and PayPal. The payment gateways available to you may vary depending on the products you sell and the country you live in. I could add more payment gateways to the mix, but I don't want to overwhelm people with payment options. Shopify Payments and PayPal are both so popular that I can only rely on these two channels.

Under Shopify Payments, I first enter the details like birthday and product details.

Then I'll scroll down to 'Banking Information' so I can change my currency to USD. You'll need to contact your bank to open a USD bank account if you don't already have one. However, setting up an account is usually pretty straightforward. You may even be able to do this online instead of in person. You can find your account details on a direct deposit form for your USD account.

Completing the finishing touches

At this point, most of the site is complete. Now is the time to do all of the last minute chores before launching the store.

Refund and Privacy Policy

Shopify Tools section has templates that you can copy and paste into your website so you don't have to invest in hiring an attorney to create these guidelines for you. I literally copied and pasted both guidelines right onto my website, just adding my company name and address. Alternatively, you can automatically generate these policies under Settings> Checkout> Refund, Policy and Terms of Use

It's pretty normal to include these two guidelines in an online store. The Refund Policy helps customers know how a refund is made in your store. While the privacy policy helps customers know how their data is being used.

Read through the guidelines so you know what you're promising your customers and make changes if necessary.

After copying the custom guidelines, I created pages for them under Sales Channels on my website.

Then I added these pages to the footer under Navigation.

The whole process took less than 5 minutes, but this is one of the things you can't forget.

Shipping zones

As I am a dropshipping product, I need to change the shipping details. Shopify automatically includes weight-based pricing, but this needs to be changed to a price-based price.

First, under Weight-Based Rates, click the x. This will remove these options from your business.

Then under Add Price Based Rate, change the title to Free Shipping, and under Price, click Free Shipping.

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Next, under Countries, you'll likely find that your country is already listed. But now you need to involve the rest of the world as well. At that point the 'Rest of World' button wasn't available so I manually clicked on each continent to add all of the countries. If there are certain countries that you do not want to sell to, you can remove those countries from your options. Some non-dropship retailers choose countries based on the affordability of shipping costs. As a dropshipper, however, the shipping costs are not too high, so I usually sell internationally.

Don't forget to hit 'Save' when you're done!

Design my logo

Throughout the business development I have tried to keep my costs down. When it came to designing a logo, I knew it was up to me to design it.

I'm obviously not a graphic designer, so my logo is nothing out of the ordinary. My goal is to achieve a sleek, text-based design that is easy to read and that matches the feel of my brand.

At first I considered adding a graphic like a square symbol. The idea was that this would work fine as most of the letter boards I sell are square.

So I went to FlatIcon to find a vector icon to use in my design. Then I typed in a square and flipped through the collections. I played around with a few icons. Unfortunately, I couldn't modify any of them too much, which limited the look.

So I used a bit of Photoshop to add text inside the square. For my font, I only went with one font that had a bold option so it was the same font family.

Here is my first design:

I wanted to speed up the logo design process so I immediately added it to the website hoping I was done. That was not me. The logo looked terrible on my website.

So I was forced back to the drawing board.

Next, I decided to use the icon as a logo without the text 'Letter Boards'.

That looked pretty bad too. I hated how much space it took up. It ruined the look of my top navigation.

Next, I focused on removing the icon and including only text.

I really liked the look. I felt a little cleaner. I decided to try the live preview.

Much better. While it didn't match the font of the top navigation, I loved that it added some highlighting. I was hoping the thicker font would help people remember the brand name better.

Now that my logo is ready, the website is complete. Time to remove the password!

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Next week

I can finally start marketing my business for the first time next week. I will experiment with different marketing strategies to see what leads to my first sale. I will walk you through my marketing process step by step to hopefully get some successful results. I was also asked to expand this case study to give you a couple of extra weeks worth of marketing hacks.

Would you like to learn more?