Before you start dropshipping, do the honest arithmetic
The price gap you see online is not your profit. Here is what sits between the sale and the money.
Dropshipping is often sold as an easy business: no stock, no shop, just ads and profit. Some people do make it work. Many more lose money, and the reason is usually the same. They look at the price gap and ignore everything between the sale and the profit.
The price gap is not your profit
Suppose you sell a product for ₹999 that your supplier ships for ₹450. It looks like ₹549 profit per order. Now subtract what actually happens:
- Ad cost per order. For a new store with no audience, getting one order can cost several hundred rupees in ads.
- Fees. A marketplace or payment gateway takes a cut of every sale.
- Cash-on-delivery refusals and returns. You often pay shipping both ways and get nothing.
- GST on your sale.
- Refunds for damaged, wrong or late items.
After all of this, that ₹549 can easily shrink to ₹50, or turn into a loss.
The only number that matters
Calculate landed contribution: selling price minus product cost, shipping, fees, ad cost per order and an allowance for returns. If that number is not clearly positive on a small test, scaling up only scales the loss.
Who it suits
Dropshipping can suit someone who already has an audience, can find a reliable supplier and can handle complaints quickly. It rarely suits someone hoping to replace a salary within a month.
Run a small, capped test
- Fix a test budget you can afford to lose completely.
- Track every order: ad spend, fees, returns and refunds.
- Decide before you start: if landed contribution is below a set amount after a set number of orders, you stop.
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