On this page
Pricing based only on supplier cost is one of the most common reasons a store looks profitable on paper and is not profitable once ads are running. Ad spend and payment fees are real costs, and a price that ignores them is not a complete price.
In this guide
- What actually goes into a price
- A simple pricing formula
- Pricing examples at a glance
- Common pricing mistakes
- Testing and adjusting price over time
What actually goes into a price
- Product cost from the supplier.
- Shipping cost, whether charged separately or built into the price.
- Payment processing fees, usually a small percentage of each transaction.
- Ad spend per sale, which varies but is rarely zero.
- Your target profit margin after all of the above.
A simple pricing formula
Start with total cost, which includes product cost, shipping, and an estimate for payment fees. Add a markup large enough that the resulting profit margin still leaves room after your typical ad spend per sale. If ad spend regularly eats a large share of your margin, the starting price needs to move up, not the ad budget down.
Pricing examples at a glance
| Total cost | Price | Resulting margin |
|---|---|---|
| $10 | $25 | 60% |
| $18 | $35 | 49% |
| $30 | $50 | 40% |
Common pricing mistakes
- Pricing only against supplier cost, without factoring in ad spend.
- Matching a competitor’s price without knowing their actual costs.
- Never revisiting price after ad costs change.
Testing and adjusting price over time
Price is not a one-time decision. Testing a slightly higher or lower price on the same product, and watching total revenue rather than just order count, often reveals a more profitable price point than the first guess.
Frequently asked questions
What markup should I use for dropshipping products?
It varies by niche, but many dropshippers use a markup of 100 percent or more over total cost to leave room for advertising and payment fees.
Should I include shipping in the product price or charge separately?
Both approaches work. Building shipping into the price often improves conversion rate, since customers tend to respond better to a single, clear number at checkout.
How often should I revisit my pricing?
Whenever your ad costs, supplier prices, or payment fees change meaningfully, and periodically even without a specific trigger, since small price tests can reveal a more profitable point.
Is matching a competitor's price a good pricing strategy?
Not on its own. A competitor’s price only makes sense as a benchmark if you also know their costs, which you usually do not.