6 Strategies to Increase Dropshipping Profits

Dropshipping is an entrepreneurial dream for so many people, but it requires a lot of hard work. In practice, it’s a big balancing act that requires constant optimization. 

Fortunately, dropshippers don’t have to worry about paying for products upfront or storing thousands of dollars’ worth of inventory. Still, it can be a grind earning six figures or more as a dropshipper; you need to use every tool in your arsenal to stay profitable for the long haul. 

Shopify is one of those tools. It’s been around since 2004, but it’s become the largest platform in the world for managing an eCommerce store. From hosting to branding and inventory sourcing, Shopify streamlines a lot of the headaches that come with dropshipping.

How To Take Your Dropshipping Profits To The Next Level

But Shopify is a platform. Like any platform, it requires optimization and updates over time to see big results. If you’re in a Shopify rut, we’ve got you. Use these 6 approaches to make your dropshipping operation more profitable. 

1 - Work with your supplier

Did you find your supplier through Shopify? If so, know that you can always negotiate terms and pricing with your supplier. Through Oberlo and AliExpress, you can find suppliers for just about any product, but that doesn’t necessarily mean Shopify will connect you with the best deals. 

The entire system works beautifully if your AliExpress supplier is worth their salt, but that doesn’t always happen. If the quality is poor, don’t be afraid to sign on with a new supplier. 

The good news is that you can negotiate your supplier relationships, too. Some suppliers will offer a bulk discount if you can guarantee a certain quantity of orders in an effort to retain you. If you’ve been hitting some great sales figures lately, get in touch with your supplier to ask for better per-unit pricing or deal terms. The worst they can say is no!

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2 - Sell profitable products

Did you know that dropshipping profit margins are just 20% on average? You don’t have a lot of room for error, which means you need to constantly check on your products’ profitability. 

Fortunately, Shopify does some of this work for you. Check out its trending product lists to see which products are most in-demand across Shopify’s thousands of stores. While you shouldn’t treat this list as gospel, it’s a great way to get some high-level ideas for profitable niches. 

If you’re struggling to improve your Shopify profit margins, you can also try: 

  • Selling one-size-fits-all products: Fashion and technology can be profitable, but they’re a nightmare with returns. Sizing, colors, and compatibility inject too much complexity into your business. Sell items like outdoor furniture, pet care, toys, and fashion accessories to cut down on return costs. 
  • Doing a test: Want to feature a new product? Instead of going all-in, ask your supplier to do a limited run. Look at the metrics over a set period of time to see if the product is worth it. 
  • Niching down: Selling to a smaller, specialized niche isn’t a bad thing. When you have a super-broad product, you’re opening yourself up to more competition and lower prices. Niche products have less competition, more loyal customers, and higher margins. By limiting your eCommerce focus, you can home in on who, exactly, your customer is and personalize your messaging. 

3 - Talk to an accountant

Yes, an accountant can improve your dropshipping profitability. A platform like Shopify does a lot for you, but it doesn’t take care of your accounting in a way that’s robust enough to help you scale.

Your business should run like a well-oiled machine to boost profits, and that means getting financial systems in place. Since 82% of businesses fail because of poor cash flow management, this should be a priority for you.

Try partnering with an accountant who specializes in eCommerce or dropshipping. They’ll be able to help you with collecting sales tax, organizing your finances, and potentially improving your tax liability. 

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4 - Offer more than a product

The biggest downside to dropshipping is that other dropshippers can sell the same products as you. How in the world do you stand out from competitors, especially when they’re charging less? 

Instead of participating in a margin-destroying race to the bottom, take the high road. Focus on delivering more than just a product to your shoppers. Your goal should be to solve their problem better than any other competitor on the market, boosting your brand’s value. 

That can take the form of: 

  • Extended warranties
  • Loyalty programs
  • An online knowledge base
  • Free content guides or video series

If you can’t beat your competitors’ pricing, see what perks you can add at a low cost that your shoppers will go crazy for. 

5 - Discount carefully

It sounds counterintuitive, but discounting items on your Shopify site can improve sales. Since 70% of US online shoppers say discounts are the biggest factor in their buying decisions, you need to offer discounts—but carefully. 

Shopify allows you to designate certain items as on sale, as well as the ability to create special discount codes. You’re allowed to create sales on either a dollar or percentage basis, though, and this is where discounting gets tricky. 

Discounting isn’t about slashing your profit margins: it’s actually about price perception. If a consumer perceives a discount to be a good deal, they’re more likely to buy. 

As a general rule, customers will get more excited if you follow these pricing principles: 

  • If the product costs less than $100, offer the customer a percentage discount like, “25% off.”
  • If the product costs more than $100, offer the customer a dollar discount like, “$50 off.”

The messaging around your discounts matters, and using the right price settings will encourage more shoppers to convert. 

If you don’t want to spend your time obsessing over prices and discounts, you can always try a repricing app for Shopify. This ensures your prices stay competitive, you preserve profit margins, and you save time.

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6 - Retain existing customers

Are you spending thousands of dollars marketing yourself to new shoppers? If so, you’re wasting a lot of precious resources. After all, existing customers spend 31% more on your products and they’re cheaper to keep around

Instead of chasing after fresh blood all the time, focus on retaining shoppers with: 

  • Affiliate or referral programs
  • VIP rewards programs
  • Retargeting ads
  • Birthday emails
  • Abandoned cart emails

Recurring orders are a dropshipper’s best friend, cutting down your marketing budget while boosting your revenue. Fortunately, Shopify offers plenty of apps that make customer retention a breeze. 

The bottom line

Shopify is a fantastic platform that streamlines a lot of the dropshipping process. With nearly everything you need to manage your store in one platform, it’s possible to maximize sales by optimizing your Shopify account on an ongoing basis. 

Don’t lose sight of what’s most important to your dropshipping profitability, though. Instead of focusing on your competitors or marketing, focus on activities that will boost profits, like suppliers, discounts, retention, and more. 

What moves the needle for your business? Solutions like Spark Shipping make dropshipping on Shopify a breeze.