Your dropshipping profit margin is what is left of the selling price after the supplier price, marketplace or payment fees, ads and returns, divided by the selling price. Do not start from a markup percentage. Start from the minimum price that covers every cost of an order: minimum price = (supplier price + ads + returns per order) / (1 − fee rate − target margin). If that price is above the supplier's MSRP, the product will not earn money on that channel.
The most common mistake is the fee base: sellers take the fee from the supplier price, while marketplaces and payment providers take it from the selling price. Below is one product traced from supplier price to profit, where the "usual" markup percentages come from, and why you should not trust them without your own numbers.
When the margin question comes up
The supplier is found, the price list has two columns: your cost and the MSRP. The first impulse is to list the product at MSRP and call the difference profit. Then come the searches: "what is a good margin for dropshipping", "dropshipping profit margin calculator", "can I make $1,000 a month with dropshipping".
"Use a 2x–3x markup" does not answer any of these: the same multiplier on a $5 item and on a $300 item gives completely different results. Three prices first, then the calculation. (If you are still choosing a model and a niche, start with how to start dropshipping.)
Supplier price, MSRP and your price
The supplier price is your cost, the MSRP is the suggested selling price, and everything between them pays for the costs of the order.
| Price | What it is | Who sets it |
|---|---|---|
| Supplier (dropship) price | The price at which the supplier sells you one unit and ships it to your customer. Often higher than the wholesale price: single-unit shipping and packing are built in | The supplier, in the dropship price list |
| MSRP | Manufacturer's suggested retail price | The supplier or the manufacturer |
| Your selling price | The price in your store or on a marketplace | You, within the supplier's terms |
Many suppliers ask dropshippers not to advertise below a minimum price (MAP) so that sellers do not undercut each other. Check whether you may go above or below the MSRP before you start.
How much is left from one product
What is left is the selling price minus the supplier price, the fee, ads and returns, and on a popular product it is usually far less than the markup suggests.
Illustrative example for the arithmetic, not market prices. Supplier price $30, MSRP $45, sold on a marketplace with a 15% referral fee on the selling price (Amazon charges 15% in many categories, for example Home and Kitchen), ads $3 per order, a returns reserve of $1 per order.
| Item | Amount, $ |
|---|---|
| Selling price = MSRP | 45.00 |
| Supplier price | −30.00 |
| Fee 15% of $45 | −6.75 |
| Ads per order | −3.00 |
| Returns reserve | −1.00 |
| Left before tax | 4.25 |
The markup here is 50% ($45 against $30), yet only $4.25 is left before tax, about 9% of the selling price. If you took the fee from the supplier price (15% of $30 = $4.50), you would miss $2.25, more than half of the real profit.
The same arithmetic answers "can I make $1,000 a month": at $4.25 per order you need 236 orders a month, before monthly costs such as your store plan, apps or a marketplace subscription (Amazon's Professional plan is $39.99 a month).
How to calculate the minimum price
Work backwards: set the margin you want and calculate the price below which you should not sell.
A 10% margin needs $45.33, which is above the $45 MSRP. On this marketplace, selling at MSRP will not give you 10%. You have three options: cheaper ads, a channel with lower fees, or another product. In your own store with PayPal Checkout (3.49% + $0.49 per transaction in the US) the same formula gives (30 + 3 + 1 + 0.49) / (1 − 0.0349 − 0.10) ≈ $39.87, below the MSRP. Run your own numbers in the profit margin calculator.
Remember that markup is calculated on cost and margin on the selling price. Bought for $100, sold for $150: markup 50%, margin 33%. To convert one into the other:
More on the difference: gross margin vs markup, and a markup calculator for the selling price from cost.
What markup dropshippers use
There is no single percentage. Guides repeat rules of thumb such as "2x–3x on cheap items, less on expensive ones", but none of them knows your product price, channel fees, ads and returns.
Why you cannot take them as they are: in the example above a 50% markup gave a 9% margin, and a 20% markup on the same product ($36) would leave a $3.40 loss after a $5.40 fee, ads and returns. A percentage means something only next to the product price and the costs of your channel. That is why sellers use a ladder: a fixed amount or a higher percentage on cheap items, a lower one on expensive items.
Illustrative ladder: under $15, add a fixed $4.50; from $15 to $100, add 25%; over $100, add 15%. Set the boundaries so that on every step the price stays above the minimum price from the formula.
What else affects your margin
Competition on the same product and the supplier's terms, not only your costs:
- Competition. Dropshippers of one supplier sell the same product with the same photos. If the same listing is cheaper next to yours, a high markup simply does not sell.
- Supplier terms. A separate fee for shipping or packing is added to the supplier price.
- Fee details. Marketplace fees often have a minimum per item, and payment fees have a fixed part per transaction. On cheap items the fixed part eats a larger share of the price.
- Tax. Income tax depends on your business structure and where you are registered; calculate it with an accountant and add it to your costs.
How to keep your margin when supplier prices change daily
Describe the markup as rules once and recalculate prices with every new price list instead of setting them by hand. When a price list has thousands of items and the supplier changes prices every day, manual repricing cannot keep up: a product that got more expensive at the supplier sells at a loss.
In Elbuz the selling price is recalculated on every price list import by rules for a price list, category or brand: a percentage or a ladder by price, rounding, a price from the MSRP if you sell strictly at it, and the "Don't drop the price below cost + N%" floor.
Each marketplace's fee is added as a surcharge in its export template, so your website keeps the base price. How it is set up: markup pricing in Elbuz; how supplier prices and stock arrive every day: dropshipping automation.
Who does not need it: with one supplier, a few dozen products and prices that change once a month, a calculator and a spreadsheet are enough.
Rule-based markup in ElbuzPrices recalculate with every supplier price list
FAQ
What is a good profit margin for dropshipping?
One that is still positive after fees, ads, returns and tax. Calculate the minimum price with (supplier price + costs) / (1 − fee rate − margin) and compare it with the MSRP; the target margin is your choice, the formula shows whether the channel allows it.
Is a 70% profit margin high?
For a net margin in dropshipping, yes: in the example above a 50% markup leaves about 9%. Check whether the 70% is a markup or a gross margin before fees and ads, because after them the net figure is usually much lower.
What is a 30% margin on $100?
$30 of profit on a $100 selling price, so the cost is $70. As a markup on cost it is 43% ($30 / $70).
Can I make $1,000 a month with dropshipping?
Divide $1,000 plus your monthly fixed costs by the profit per order. In the example $4.25 per order means 236 orders a month before fixed costs.
How do I include marketplace fees in the price?
Calculate them on the selling price, not on the supplier price: the fee rate sits in the denominator of the minimum price formula. Taking it from the supplier price hides more than half of the profit in the example.
How do I update prices when the supplier changes the price list?
Describe the markup as rules and recalculate prices with every price list import, with a floor at cost plus your minimum percentage. Then a supplier price increase will not turn a sale into a loss.
Sources
- Amazon referral fees by category (15% in many categories, Home and Kitchen 15% with a $0.30 minimum) and the Professional plan at $39.99 a month — sell.amazon.com/pricing.
- PayPal Checkout in the US: 3.49% + fixed fee, fixed fee for USD $0.49 — paypal.com/us/business/paypal-business-fees.
Checked on November 1, 2026.
