Dropshipping is selling products you don't keep in stock: you list a supplier's product in your store or on a marketplace, the customer pays you, and the supplier ships the parcel straight to the customer. You earn the difference between your price and the supplier's price, minus fees, returns and ads. To start, you need a niche, a supplier you have tested, one sales channel and a budget for the first month.
Most beginners spend weeks looking for the "perfect supplier" and skip the math: how much money goes out before the first profit, and how much one order from ads may cost before it loses money. Below is how one order works, what is left from it, a first-month budget in illustrative numbers, seven steps with a check for each, and a rule that shows whether your niche works.
When people start looking into dropshipping
Usually someone wants a side income or has a product idea, but doesn't want to spend money on stock or rent a warehouse. They search for "what is dropshipping" and "how to start dropshipping", and then ask "is $500 enough to start", "do I need a business license" and "why do so many dropshippers fail".
The last question is the useful one. Dropshippers rarely fail because of the supplier: they fail because the margin does not cover ads, fees and returns. That is easy to check before the first order, so we start with the numbers.
How dropshipping works
You are the seller to the customer, and the supplier is your vendor who ships to your customer instead of to you. One order goes like this:
- You list the supplier's product at your price.
- The customer buys and pays you the full price.
- You pass the order to the supplier and pay the supplier's price.
- The supplier packs and ships the parcel to the customer, and you send the customer the tracking number.
- Returns and complaints come to you, because the customer made the contract with you.
The last point matters most. Dropshipping is legal, but it does not move responsibility to the supplier: you answer to the customer for the delivery time, the refund and whether the product matches the listing.
How much you keep from one order
Profit per order = your price − supplier price with shipping − platform and payment fees − returns per order − ad cost per order. The markup is not the profit: fees, returns and ads come out of it.
Illustrative example for the arithmetic, not market prices. You sell a product for €60. The supplier charges €40 including shipping to the customer. Platform and payment fees take 10% of the price. One order in ten is returned, and each return costs you €10 in shipping and handling, so €1 per order on average. An order from ads costs €8.
| Item | Calculation | Amount, € |
|---|---|---|
| Your price | 60 | |
| Supplier price with shipping | −40 | |
| Fees | 60 × 10% | −6 |
| Returns | €10 ÷ 10 orders | −1 |
| Ads | −8 | |
| Left before tax | 5 |
Out of a €20 margin you keep €5. That is the honest answer to "do dropshippers really make money": yes, if the markup covers everything else, and the line that decides it is the ad cost. Try your own numbers in the profit margin calculator.
Who dropshipping suits and who it doesn't
- Suits: testing a niche without buying stock; adding products to a store that already sells; bulky or rarely bought items that are expensive to keep in a warehouse.
- Doesn't suit: low markups with many returns (clothing and shoes in many sizes); suppliers that ship slower than your customers accept; when you want to control packing and quality of every parcel.
- Hard: when many sellers list the same product from the same supplier and the only difference is price. Your markup then melts to zero.
How much money you need to start
You don't buy stock in advance, but the first month still needs money for ads, a sales channel, a test order and a returns reserve.
Illustrative example, not market prices. A test of 30 orders at €10 of ads per order, a store plan of €40 a month, one test order to yourself at €40, and a reserve for three returns at €10 each.
| Item | Calculation | Amount, € |
|---|---|---|
| Ads | 30 × 10 | 300 |
| Store or marketplace plan | 40 | |
| Test order | 40 | |
| Returns reserve | 3 × 10 | 30 |
| Total | 410 |
Business registration, licences and accounting depend on your country or state and come on top. "No money needed" is not true: in this example most of the budget is the ad test, and it is the part that tells you whether the niche works.
Step 1. How to choose a niche
Pick one narrow niche where the price covers ads and fees and returns are rare. "Everything at once" is worse at the start: you can't tell what sells, and you can't target ads.
- Demand. People search for the products on Google and on marketplaces: you can see it by the number of reviews and sellers on Amazon, eBay or Etsy.
- Price. The gap between the supplier price and the selling price is bigger than the ad cost and fees of one order.
- Returns. Clothing and shoes with size charts, fragile and complex products come back more often.
- Suppliers. Several suppliers in the niche work with dropshippers, so you don't depend on one.
- Season. Starting out of season gives a false test result.
Check: you can name 20–50 products of the niche, and for each you know the supplier price and the price other sellers charge.
Step 2. How to find and check a supplier
You need a supplier that ships single units, gives you a price list with stock levels and updates it at least daily. Before you start, find out:
- the format of the price list (an XML or CSV link, a file by email, a portal, an API) and how often stock is updated;
- the supplier price and whether there is a minimum advertised price you must not go below;
- how to send orders and how many hours until dispatch;
- whether the parcel goes out without the supplier's invoice and prices inside;
- who pays for returns, and where the customer sends the product back.
Check: a test order to your own address arrived on time, the product matches the description, and the packing is something you would not be ashamed to send a customer. Where to look and the full vetting checklist are in how to find and vet dropshipping suppliers; if you consider AliExpress, read AliExpress dropshipping: what you keep first. If you plan to work with EU suppliers in Poland, see dropshipping in Poland: rules and suppliers.
Step 3. Set up the business and the returns policy
Register the business the way your country or state requires before regular sales start, and write the shipping and returns terms before the first order. Two consumer rules hit dropshippers directly:
- EU. A customer who buys online can cancel within 14 days without giving a reason, counted from delivery. The customer pays the return postage only if you told them so before the purchase.
- US. Under the FTC Mail, Internet, or Telephone Order Merchandise Rule you must ship within the time you state, or within 30 days if you state none. If you can't, you must offer the customer to agree to the delay or cancel with a prompt refund.
For a dropshipper both rules depend on the supplier: their dispatch time becomes your promise, and their returns process becomes your refund deadline. Put the supplier's time with a margin into your listing.
Step 4. Where to sell first
Where buyers in your niche will come from faster, and in one channel only, until orders run smoothly.
| Channel | Choose first when | What to keep in mind |
|---|---|---|
| Marketplace: Amazon, eBay, Etsy | People already search for the product there | Sales fees, listing rules, and each marketplace has its own dropshipping policy — read it before the first listing |
| Your own store: WooCommerce, Shopify, OpenCart, PrestaShop | You have an ad budget and want your own customers without marketplace fees | You will have to buy traffic or build it with SEO |
| Social: TikTok, Instagram, Facebook | The product sells well on photo and video | Orders in messages are easy to lose |
Check: the first products are live, and you know how much one order from ads costs in this channel.
Step 5. How to fill the catalog with supplier products
Take the name, category, photos, attributes, description, price and stock from the price list, and start with the part of the catalog you are ready to advertise, not the whole list. A hundred well-made listings sell better than a thousand with the same supplier photos. Your own description is one of the few things that set your listing apart from other dropshippers of the same supplier.
Check: every listing has a selling price, stock, several photos and your own description.
Step 6. How to set prices and update stock
Calculate the selling price from the supplier price with a markup that covers ads, fees and returns, and update the price list daily. Suppliers change prices and stock all the time: a store updated once a week sells products that are gone, and at an old, lower price. How to set the markup is in dropshipping profit margin: formula and example; how the daily update runs without manual work is in dropshipping automation.
Check: you know when prices and stock were last updated, and nowhere in the store is the price below the supplier price plus costs.
Step 7. How to process the first order
Check stock, pass the order to the supplier and make sure the margin stays with you:
- if the price list was not updated today, confirm stock with the supplier;
- make sure the payment has come through;
- send the supplier the product, quantity, customer name, address and phone the way you agreed, and pay the supplier price;
- get the tracking number and send it to the customer;
- after delivery and the return period, the margin is yours; note any return and who paid for it.
How to tell if your niche works
The niche works if the real ad cost per order is below the cost at which you break even. You can calculate that limit before launch:
If after 20–30 test orders ads cost you €8 per order, the niche makes money and is worth scaling. At €15 or more every sale loses money: change the product, the channel or the ads, not the supplier.
Common beginner mistakes
Almost all of them are about money nobody counted in advance:
- Counting profit from the markup. Ads, fees and returns come out of it.
- Not testing the supplier. The first complaint about a defect or slow shipping is your review, not the supplier's.
- Updating stock by hand. Within a few days the store shows products that are gone.
- Listing the whole price list at once. A thousand products without descriptions sell worse than a hundred well-made ones.
- No agreement on returns. Who pays for a return must be clear before the first one.
- Selling below the minimum advertised price. If the supplier sets one, breaking it can end with losing access to the price list.
When supplier price lists outgrow a spreadsheet
With one supplier and a few dozen products, a spreadsheet is enough. With two or three suppliers and hundreds of products, a daily update of prices and stock by hand no longer keeps up, and that is when the store starts selling products that are gone.
Elbuz does this part: it loads supplier price lists on schedule from a link, email, FTP or API in XLSX, CSV or XML, turns rows into catalog products, calculates selling prices by your markup rules, fills in descriptions and attributes with AI, and sends prices and stock to your WooCommerce, OpenCart or PrestaShop store and to the Google Shopping feed. Who doesn't need it yet: if you start with twenty products from one supplier, add them by hand and come back when there are hundreds.
Dropshipping with ElbuzSupplier price lists, prices and stock in one system, 14 days free
FAQ
Is dropshipping legal?
Yes. It is ordinary selling with shipping from a supplier. The usual seller rules apply to you: business registration, taxes, shipping times and the customer's right to return.
Is $500 enough to start dropshipping?
It can be, if most of it goes to the ad test. In the illustrative example the first month takes €410, of which €300 is ads for 30 test orders; registration costs in your country come on top.
Why do so many dropshippers fail?
Because the markup does not cover ads, fees and returns. Calculate the break-even ad cost per order before launch and stop or change the product when real ads cost more.
Do dropshippers really make money?
Those whose ad cost per order stays below the limit do. In the illustrative example €5 is left from a €60 order before tax.
Do I need my own website?
No. You can start on a marketplace or on social media and add a store when you want your own customers without marketplace fees.
How many suppliers do I need at the start?
One or two in your niche. The second one covers you when the first runs out of stock.
Sources
- EU right to cancel online purchases within 14 days and return costs — europa.eu, Your Europe: Returns.
- US shipping time rule (stated time or 30 days, delay notice, option to cancel) — ftc.gov, Business Guide to the FTC's Mail, Internet, or Telephone Order Merchandise Rule.
Checked 01.11.2026.
