$98k in revenue, less than $100 in profit: the dropshipping margin trap

One of my students reached $98,000 in revenue for March.

Not bad, eh?

This is what would be posted in the dropshipping groups.

“Look at what this person got!”

“$98k month!”

*Cheers and well done’s all round*

Not with us.

We use a tool called the Daily Clarity Dashboard™ which pushes vanity metrics aside.

Here’s what really happened once we looked…

$98k revenue

0.07% profit margin

= less than $100 profit

… for the entire month!

It’s not uncommon in dropshipping. I know this… you know this I’m sure.

Another in our group had 0.09% profit for March. Less than $1,000.

Same story for one of my dropshipping only stores (we don’t yet have our own branded products)…

$46,818 revenue

4.70% profit margin

$2,002 profit

$2k?! That barely covers a tank of fuel these days.

The problem is the product margins.

The tiny slices your local dropship suppliers give you aren’t enough to sustain a long-term business.

Compare that to one of my other stores which does have its own branded products…

Revenue $361,281

Profit margin 24.40%

Bit of a difference?

Here’s the thing though… both students know exactly what’s next.

They’ve done the work.

They know their numbers.

They’ve got their manufacturers shortlisted.

They’re heading to China shortly and when they come back with their own products… the game completely changes.

<1% profit dropshipping to ~20%+

That’s the sequence.

Clarity first → then the move.

-Matthew