Effectively pricing your products is crucial for success in the dropshipping business. If your prices are set too high, customers may turn to competitors; if set too low, your business may struggle to gain credibility. This article offers valuable formulas and effective pricing strategies to help your online business thrive.
Factors to Consider for Dropshipping Pricing
When determining the prices for your dropshipping products, consider the following key factors:
I. Product Cost
The product cost refers to the amount charged by your supplier. If you source products from AliExpress, keep these components in mind:
- First-Time Price: This is the initial price of the product. Be aware that prices may vary based on options like color, quantity, or finish. Always select the desired options to determine the final price.
- Discounted Price: AliExpress frequently offers discounts through promotions or limited-time deals:
- Current Supplier Discount: Suppliers may provide discounts that lower the overall price for a specified duration.
- AliExpress Coupons: New users can receive coupons for their first purchase, further reducing the price.
- Supplier’s Coupons: Some suppliers offer additional coupons. Check the conditions for these discounts.
- Currency Conversion: Prices on AliExpress are typically listed in US dollars (USD). If you view prices in other currencies, they are approximate and depend on the exchange rate at the time of purchase.
II. Shipping Fees
Since suppliers manage shipping, clarify the shipping origin, destination, and methods for each product to accurately calculate shipping costs.
III. Other Expenses or Business Costs
Include expenses such as marketing, your Shopify/Zopi subscription, and transaction fees when setting product prices. Your pricing should at least cover these essential business costs.
IV. Competitors’ Prices for Similar Products
Research what competitors charge for similar products. Understanding the competitive landscape will help you set appropriate prices. If competitors offer lower prices, consider how to add value to justify a higher price. Conversely, if they charge more, you might attract customers with lower prices.
Best Dropshipping Pricing Strategies for Success
I. Pricing Strategies for Low-Ticket Products ($0 – $10)
Free Plus Shipping Strategy
The free plus shipping model incorporates shipping costs into the product price, allowing you to offer “free” shipping. Set a shipping fee that covers the product cost and your desired profit margin. For example, if a product costs $5 and shipping is $2, you can charge $9, effectively giving away the product for “free” while making a $2 profit. This strategy is effective for driving impulse purchases and creating urgency.
II. Pricing Strategies for Medium-Ticket Products ($10 – $25)
Cost-Based Pricing
The cost-based pricing strategy calculates the selling price based on total costs plus a fixed percentage markup. Start by determining the total cost of the product, including supplier costs, shipping, and operational expenses. Then, decide on a markup percentage, typically between 20% and 50% based on your profit goals.
For example, if the total cost is $25 and you want a 20% markup:
- Total Cost: $25
- Markup: 20% of $25 = $5
- Selling Price: $25 + $5 = $30
This approach ensures consistent profit margins while remaining competitive.
III. Pricing Strategies for High-Ticket Products ($30+)
Perceived Value Pricing
Perceived Value Pricing focuses on how customers perceive the value of a product, considering brand awareness, quality, market positioning, and customer experience. Continuously adapt your pricing based on market trends, customer feedback, and competitive analysis.
IV. Other Common Dropshipping Pricing Strategies
1. Keystone Pricing
Keystone pricing is a straightforward strategy where you double the price you paid for the product. For example, if you buy a product for $10, you sell it for $20. Note that this method does not account for additional costs like shipping and taxes.
2. Tiered Markup on Cost
Tiered markup on cost involves applying different markup percentages based on the product’s cost. This allows for higher markups on lower-priced items and lower markups on more expensive items. For example:
- If a product costs $1 – $10, apply a 100% markup.
- If a product costs $11 – $100, apply a 75% markup.
- If a product costs $101 and above, apply a 50% markup.
Adjust these percentages to fit your business needs and profit goals.
3. Psychological Pricing
Psychological pricing leverages customer psychology to encourage purchases. Set prices that appear more affordable or of higher value by using specific price points, such as ending prices with 9 or 99. Here are two types of psychological pricing:
| Pricing Type | How It Works |
|---|---|
| Charm Pricing | Set prices just below round numbers, like $19.99 instead of $20, to create a perception of affordability. |
| Prestige Pricing | Set prices higher than the average market price to convey higher quality or exclusivity, such as pricing a luxury item at $999 instead of $900. |
Experiment with different price endings to find the most effective approach for your target audience.
How Zopi Helps You Price Dropshipping Products
I. Check Product and Shipping Costs
Prices on AliExpress can fluctuate. Here are two ways to review product and shipping costs:
1. In AliExpress
Ensure everything aligns with your expectations. Click on the color and size to see the actual price. For example, selecting a dress in size XS may cost US$ 12.42, while size L may cost US$13.01. Shipping costs may also vary based on the selected location. Always check for available coupons before purchasing.
2. In Zopi
Zopi allows you to check all potential costs and expected profits. Go to the Zopi dashboard, navigate to the Imported Products page in the Product Center, and click the Edit Product button to access the Product Editor. Then, check the Supplier’s Variants tab for product and shipping costs.
IMPORTANT NOTE:
- The supplier’s cost reflects the price at the time of import. To check the most recent cost, click the drop-down button in the Supplier column.
- To determine shipping costs, specify the shipping origin, destination, and provider.
II. Price Your Products Shown in Shopify Stores
Zopi’s Pricing Rule feature allows you to set pricing rules that automatically apply to products when pushed to your online store. To set your pricing rules, go to the Zopi dashboard and access Pricing Setup in the Settings & Billing page. Enable the desired store and choose between Basic Pricing Rule or Advanced Pricing Rule. You can also set the Assign Cents option for psychological pricing.
When putting a product on sale, you may want customers to see the original price for comparison. Use the Compare-at-Price function for this purpose.
For detailed steps on creating your pricing, check this guide.
Final Words
By understanding the factors influencing dropshipping pricing and implementing effective strategies, you can set smart selling prices and elevate your online dropshipping store. Keep these insights in mind as you embark on your dropshipping journey, and watch your business thrive. Best of luck and happy selling!