What profit margin should a dropshipping store have?
Short answer
Aim for a 60-70% gross margin before ads and 15-25% net margin after them. That requires pricing at a minimum of 3x your landed cost — on a $13 landed cost, $39 or more. Below a 2.5x markup, break-even ROAS climbs above 1.8 and there is no room left for a bad testing week or Q4 CPMs.
| Markup | Selling price | Gross profit | Gross margin | Break-even ROAS | Verdict |
|---|---|---|---|---|---|
| 2.0x | $26.00 | $12.05 | 46% | 2.16x | Unsellable on paid traffic. |
| 2.5x | $32.50 | $18.26 | 56% | 1.78x | Borderline. One bad week ends it. |
| 3.0x | $39.00 | $24.57 | 63% | 1.59x | The working floor. |
| 3.5x | $45.50 | $30.88 | 68% | 1.47x | Comfortable. |
| 4.0x | $52.00 | $37.19 | 72% | 1.40x | Needs a real angle to defend the price. |
Markup versus margin on a $13.00 landed cost, with 2.9% + 30c payment fees.
Two margins, and people confuse them constantly
Gross margin is what is left after product cost, shipping and payment fees, before advertising. Target 60-70%.
Net margin is what is left after advertising, refunds, apps and your platform fee. Target 15-25%. This is the one that pays you.
A store advertising a 70% margin is quoting gross. After a $25 CPA on a $50 product, that 70% becomes roughly 20%, and after refunds and a $39 platform fee it becomes less again.
Why 3x landed cost is the floor
Landed cost is product plus shipping, which is the number people get wrong. A $8.40 item with $4.60 shipping is $13.00 landed, not $8.40.
At 3x that, $39 retail, you keep about $24.57 gross per order. That absorbs a $20 CPA and leaves something. At 2x, $26 retail, you keep $12.05 — and a $20 CPA loses $8 on every sale while the dashboard shows revenue climbing.
The full picture on a working store
100 orders a month at $49.95, landed cost $13.00, CPA $24.98:
| Line | Monthly |
|---|---|
| Revenue | $4,995 |
| Cost of goods | −$1,300 |
| Payment fees | −$175 |
| Ad spend | −$2,498 |
| Platform + apps | −$39 |
| Refunds at 3% | −$114 |
| Net profit | ≈ $869 |
That is a 17% net margin, and it is a normal outcome for a store that works. Anyone showing you 40% net margins on cold paid traffic is either selling a course or excluding their ad spend.
Where margin actually comes from
- Price. The fastest lever and the one people are most afraid of. Test a 20% price increase before you test a new audience — conversion rate rarely falls proportionally.
- Average order value. A post-purchase upsell converts 5-12% of buyers and costs nothing in ad spend. It is the cheapest revenue in e-commerce.
- Landed cost. A private agent takes 10-25% off unit cost above 30 orders a day. See the supplier comparison.
- Refund rate. Every refunded order costs the goods plus the ad spend that produced it. Honest delivery windows are worth more than most optimisation work.
Check yours
How to calculate break-even ROAS walks the same arithmetic step by step. Or put your product straight into the break-even calculator — it shows gross profit, net profit, margin and break-even ROAS from the same inputs, and the monthly projection subtracts refunds and subscriptions so the number resembles your bank account rather than a spreadsheet.
Related questions
Is a 30% profit margin good for dropshipping?
How do I increase margin without raising prices?
This is one question out of a much longer guide. The full breakdown lives onthe break-even calculator, and you can run your own numbers in thebreak-even calculator.