Most dropshippers operate on margins of 15-45%, with the average falling around 20-30%. Higher margins are achievable with niche products, strong branding, and direct supplier relationships. Commoditized products on competitive marketplaces tend to have thinner margins.

The biggest margin reducers are advertising costs (often $5-15 per acquisition), platform fees, payment processing, and refund handling. Many new dropshippers underestimate ad costs, which can consume 30-50% of revenue before other costs are considered.

Negotiate better supplier rates by building volume, reduce advertising cost per acquisition through better targeting, bundle products to increase average order value, and offer upsells. Switching to a private-label model can also significantly boost margins over time.