What this calculator does
This calculator works out the profit margin on a single dropshipping order once every cost is accounted for. Instead of comparing the selling price to the supplier price alone, it subtracts shipping and payment processing too, which is where most beginner margin figures fall apart. The result is the percentage of each sale you actually keep before any advertising is paid for.
How to use it
- Enter the selling price exactly as the customer sees it at checkout, before any sales tax is added.
- Enter the product cost your supplier charges you per unit, not the price a customer would pay on a marketplace.
- Add the shipping cost you pay to get one unit to the door. If shipping is quoted per shipment, run it through the shipping cost calculator first.
- Add your transaction fees — the percentage and fixed fee your payment gateway takes, plus any per-order platform fee.
- Read the result. The large number is your net margin; the metrics beneath it show profit per unit, landed cost and markup on cost.
The formula, explained
Margin is always measured against the selling price, never against the cost. That single detail causes more confusion than any other number in ecommerce. If you buy at 20 and sell at 40, your markup is 100% but your margin is 50%, because half of the 40 you collected is profit.
The calculator also reports markup on cost so you can move between the two languages. Suppliers and pricing guides tend to talk in multiples of cost; accountants and ad platforms talk in margin. Both describe the same order.
A worked example
Say you sell a portable blender for 49.99. Your supplier charges 18.50 a unit, delivery costs you 4.50, and your gateway takes 2.9% plus 30 cents, which is about 1.75 on this order.
Landed cost is 18.50 + 4.50 + 1.75 = 24.75. Profit is 49.99 − 24.75 = 25.24. Margin is 25.24 ÷ 49.99 × 100 = 50.5%. That is a healthy figure — it means you can pay up to about 25 for a customer and still break even, which gives real room to test paid traffic.
| Selling price | 49.99 |
|---|---|
| Landed cost | 24.75 |
| Profit per unit | 25.24 |
| Net margin | 50.5% |
| Markup on cost | 102% |
What a good result looks like
Dropshipping margins vary hugely by category, but a few ranges hold up across most stores that survive their first year.
| Range | What it means |
|---|---|
| Above 40% | Comfortable. There is room for paid ads, refunds and a bad month. |
| 25% to 40% | The normal working range for a store running Meta or TikTok traffic. |
| 15% to 25% | Viable organically or with email, difficult with cold paid traffic. |
| Below 15% | Fragile. One price increase from your supplier turns this negative. |
Common mistakes
- Comparing margin to markup. A 50% markup and a 50% margin are completely different products. Decide which language you are speaking before you make a pricing decision.
- Forgetting payment fees. Two to three percent sounds trivial until you notice it is a tenth of a thin margin. Fixed per-order fees hurt low-value products most.
- Ignoring the refund rate. Margin per successful order is not margin per order placed. If four percent of orders are refunded, your effective margin is lower than this calculator shows.
- Using a supplier price that changes. Many suppliers price by quantity tier. Calculate on the tier you are actually buying at today, not the one you hope to reach.
- Treating ad spend as an afterthought. Margin is what you have available to buy customers with. If margin is 20% and your CPA is 30% of the price, no amount of scaling fixes it.
Frequently asked questions
What is a good profit margin for dropshipping?
Most sustainable dropshipping stores run a net margin between 25% and 40% before advertising. Below 20% it becomes very hard to buy paid traffic profitably, because your entire margin has to cover the cost of acquiring the customer. Above 40% you have room to test aggressively.
Does this calculator include advertising costs?
No, and that is deliberate. This tool measures product-level margin — the money available before you spend anything on acquisition. Once you know it, use the break-even CPA calculator to see how much of that margin you can hand to an ad platform.
Should I use margin or markup to set my prices?
Use markup to set the price quickly, then check the margin to make sure it is worth selling. A 3× markup on landed cost usually lands somewhere around a 55% to 65% gross margin, which is the range most dropshipping pricing advice is really pointing at.
Why is my real margin lower than the calculator says?
Almost always refunds, chargebacks, discount codes or currency conversion. The calculator shows margin on a clean order at full price. Run your refund rate through the refund cost calculator and subtract that from this figure for a truer number.
Do I include sales tax or VAT in the selling price?
No. Enter the price excluding tax. Tax you collect is not revenue — you are holding it on behalf of a tax authority. If your prices are displayed tax-inclusive, extract the tax first with the sales tax and VAT calculator.
How this fits with your other numbers
Margin is the number every other calculation on this site depends on. Your break-even ROAS is derived from it, your maximum cost per acquisition is derived from it, and your monthly revenue plan is only credible if the margin behind it is real. Getting this figure right once, with shipping and fees included, saves you from a dozen optimistic decisions later.
It is worth recalculating whenever a supplier changes their price, when you switch shipping method, or when you add a payment provider with different pricing. Margins erode slowly and quietly — a supplier adding fifty cents and a carrier adding forty is a full percentage point of margin gone with no visible event to prompt a review. Put a recurring reminder in your calendar and rerun the numbers each quarter.