To many dropshippers, selling high-ticket products makes much more sense because it has a high profit margin.
A lot of dropshipping gurus preach this. The logic is that it is easier to make money on a high-ticket product than low-ticket items.
But is it the way to go if you are a beginner?
I don’t think so.
Today, I will discuss five reasons why you should not dropship high-ticket products if you are a beginner in the dropshipping business.
These reasons are:
- You need to wait long for a purchase
- You need to be credible
- You need complicated sales strategy
- You need a huge capital for each product
- You need more money for marketing
By the end of this tutorial, you should be able to make a decision whether you will take this huge risk or not.
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What is a high-ticket product?
A high-ticket product means it costs no less than $500. Some would contest that the product must at least be $1,000.
There really is no standard definition how much a high-ticket product costs. For as long as it is expensive, then it is a high-ticket item.
The concept is irresistible, if you think about it. And if you do the math, you will realize that it does make sense. In most high-ticket products, your profit margin is above the 40% range.
What this means is that if you sold an item for $500, your profit margin is $200 or more. This sounds enticing, as it only takes one sale to cover the cost of your Shopify store, hosting, or even the cost of running ads.
You can read my blog about Shopify pricing if you do not know how much Shopify costs per plan: Shopify Pricing: What Are the Different Features Between the Plans?
Take a look at the table below where we are comparing a high-ticket item like a Bitcoin miner and a hydro flask.
|Buy Price||Sell Price||Profit||Profit Margin|
As you can see, all it takes is to sell one Bitcoin miner, and you would have made more than $2,000 in profit!
That is all it takes to recoup your capital, your subscription to Shopify, and your marketing expenses.
Now, if you sell the flask, you have to sell at least 100 of it to make a profit of $3,100. As you know, I tis much more difficult to sell 100 items than one.
Or is it?
So, why is high-ticket dropshipping discouraged if you are a beginner?
1. You need to wait long for a purchase
If you really think about it, who is going to spend $6,000 for a bitcoin miner? If somebody found that product in your website, do you really think the customer is going to buy that right away?
No. This customer is going to take weeks, and even months, to make this decision.
During these weeks, the same customer is going to view this same product from a lot of sellers, and this includes Amazon, eBay, and other tech giants.
While this customer is doing research, the days pass by and you are not making any sale. The thing is, you have to pay your monthly dues to your webhost.
If you are using paid apps and plug-ins, you also have to pay them on a monthly basis.
In any business, a sale is your bloodline. Without a sale, you are bleeding money. One day, you will realize that you have spent a ton of money to run your store and your sales never picked up.
As you can see, a $6,000 purchase is not an emotional purchase. The person has to think—really deep—before making this decision.
But if you sell a mug with a personalized print, a site visitor is going to say, “Hell, yeah! $30 is a good price!”
At $30, the customer is going to make an emotional purchase, not an intelligent one.
Why? Because $30 is disposable, but $6,000 is not.
2. You need to be credible
Let us face it—dropshippers are mostly small to medium-sized business whose brand is not known worldwide.
While it is great to build a brand, it takes years to finally see the culmination of all your branding efforts.
As a beginner, the world does not know you. As a result, they are not comfortable shelling out a huge amount of money to you.
It does not really matter if you have your picture, phone number, or address on your store.
What matters is you are not credible enough to be charging customers $500 or more online. They do not know you, and you do not have the backing of a giant corporation should something go wrong.
For eBay and Amazon, both these companies can guarantee customer satisfaction. Customers who buy from both Amazon and eBay know that they are protected.
Both companies have buyer and seller protection programs, and they have an army of customer satisfaction experts to take care of the consumers’ interests.
Sadly, you cannot dropship on eBay. And while you can dropship on Amazon, the high-ticket product you are dropshipping is already likely to be listed there by the manufacturer himself—at a lower price than yours!
The higher the item’s price is, the more credibility you should possess. While we can say that al dropshippers are honest and credible people, it is not the truth that matters, but how customers perceive you.
Just ask yourself, will you really buy something worth more than $500 from an unknown company?
3. You need complicated sales strategy
Just how exactly do you sell an expensive item?
If you sell a high-ticket item, we know that it takes more than one or two attempts to convince a prospect to shell out money.
In low-ticket dropshipping, your customer can decide right then and there. “Oh, the mug is just $19.99, I am going to buy it now.”
There is no need to take this customer to a sales funnel. But in high-ticket dropshipping, you need a complicated sales strategy.
I have written a blog about sales funnel, which you can also download as free eBook. If you need more information about what a sales funnel, please read my blog: Sales Funnel Explained: What is a Sales Funnel?
So, what does it take to sell an item that is worth $500?
For one, you need a website that beats all your competition. This, of course, entails cost.
A simple Shopify store with a common template is not going to make the cut. Your website must be unique, and it should not be like those “me-too” dropshipping stores whose product pages look the same.
Once a customer sees your product and decides not to buy, do you have the following strategies to your funnel?
- Do you have advertisement retargeting?
- Did you successfully get the customer’s email address?
- Do you have an automated email drip content in place?
As mentioned earlier, it takes several touchpoints to convince a customer to buy a high-ticket item. If you do not have a complicated sales funnel, this customer is not likely to come back.
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4. You need a huge capital for each product
Let us say that you successfully sold this item. Do you have the money to front the payment to your supplier?
In dropshipping, it is not uncommon that you get paid a few days after the customer has sent the money to you.
For example, if you use 2Checkout as your payment processor, the company takes days before the money is transferred to your bank.
During this waiting period, you need to front the money with your own and order the item from your supplier.
If somebody bought something worth $6,000, with a capital of $3,000, do you have $3,000 to pay the supplier?
Maybe you do now. But what if there are four people who bought the item? Even if you are selling products worth $500 each, selling four of these means you have to front $2,000 all at once.
You also have to front the shipping cost. Once you have paid your supplier, only then will he ship the item.
Then, it would take days before you get the customer’s payment transferred to your bank for you to withdraw and use.
Now, if you compare this with a $30 mug or flask that costs only $20, you can surely buy ten of these at any given time.
As you can see, high-ticket products require a lot of money. And if the customer refunded that item, you are really going to find yourself in deep trouble.
And why would customers do this?
If a customer paid $6,000 for an item and finds out it does not work the way it is expected to, he is going to return it.
Customers who pay a lot for an item have more likelihood of demanding perfection compared to those who bought something for less than $50.
If a customer paid less than $50, he would rather make do with the low-quality item than go through the motion of filing a complaint or getting a refund. The worse that can happen is that he would leave you a bad review.
5. You need more money for marketing
You have to spend a ton of money for high-ticket dropshipping items for marketing. Advertising on Facebook is not enough.
As we mentioned earlier, you need to have several touchpoints before you can convince a customer to buy. These touchpoint include following your customers no matter where they go.
Also called re-targeting, you must have advertisements set-up in different platforms—from Google search to YouTube to Instagram—anywhere the customer goes online. You can only do this if you have installed re-targeting as part of your campaign.
As such, a person who saw your ad on Facebook and clicked it will also see the same ad on YouTube, Google search, and other platforms.
But as you know, you also have to pay for ads on these platforms separately. You need a huge marketing budget, and this is a necessity—a must-have, not a great-to-have, marketing strategy.
On top of that, you also need to create an email automation campaign to convince your customers to make the purchase. You need to send drip emails to remind them about your product.
Without email marketing and ad re-targeting, you will not be able to establish multiple touchpoints with your prospect, and you cannot make a sale.
Is high-ticket dropshipping worth it?
Yes and no. I do not recommend this to beginners, as you would have massive headaches along the way. Professional dropshippers—those who have been doing it for a long while, or those who have a significant number of employees, can do good with this business model, but not beginners.
My advice is to start small. Focus on items that customers buy for emotional reasons. Focus on impulse-buy products, not those that cost too much money and requires too much thinking.
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