Are the profit margins good when drop shipping from DHgate?

Drop shipping has exploded in popularity as an ecommerce business model that lets you sell products without holding inventory. While hugely attractive in theory, many have found profit margins harder to achieve in practice. DHgate is a China-based wholesale marketplace connecting suppliers and buyers in 230+ countries. It hosts over 30 million global buyers purchasing goods direct from Chinese manufacturers at wholesale rates for pennies on the dollar. The site is essentially Alibaba’s cheaper competitor targeted more for drop shipper’s vs giant corporations. It carries a wider range of inexpensive products.

DHgate drop shipping model  

The drop shipping model utilizes DHgate as your sourcing inventory that ships items directly to your customer upon ordering. This avoids upfront costs and hassles of storing stock yourself. Your online store or marketplace listings simply mark-up DHgate wholesale pricing to build in revenue margin to earn profits. The supplier handles fulfilment duties. You collect the sales difference while providing the storefront visibility driving orders.

Factors impacting margins

When assessing likely profit margins, recognize key variables at play:

• Wholesale product costs – base price paid to DHgate suppliers sets the foundation for margin calculations. Unique items with very low supplier pricing allow more flexibility vs commoditized products with thinner trade margins industry-wide no matter the source.
• Shipping expenses – since DHgate sources products internationally from Chinese manufacturers, bulk shipping costs can be high, especially when utilizing faster delivery methods. This impact margins.
• Platform sales commissions – if selling via a store on platform like shopify or ebay, their commission fees based on sales revenue also deduction from profits. Ranges from 5-15% typically.
• Returns & refunds – while infrequent, some inevitable order returns/refunds do occur. Build enough margin to absorb some level of overhead customer service costs.
• Taxes – sales tax registrations may require collection/remission on taxable revenues. Remember to accommodate based on your state tax obligations.

Optimizing profit prospects

When actively sourcing products, keep these tips in mind to maximize profit margins:

• Seek niche items – target unique, novelty or specialty items with lower competition that enable higher markups over generic offerings readily found on amazon.
• Negotiate deals – engage DHgate sellers to negotiate bulk order discounts exclusive to your store.
• Sell bundles – curate complementary products like accessories to bundle with main items. This raises order values to cushion margins.
• Upsell customization – provide custom print/engraving upsells like monograms to raise prices. Outsource fulfilment to DHgate partners.

So realistically, typical profit margins when sourcing from DHgate range from 20% to 50%+ after factoring in key variables. Some very unique items can drive higher returns. Just ensure enough buffer exists to operate sustainably.

DHgate certainly offers workable profit margins for drop shipping ecommerce. Its rock bottom supplier pricing provides advantageous cost efficiency to build decent revenues atop. However, remain diligent coordinating international product fulfilment and anticipate thinner margins on highly commoditized items. From review on DH Gate platform, it is likely better supplementing inventory rather than serving as sole supplier source. For niche offerings, customization potential and negotiated vendor deals – DHgate can fuel a profitable drop shipping venture. But stay conservative projecting upside and account for all margin-eroding expenses. Hopefully this overview gives clarity on assessing likely financial return prospects when importing DHgate goods for domestic resale. While no perfect system – calculated risks can certainly pay off.