Normally, The standard dropshipping business would revolve around selling high volume and low-cost products, or low ticket product, with the goal of gaining a big profit margin and selling a great amount. But there are some problems with this common strategy. First of all, this strategy only allows you to get a low-profit margin since it’s hard to set the prices high for low-cost products. Secondly, if you are selling low ticket products, you will need a great sale volume to gain considerable profits, and it usually comes with greater risk since a decline in sales can instantly obliterate your thin profits, which may eventually lead to net loss.
Due to all these reasons, many dropshippers are transforming from low ticket dropshipping to high ticket dropshipping. This article will show a detailed analysis of high ticket dropshipping. The pros and cons will also be provided for your sake.
What is a high ticket product
As most dropshippers are doing low ticket dropshipping, many people are not familiar with high ticket products. High ticket dropshipping is all about selling expensive items or what is called high ticket products. On average, these are products that cost $200 and up. With high ticket products, you get more significant profit margins and better flexibility in pricing as opposed to low ticket products where you are constricted within a very thin profit margin to maintain the marketability of the products.
Here are examples of a high ticket product and a low ticket product. As you can see, the wedding ring is a high ticket product. Even though the price is not displayed, it will obviously go over $200. On the other hand, the phone case is much cheaper and has a broader market base.
Choosing between the two different models will significantly define the scalability of your business in the long run. And you can do either model for any kind of stores or platforms you are using. But think carefully before you make the decision as it would impact the strategy you will implement.
Pros of high ticket dropshipping
Because high ticket products are expensive, you also get to enjoy higher profit margins, and that means you can sell fewer products to gain more money. Moreover, you could do a lot of promotional marketing with such a high margin. For example, offer customers some discounts to make the products more attractive is a commonly used strategy. Offering free shipping is another great way to add value to your products and grab customer loyalty.
Sell less to gain more
Another advantage of selling high ticket products is that you can sell fewer products to gain more. Even though you are not selling as many items as that of a low-cost dropshipping store, your revenue still increases, enough to sustain your business because of the high prices. What’s more, you can spend less effort on customer support since you don’t have to deal with so many orders as low-ticket dropshipping would do.
Target customer with low price elasticity
High ticket products are goods with high value and high selling price like luxury watches, jewelry, bikes, etc. Another main benefit of running a high ticket dropshipping store is that the target customers are relatively less price-sensitive, making it easier to sell than budget buyers. Thus, by simply establishing good customer-client relations, you will be sure to have a constant customer inflow and sales.
Spend less time on product research
You can also spend less time on product research. Since you only sell certain products for your target niche, you won’t need to research and continuously add tons of new items to your inventory. Besides, you don’t need to sell as many items to generate a healthy profit. By only focusing on your niche market, you can grow your business and dominate a particular high ticket niche by simply offering the best item paired with the best customer support.
Overall, the above are the key reasons why you should consider transitioning to a high ticket dropshipping business. However, every coin has two sides; high ticket dropshipping also has its weaknesses, and it comes with downsides as well.
Cons of high ticket dropshipping
More investments are needed at the beginning
Compare to low ticket dropshipping, you will have to set aside more money to start with. Landing a $2,000 sale for your first time sounds awesome until you realize that money doesn’t come back instantly. PayPal can easily take up to three weeks to arrive, with Stripe only having weekly pay-outs. The reality is, to have everything smooth sailing at the start, you will need more money set aside to fulfill orders on time if you want to reduce complaints and shipping times, and not many young beginners have the money.
Expensive shipping and risks
A lot of customer complaints come from shipping-related issues, nevertheless, shipping is riskier with high ticket products. If the parcel is unfortunately damaged or lost during the shipment, dropshippers will have to compensate more. You might ask: Why don’t you buy insurance for the products? A lot of shipping companies do offer insurance for parcels, but they are not cheap; the more you want to be compensated when the parcel is lost or damaged, the more you will need to pay, and all those fees will become costs on you eventually. And some of the high ticket items are really big, for example, bikes and paddleboards. Over-sized and over-weighted products have an extremely high shipping cost compared to normal products like the phone case above.
No trust no sales
You need to build trust between customers in order to have regular sales. No one wants to buy a thousand-dollar ring without knowing the quality and authenticity. This problem is less likely to happen if the customer is buying a 5 dollar phone case. Moreover, the customer would likely ask for a refund if the product doesn’t meet his/her expectation. Even if you do accept refunds, returning such high-value items back involves risk as well. Especially when you realize shipping costs are so high that could even wash away your profits.
Small market base and strong competitors
When buying high-value products, people would tend to choose branded items because they are backed up with guaranteed after-sale supports and good quality. Plus, the market base for high ticket dropshipping is already smaller than a low ticket, marketing your stores and products becomes even more difficult under such circumstances.
There are many different ways to do dropshipping, and every method has its ups and downs. To be honest, there is no best and worst; there’s only the most suitable for you. As we discussed before, choosing the right method is the most important step for any dropshipping store at the beginning, so please be really cautious about it. Hope this article is helpful to you, and please read it before you decide which is the way for you to go.