Can You Launch a Dropshipping Store for Only $500?

Sure, starting a dropshipping store can be cheap.

But it ain’t free.

So, exactly how much do you need to launch your store? $10? $1000? $10,000?

To answer that question, I went straight to an expert.

In the dropshipping world, Tim Vangsness is practically ancient. I mean, he’s been dropshipping since way back in 2016.

He’s launched multiple successful stores, and tried his hand at selling watches, jewelry, gadgets, sunglasses and more.

I called him on Skype all the way in Australia, with a challenge:

Can you launch a successful dropshipping store for only $500?

In the interview below, he spills on his secrets behind how to launch a successful store without busting the bank. 

Got your notepad ready?

Let’s go.

What product would you choose as a beginner?

If I was just getting into dropshipping, I think that an excellent product would be leggings. You should try to sell a product that is low-cost to start with, just in case you have returns. And with leggings, you can get pretty awesome quality for less than $20.

Leggings are also great because if you’re doing shipping from China, there’s a chance that things can get damaged in the mail. And leggings are the type of material that aren’t going to get damaged, regardless of how it’s handled.

The price point of leggings also means that you can get a lot of samples if you want to test different qualities. It also means you can send out samples for free without much of a pain to your wallet.

So which leggings would you pick? And why?

To pick a product, I always remember the key mistake a lot of people make – What I like and the customer likes may not be the same! An easy approach for this is to find the products that have sold the most. This means when I’m choosing products to sell, I sort by order count and set the ‘selling to’ drop down menu to United States. The US has always been a key audience for me, so I want to find products that can be shipped there.

I also make sure that the ePacket filter is ticked, because shipping time is a priority for me. Then I’ll choose the products that match the brand I’m building.

Here’s what I chose:

I chose these particular leggings because the:

• High number of orders
• Supplier provides ePacket
• Product looks good and fits my brand’s style
• High number of imports

Okay, what’s the deal with the samples? How much does this cost you?

Once I chose my products, I’d be ordering samples of between four to 10 different types of leggings. I’d order a sample of one of each, just so I can see how the quality is. I might order from a few different suppliers too.

I’d order enough so I can take my own product photos, which is super important when you’re setting up your site.

I’d also want a few extras to give them out as samples to friends and influencers so I can get their opinion. If I can get samples for $5 or $10, I’d be happy to get up to 10. Ten is a good number because that’s enough to send out to a few people for promotion and it’s enough to see if the quality varies with each pair.

When you’re setting up your store, do you pay for a theme?

I think to start with, unless you’re very confident that you’re going to make sales, I’d say start with a free theme. Venture is my go-to theme. I think they’re all so flexible nowadays that it’s not too much of a concern which theme you choose.

I wouldn’t spend too much time focusing on your perfect theme. In the end, just because you think something looks good, doesn’t mean that your customers will. You customers will tell you what they want. You can do your best guess, but they’re the final judge.

What about a logo? Do you shell out for that?

Depending on what you call it, you can probably just get away with using a letter for your logo. You don’t need to go too intense with the logo, as long as it looks clean.

If you want a bunch of logos made, you can just go to Fiverr. But I think you’ll find that a lot of the cheap logo creators on there are just using free logo creator tools online anyway, so you’ll be able to do it yourself.

Free Logo Maker

Once you’ve got sales coming in, you might want to go out and invest in getting your store branded really nicely.

I think a lot of people run into problems because they spend so much time and money upfront, trying to get the store looking amazing before they actually know if they’re going to make any sales. I think it’s more important to get your store to the minimal viable product, have it looking clean, and then try to get some sales. And then use that money to grow your store from there.

What apps would you install?

Whatever you do you need to have some kind of app which will allows you to have reviews. Especially when you start dropshipping, reviews are probably one of the biggest things that help with building up trust with your store and convincing people to buy from you. I’d recommend Product Reviews.

The first app I usually install is something which shows the recent sales. The one I usually go for is SalesPop, which is free. With any store that I’m running, having the sales notification installed has increased conversions.

When you set up your store, you want to be able to send emails to your customers. You need some form of email client that helps you send out emails to people who have purchased, or people who have added to their cart but haven’t purchased is very important. Abandoned Cart Converter is great.

If someone is trying to leave your website, some way of capturing their data is hugely important. Whether you’re looking to get their email address or get them to share something on social media, you need some way to make the most of that customer coming to your site. There’s one that pops up when you’re leaving where you get to spin a wheel in return for discounts. I’ve got friends who have had mind-blowing results using it.

You said you take your own product photos. How do you do that?

If you’re trying to save money, you’re going to have to be creative.

So what I would do is go into the city center and find some people who are willing to try the leggings on and give me a review in person. Then I’d also take photos with them.

By doing that, I actually get reviews for the product. Plus I’d give them a free sample of the leggings and encourage them to tag us on social media. If they’ve got any decent followers I might be able to sales through their promotion.

Also, I’d plan on filming the whole event so I can get video footage of them. This way, for my ads I can use both photos and videos of people wearing the leggings.

I think you’ll find that if you just go talk to people, they’ll be more than willing to just try stuff out. Especially if they get to keep a sample at the end.

Okay, so now we’ve got photos. How do you get traffic to your store on the cheap?

You want to be thinking about growth hacking techniques. I’d be jumping onto social media first, where I’d be sharing the photos and videos I recorded of the people trying my leggings.

Also, if you can find Facebook groups associated with your niche, definitely take advantage of that. Post in the groups about your store and try to drive traffic to your website.

There’s tons of other free traffic sources, so pick something you know. There’s people who use Quora and answer questions for people, but I’ve never touched it. For me, I’d feel far more comfortable using something like Reddit or Imgur. Whatever platform you have experience with, try to use that.

I try to use as many free sources of traffic as possible to get people onto my website to see how they convert. If I can get any form of positive conversion, then that’s awesome. If not, then I’m going to try to think why not. It may be because there’s something wrong with the website, or it may be because something isn’t working well with my marketing.

Once we’re driving some traffic through our free traffic sources, what’s next?

As soon as I’ve got a sale, I’m going to be excited to start running Facebook ads. First of all I’d look at other companies who have sold similar leggings, and I’d try to reverse engineer what audiences they’ve been targeting. Then, I’d target the same.

With your ads, you should test general audiences at the beginning. For example, with leggings you can test your ads with all females from 15-40 years old. Then I’d look to see what type of audience within that was working best.

You can also try a more specific audience. With leggings, the first niche audience I would test would be fans of Kylie Jenner. So anyone who has liked Kylie Jenner on Facebook, I’m going to start targeting them. Also if anyone has liked any of the other popular leggings companies, I’ll target them too.

But most importantly, you want to be able to determine what is causing those conversions. So I’d be setting up a few different ads with small budgets to see how they convert.

How many ads are you setting up? How much is your budget for each?

My go-to amount is $10 a day, and that gives you a good amount of data.

I’d set up an ad with a static image, and a video or two. I’d use the same copy, but with a different image or a different video. Then I’d run those three at the same time and see which one works best. Whichever one wins, I’d continue working on that ad. When I find one that is making profit, I’ll focus on scaling that ad. I’ll also copy it to make similar ads to see if I can improve it.

For my first ads, I’d use the video footage that I recorded in the city with the people trying on my products. Very quickly in my video I’d be using a call to action. The second they start looking at the video, I’d be talking about some sort of benefit or pain they can avoid by clicking through.

For the very first ad that I run, I’d also be running an “opening sale” discount for the product. I think when you start up that’s how you’ll get your best sales.

Okay, so when you’re setting up your first campaign in Facebook Ads Manager, what marketing objective do you choose?

At the beginning, I always choose “Add to cart” under “Conversions.” You want to get as much data into that ad as possible so that it can start to optimize. If you optimize for “Purchase,” and you spend $100 and you’ve only gotten two or three purchases, then it’s not much data for Facebook to go off. But with the “Add to cart” you might get 20 or 40 people who have added to cart, which gives Facebook a lot more to work with to optimize your ads to the right audience.

“Add to cart” is always how I start, and later on I’ll start trying different methods. You can set your first ads up with “Add to Cart” and start targeting both the broad and the niche targets.

So what’s next?

Well, then we wait to see if they convert. For me, if an ad hasn’t become profitable after five days, I’m going to cut it.

Usually the ads that do well, I notice that they are profitable after day one or day two. If you find an ad which is breaking even or close to breaking even, then it means there are a few things that you can probably tweak and hit that positive conversion.

What usually goes wrong with your ads?

If an ad wasn’t working, and it wasn’t converting, I’d probably assume it was due to my ad copy. The reason for that is because leggings are a very popular item and I know people are interested in them. If I’m not getting sales then I know that it’s probably something on my end that’s gone wrong. Leggings are one of the top selling products on AliExpress, so you know people are making sales. If you’re not making sales, you must be doing something wrong on your end.

You should try a new ad. By split testing you’ll be able to determine if it was a certain design that no one likes, or if you’ve got bad ad copy.

Right, so leggings are popular and should sell. But what if you’re selling something new and unusual?

I wouldn’t be starting a store with a new gadget or piece of technology. Until I’ve got good cash flow and I’ve got some money to start experimenting a bit, I’ll stick to products that I know work.

Until you have money coming in, you’re best to avoid the risky products.

So if we’ve got one ad that’s performing really well, what now?

First of all I’d duplicate it, and start running an identical ad and seeing if they are getting that same profitable conversion. If they are, I’ll start scaling. That original ad, I’ll leave it alone at the budget it was set at. With the new ad if I’m getting similar returns, I’ll start scaling them and increasing the budgets. I think that’s a good way to start.

When I say I’m duplicating it, I’m literally creating exactly the same ad and running it alongside the others. The more you say you’re willing to spend on Facebook, the more people Facebook will be trying to put that ad in front of, which means that your targeting can get less and less accurate. So, what I’ve found with some of my ads is that when they’re very low at the $10 a day budget, I’ll be paying 20 cents per add to cart. When that scale goes up to a larger amount, if you’re getting towards $1000 a day, you start looking at up to $1 per add to cart. That sort of scaling can get very expensive very quickly. I think the easiest way to avoid that is by duplicating your ads and keeping your budgets low so that Facebook actually targets people they think will convert.

Apart from the ads, where else are you spending that initial $500?

I really like to use social media. If I can take advantage of influencers, especially with a low-cost product like leggings, I would. If I had any money left over, or I found an ad that was converting profitably, with whatever I had left I would buy as many samples of that product as I could.

Then I would make a list of influencers and I would send them all a free product. I’d say, “Hey, I love your content. I wanted to send you a free product, I thought you might like it. Thank you, and I love following your content.” If they’ve got a large following, you need to come across more softly. You need to just offering them something of value without asking anything in return.

But if they’ve got a small following, you can be more direct and tell them you’re sending them a product and ask if can they take a photo with it.

My whole goal of this approach is to get as many photos as possible. You want photos of people using your product and showing that it’s legitimate. Especially with leggings, if you’ve got a good offer, the cost of sending the product to someone might bring two or three times the amount in sales.

Would you go for huge influencers or micro influencers with smaller followings?

I normally found that you break even with people who have around 1,000 followers. When you’re heading towards people with 10,000 followers, that’s when you start finding that if you send them a $10 product, you can start getting $50-60 worth of sales.

Above 10,000 followers and you’re probably going to need to pay them to promote the product too. I find that bigger influencers are sort of a mixed bag. Some people you’ll pay a lot of money, and get nothing. Others you can get really good returns.

So let’s be real, is $500 enough to start a dropshipping store?

$500 is a fair bit of money! Most of the stores I’ve started, I’ve never spent more than $100 before I’ve decided if it’s something I’m going to go ahead with or if I need to rethink my approach. If you’ve spent $300 or $400 and you still haven’t made any sales, you’ve got an issue.

If you’re selling a product like leggings, there’s a lot of other people selling products like this. You should be able to go to their website and see what they’re doing well, and see what they’re doing poorly and improve on it.

With the number of free trials and free apps, and if you’re putting in the hard work by using growth hacking and free traffic methods, it’s very easy to start a store with $500.

The Breakdown of Tim’s Budget

Okay, so let’s break it down. Where was he spending all that cash again?  

Now you know what it’s going to cost, it’s time to get started. Sign up for Shopify now to begin building your business.