A product bought for $12 and sold for $30 does not automatically earn $18. The supplier may charge shipping, the payment processor takes a fee, an ad may be needed to win the customer, a border charge may be due, and a late or defective order may need a replacement or refund. A pricing decision built on the displayed product price can fail even when sales are steady.
Calculate contribution from the complete order and the actual delivery path before setting a price. Separate amounts you know today from estimates, then update them after real orders. Use a conservative case to decide whether the offer can survive a supplier price change or one ordinary exception.
This is part three of the AliExpress Dropshipping Guide. First understand the model and its limits and vet the product, seller, and delivery route. The Shipping Profit Guide provides a complementary order-level framework for fulfillment and returns.
Distinguish supplier price from landed cost
The product page price is only the first line. Landed cost means the amount required to get the product to the buyer’s destination under the actual order terms. Include the selected variant and quantity, supplier shipping, any insurance or service upgrade, currency conversion cost, and taxes, duties, clearance or handling charges that your business bears. Responsibility for import charges can depend on destination, carrier, transaction terms, and current rules. Do not assume every low-value package enters duty-free or that the customer will pay charges you did not explain.
The U.S. International Trade Administration’s landed-cost guidance frames landed cost as the total cost when a shipment reaches its buyer. Although its example concerns exporting, the accounting idea applies to a cross-border sourced order: list every cost to the destination and identify who pays it. For U.S.-bound shipments, check current Customs and Border Protection guidance and your carrier or broker for the exact product, origin, and route. Rules can change faster than a saved supplier spreadsheet.
Write the cost by order, not by a generic product thumbnail. Two variants can have different prices and weights. A supplier may offer free delivery to one address and a paid method to another. A seller may show a discounted first-purchase price that disappears on repeat orders. Use the price available to your business when the customer places the order.
Add the cost of making the sale
Payment processing and marketplace fees reduce the amount retained from the buyer’s payment. Some channels calculate fees on shipping charged to the buyer as well as the item price; others charge fixed per-transaction fees or subscriptions. Use the current terms for your channel and processor. Do not apply a fee percentage borrowed from someone else’s store or a screenshot from last year.
Customer acquisition can be the largest variable cost. If a $4 advertisement is needed for every completed sale, it belongs in the order model. If you spend $100 on a test and get ten valid sales, a simple initial acquisition cost is $10 per sale, subject to how you treat repeat customers and unsuccessful campaigns. Do not divide advertising only among the orders that happened to be profitable while ignoring the spend that produced no orders.
Support time matters too. A supplier order must be placed or checked, tracking reconciled, buyer questions answered, and exceptions managed. Assign a planning value to this labor so products that require repeated emails do not appear more profitable than simple ones. Subscription tools and store hosting can be allocated separately across a sensible volume, but keep them distinct from charges caused by a particular order.
Build a transparent contribution formula
Use a small worksheet with separate revenue and cost columns:
Order contribution = retained buyer payment − supplier product price − supplier shipping − import charges borne by seller − payment and channel fees − acquisition cost − order labor − expected net exception cost.
“Retained buyer payment” means the amount that remains after discounts and refunds under your chosen accounting convention. If you instead use the original buyer payment and subtract refunds as a cost, do not subtract the same refund twice. Sales tax collected and remitted on a platform’s behalf should not be counted as business revenue. Keep records that let you reconcile the model to real payouts.
The expected net exception cost is a pricing reserve: incident rate multiplied by average loss after supplier or carrier recovery. It is not a prediction that every order will fail. When a real return occurs, record the actual cost against that order and reconcile the reserve in your aggregate analysis. The shipping profit worksheet explains this distinction in more detail.
Work a realistic fictional example
Suppose a customer pays $36 for a product and $4 for delivery, for a $40 total. The supplier charges $14 for the exact variant and $5 for the selected shipping service. Your payment and sales-channel fees total $3.20, advertising averages $6 per acquired order, and order handling takes $2.40 in planning labor. An estimated $1.50 of import-related and currency expense is borne by the business, and your historical exception allowance is $2.50 per order.
The modeled contribution is $5.40: $40 minus $14, $5, $3.20, $6, $2.40, $1.50, and $2.50. The gross spread between the $40 buyer payment and $14 item price was $26, but only $5.40 remains in this model. These are fictional values for illustrating the calculation, not current AliExpress prices, duty rates, or expected margins.
Test a less favorable case. If acquisition cost rises from $6 to $9 and supplier shipping rises from $5 to $7, modeled contribution falls to $0.40. A single defect could turn the batch negative. This tells you to improve acquisition, negotiate a stable supplier rate, raise the price if buyers still see value, or choose another product. Scaling advertising without understanding the sensitivity would amplify the problem.
Model the downside, not only the average
Create at least three cases: expected, higher delivery cost, and failed order. In the failed case, include a full or partial customer refund, unrecoverable supplier cost, return or replacement shipping, processing fee treatment, support time, and any recoveries. A supplier refund may arrive later or be denied. Cash-flow planning should assume you can fund the buyer remedy first.
Estimate the maximum loss on one order and on a cluster of simultaneous orders. If ten delayed orders would require $300 in refunds while $200 is tied up in supplier purchases, the business needs enough reserve to handle that timing. A product can have positive average contribution and still be too risky for a small seller with no working capital.
Do not force a precise incident percentage from a tiny test. With five orders and no returns, you have not proven the return rate is zero. Start with a conservative allowance, then update it as your own data grows. Segment by supplier, variant, destination, and marketing channel; a blended average can hide an unreliable variant.
Verify who owes tax and border charges
Cross-border costs are especially unstable. Import treatment depends on current law, product classification, origin, destination, declared value, shipping route, and who is importer of record. Sales tax, VAT, or other consumption taxes may be collected at checkout, by a marketplace, by a carrier, or by the destination authority. The same product can have a different economic result when shipped to a different jurisdiction.
Before listing to a destination, determine who will be asked to pay each charge and what the buyer will see. Do not call delivery “free” when the buyer may face an undisclosed collection at the door. If you cannot identify the likely charge and responsible party, limit the destination until you can. For U.S. imports, review current CBP information or consult a qualified customs professional for a material exposure; this article does not supply a tariff classification or legal conclusion.
Keep supplier invoices, order confirmations, carrier bills, and tax records. The IRS small-business guide discusses business records and cost-of-goods treatment, but the right tax method depends on your business. The pricing worksheet is an operational model; reconcile it with professional accounting records rather than using it as a tax return.
Price for an honest buyer offer
Choose a retail price from buyer value and market alternatives, then test whether that price supports the full cost. A cost-plus formula alone cannot make an undifferentiated product attractive. Likewise, a competitor’s low price may be impossible to match while providing accurate delivery, support, and returns. If the numbers do not work, reject the offer instead of concealing shipping or return terms.
Make the buyer’s total cost clear. The FTC’s online advertising FAQ emphasizes truthful price claims and clear disclosure of material terms. Applicable pricing and tax rules depend on your market and channel. The next guide turns verified product facts and costs into a listing and policy the customer can understand before paying.
Avoid using a temporary sale price as the foundation for a permanent listing. Recheck supplier prices, shipping options, exchange costs, and fees before buying each order. Set a rule for what happens when the supplier cost crosses your margin floor: pause the listing, quote a new price for future buyers, or use an already-vetted alternative supplier. Do not substitute a cheaper untested variant to preserve margin on an accepted order.
Reconcile after each test order
For every sale, record quoted supplier cost, actual supplier charge, buyer payment, fees, ad attribution, labor, border charges, delivery outcome, and refund or claim result. Compare the estimate with the final outcome. If a product repeatedly earns less than modeled, identify the cause before changing the whole catalog. Common causes include a shipping option that disappears, a fee calculated on the buyer’s full payment, more customer support than expected, or a return path that costs more than the item.
Review the product’s contribution as a small cohort, not just its best sale. Include unsold ad spend and failed orders. If the product still clears your chosen contribution target under realistic conditions, expand cautiously and keep vetting the supplier. If it does not, a high markup screenshot is not evidence of a viable business.
The purpose of the calculation is a decision. Knowing the full landed and operating cost lets you choose a price you can stand behind, a buyer promise you can fund, and a product you can stop selling before losses accumulate.