Dropshipping and Google Ads: the cost per customer you can afford

In dropshipping, the click price is not what decides whether a customer pays off. You can pay no more than what a paid order leaves after the supplier, shipping, the payment fee, and returns. I call that sum the most you can pay per customer. People often call the same line break-even CPA.

You turn that amount into the campaign target. The main path: conversion value, the sum you send for the order, is the price. Then break-even ROAS equals price divided by the expected leftover after returns. The 100% line is only for that expected leftover, not for the leftover before returns. How to read ROAS in the report is in the piece on ROAS in Google Ads.

The short answer: what you can pay per customer

Take the price. Subtract what you pay the supplier, the shipping you pay, and the payment fee. Then weigh returns. Some orders keep a leftover. Some orders cost you the trip out and the trip back.

Break-even ROAS equals 1 divided by margin only when conversion value is the price the buyer paid. Margin is the expected leftover after returns, divided by price. Do not mix the two bases. In the example, 400% holds when returns are not subtracted from the value you send. In the help on conversion values, Google names both: sales revenue or profit margin.

Where a dropshipping store finds money for ads

The money for ads sits in the gap between what the buyer pays and what you already owe the supplier, the carrier, and the payment processor. A bid strategy will not widen a thin gap.

If the buyer pays shipping at checkout, do not subtract that shipping from the price a second time. If you pay shipping, the leftover has to carry the trip to the buyer and the return trip.

A worked example

Take one product, for example. These are not market prices and not a promise of profit. The buyer pays $100. You pay the supplier $55. You pay $10 to ship it to the buyer. The payment fee in this example is 5% of the price, so $5. If the order stays sold, the leftover before returns is $30.

For example, 1 order in 10 comes back. The supplier takes the goods and refunds the $55. You lose both shipments, $20 together. This example does not add the payment fee again on the return. The expected leftover after returns is $25 per order. In this example the supplier accepts the return. The example skips tax, customer support, and repeat orders. We count the first order.

If you spend $25 on ads per order, profit is zero. The 100% in the table is 25 divided by 25. That line holds only if conversion value is the expected leftover after returns, not the $30 leftover before returns. If you want to keep $5, use the assumption row: you can pay $20, and the target is 500%.

Target ROAS or Target CPA: which one to set

In the account the strategy is called Target ROAS. During the transition the name in the account may still differ slightly. From June 2026 the longer name Maximize conversion value with a Target ROAS is replaced by Target ROAS. The behavior stays the same. Maximize conversions with a Target CPA becomes Target CPA.

The comparison below is for a Search campaign. Use Target ROAS when order values differ and you send those values. Use Target CPA when the value is the same. The average cost holds, and a single conversion can cost more or less. In the help on Target ROAS, $5 of sales per $1 of ads is a 500% target. You can start Target CPA with no conversion history. If prices differ, one cost per conversion treats them as equal. For a Shopping campaign the help describes only Target ROAS. On the example line, a Search Target CPA is also $25, and only when one conversion is one order of equal value.

In the Target ROAS campaigns I reviewed from September 2024 through February 2025, only 27% hit or beat the target. The median lands at 86% of the target. This slice ends in February 2025, before the August 2026 bid change for campaigns with the Limited by budget status. The example target of 400% at that median lands at 344%. On $100 of revenue the ads cost about $29 against a $25 expected leftover, a loss of about $4. Count the target from the profit you want, as in the table row about $5.

A Shopping campaign needs conversion tracking and at least 15 conversions per Merchant Center ID in the last 30 days. That ID is your Merchant Center account number. In the general requirements list, a conversion with a value of 0 or less does not count toward the threshold. A portfolio strategy, shared by several campaigns, is not available for Shopping with this target. The target sits on the campaign itself. You can change the bid strategy at any time, but do not turn this one on before that threshold.

1. Send the order price as the conversion value. That is the main path. The expected leftover after returns is a different line. Do not send the leftover before returns, and do not send zero.
2. Open Campaigns, then Campaigns again, the campaign, and Settings.
3. Under Bidding, click Change bid strategy, choose Target ROAS, and click Save.
4. Add Conv. value/cost for the last 4 weeks from Columns, then Modify Columns, in the Conversions list, and multiply by 100. That number is the fact, not the target. Compare it with the 400% break-even line. Set the target from that line and from the profit you want.
5. Give the strategy about 15 days before you judge it. After that, read weeks. Compare the result with the Avg. target ROAS column. In the column list it sits in the Performance category. It is weighted by traffic.

A target that is too high may limit traffic. Fewer clicks are expected here. Bidding only sees actions with Include in “Conversions” turned on.

Budget: be ready to spend up to twice the average daily budget on one day. Over a month you will not be charged more than the average daily budget multiplied by 30.4.

After the rollout finished on August 27, 2026, a campaign with the Limited by budget status on Target ROAS or Target CPA optimizes to the target itself, whatever the budget. This covers Shopping campaigns too. Before the change, such a campaign could beat the target. If the target is higher than the current result, daily spend is likely to change. Daily and monthly budget limits are still respected. Google does not change the target or the daily budget for you.

I build the Shopping campaign in the piece on Google Shopping ads. The rest of the account is in the Google Ads course.

What Merchant Center requires from a store with no warehouse

On the Shopping policy pages I checked, the word dropshipping does not appear. For a store with no warehouse, do not hide or misstate the actual business location, the headquarters, or who actually fulfills the orders. State the terms before payment and the ship-from location honestly.

Serious misrepresentation can suspend the account at once, with no warning. That includes a fake address and a ship-from location hidden on purpose so the parcel looks local. A different class is showing an item in stock when you cannot fulfill it, or hiding the ship-from location to suggest fast delivery. For that class the warning comes at least 7 days ahead. The suspension is unpacked in the piece on Merchant Center misrepresentation. The policy wording is in the misrepresentation help.

For most account problems Google gives 7 or 28 calendar days. A serious violation may get no warning. A repeat account review after a misrepresentation violation usually takes 7 business days, and a complex case takes longer.

For a store with no warehouse, three things matter most: stock in the feed, the delivery time and the ship-from place, and the return address.

• The product is sold in your own online store. An affiliate link is banned for Shopping, except a comparison-shopping service in a program country.
• Contacts are visible, checkout is complete, and at least one ordinary payment method is there. You handle the refund, not Google. If you do not accept returns, say so outright.
• Return policy path: Products & store, Shipping and returns, Return policies, Add return policy. The policy is visible without a login, and the text matches the site. If you accept returns, cover a change of mind, not only a defect.
• If the return address differs from the business address, show the return-shipping cost before purchase. An international return window starts on the delivery date, not the purchase date.
• Shipping: Shipping policies, Add shipping policy, up to 20 per country. The destination country can differ from the ship-from country. The cost matches checkout. If an exact cost is impossible, set a slightly higher cost, not a lower one.
• Automatic speed from the carrier is not offered everywhere. For other countries, enter the times by hand. The date is maximum handling days plus maximum transit days.
• Send fresh product data at least every 30 days. Link Merchant Center to Google Ads. A third-party service can overwrite shipping settings you entered by hand.

When not to run dropshipping ads in Google

Do not launch if the leftover does not cover the cost of a customer and the profit without which you do not want the order. If the supplier, shipping, and the fee eat almost the whole price, the campaign buys a loss before the strategy has time to learn.

Do not launch if you cannot state the delivery time and the ship-from location honestly. A supplier’s stock that is already gone becomes an unavailable offer if the feed still shows the item in stock. Do not launch if checkout sends the buyer to someone else’s affiliate link. And do not turn on Target ROAS until that Merchant Center ID has 15 conversions in 30 days.

The step-by-step version of how to set this target for your store and build the first Shopping campaign is in my book on Google Ads for business owners.

When this does not apply

The formula does not apply when the Conversions column holds a page view, a click, or a lead instead of a paid order. Then both Target CPA and Target ROAS optimize for something other than a customer. Check Include in “Conversions” before you type the percent.

It does not apply when product prices differ and every conversion sends the same default value. It also does not apply as one portfolio target across several Shopping campaigns. That portfolio is not available for Target ROAS on Shopping.

Questions and answers

How many conversions does a Shopping campaign need for Target ROAS?

The three 15s have different jobs. The entry threshold is 15 conversions in 30 days per Merchant Center ID. The pause before you judge is 15 days, and that pause is not a second threshold. The campaign tip is at least 15 conversions a month.

Should conversion value be the order total or the leftover?

The main path is the order total. On that total the example line is 400%, if returns are not subtracted from the value you send. If you send the expected leftover after returns, the line is 100%. The leftover before returns is a different sum. Do not use it for the 100% line.

Can you refuse returns?

In the Merchant Center rules, yes, if the buyer sees that before paying. Consumer rights under the law of your country are a separate topic. This page does not check them. If you accept returns, cover a change of mind, not only a defect. A different return address requires the return-shipping cost before purchase.

Can you hide that a supplier ships the item?

No. The rules call it a serious violation to hide or misrepresent material details about your actual business location, your headquarters, or who actually fulfills the orders, when that misleads the buyer or evades a check. The destination country can differ from the ship-from country.