Amazon Dropshipping: A Step-by-Step Guide for Beginners
Are you eager to dive into the world of e-commerce and explore the exciting opportunities that Amazon has to offer? If you’re curious about dropshipping and how to get started with this popular business model on Amazon, you’ve come to the right place! In this step-by-step guide, we’ll walk you through the ins and outs of Amazon dropshipping, specially tailored for beginners. Grab your entrepreneurial spirit and let’s discover the secrets to success in the world of Amazon dropshipping!
What Is Dropshipping on Amazon?
Dropshipping on Amazon is an order fulfillment option that allows e-commerce businesses to outsource the processes of procuring, storing, and shipping products to a third party—typically a supplier, without the need for your own website
This fulfillment model commonly appeals to entrepreneurs seeking efficiency and low overhead, but it can come at a cost—especially when it comes to customer experience. This guide will cover what Amazon dropshipping is and explore how this fulfillment method can work. Amazon also looks at a few dropshipping alternatives that can potentially save you time, lower your overhead, or simplify your business.
I myself engaged in forms of dropshipping for years on Amazon and grossed hundreds of thousands of dollars doing so. There are pros and cons of this model that we will discuss in this article.
Here’s how dropshipping on Amazon typically works:
- Product selection: The seller researches and identifies popular or profitable products to sell on Amazon.
- Listing creation: The seller creates product listings on Amazon’s marketplace online store, (after creating an Amazon seller account) including product descriptions, images, and pricing, or uses existing listings for the product.
- Order placement: When a customer purchases a product from the seller’s listing, the seller receives the order and payment details.
- Order fulfillment: The seller then forwards the order details to the supplier or wholesaler, along with the customer’s shipping information and payment.
- Supplier fulfillment: The supplier or wholesaler ships the product directly to the customer on behalf of the seller. They handle packaging, shipping, and any necessary tracking information.
- Customer service: The seller must handle customer service, concerns, or issues related to the product or order. They act as the primary point of contact for the customer.
- Profit margin: The seller makes a profit by charging a higher price than the cost they pay the supplier for the product. The difference between the selling price and the supplier cost covers the seller’s expenses and profit.
There is no direct way to determine just by looking at the Amazon online store if an online retailer is utilizing Amazon dropshipping. However, one trait that all Amazon sellers who use dropshipping have is that they are using “FBM” or “Fulfilled By Merchant.” You can look at the Amazon Buy box to see if the seller and shipper do not show Amazon, and if so, it’s possible it is an Amazon dropshipping product.
Can I Dropship on Amazon?
Yes, you can engage in dropshipping on Amazon. Amazon allows dropshipping as a business model, but it has specific guidelines that sellers must follow. Here are some key points to consider:
- Amazon Seller Account: You need a professional seller account on Amazon to list products and sell through dropshipping. This requires a monthly subscription fee. All of the products you list will now be in your Amazon e-commerce store.
- Prime Eligibility: Dropshipped items by definition are not Amazon Prime usually. Most Amazon Prime products are shipped via Amazon fulfillment centers. However, Amazon is bringing back Seller Fulfilled Prime shipping, which means that if you can have a product delivered within a 2-day window, even if you or your dropshipping supplier are fulfilling the orders, you can get the Prime badge.
- Inventory Ownership: While dropshipping, you must maintain control over your inventory. Amazon never will touch the products, so you are responsible to get the products to the customer’s door.
- Customer Experience: As the seller, you are responsible for providing excellent customer service. This includes addressing customer inquiries, handling returns, and resolving any issues promptly. Unlike FBA orders, customer service must be handled by Amazon sellers.
- Seller Performance: Amazon holds sellers accountable for their performance. Maintaining a good seller rating, meeting performance metrics, having on-time delivery, and ensuring high customer satisfaction are essential to succeed in Amazon dropshipping.
Remember, it’s important to thoroughly review Amazon’s policies and guidelines for dropshippers to ensure compliance and avoid any potential issues or account suspensions.
What Is Amazon’s Dropshipping Policy?
On Amazon’s website, they have very clear terms of service for those who want to sell products via Amazon dropshipping.
First of all, here is their own definition of Amazon dropshipping:
So, to dropship on Amazon, you are having a third-party fulfill orders to customers on your behalf. It is part of the Amazon seller agreement as well that it is clear that the Amazon seller (not the third-party drop shipper) is the seller of record. Notice more of their policy for those who want to dropship on Amazon
- Purchasing products from a third party, including Amazon or another seller in Amazon’s stores, and having that third party ship directly to customers, if the shipment does not identify you as the seller of record or if anyone other than you (including the third party) appears on packing slips, invoices, or external packaging, it is strictly prohibited without exception; or
- Shipping orders with packing slips, invoices, external packaging, or other information indicating a seller’s name or contact information other than your own is also strictly prohibited.
This is a very important point, and something that can get your Amazon online business suspended if you do not comply: having packaging or paperwork that does not have your Amazon seller information on there, and instead the information of your dropship suppliers.
Because of this, many other sellers have had their seller accounts suspended. It’s one of the reasons I stopped doing drop shipping. A few years ago, I was grossing thousands of dollars daily dropshipping Walmart products in my Amazon account.
It was around this time that Amazon got more strict with its policy about packaging and packing slips. Since Walmart products were being delivered with Walmart invoices and boxes, it was too risky to continue this form of Amazon dropshipping despite how much money I was making.
To have an Amazon dropshipping business that doesn’t run the risk of suspension, you will need to tell your dropshipping wholesale suppliers that they under no circumstances have their own branding on the packing lists or packaging.
Here are more drop shipping policies from Amazon of things you have to have:
- Have an agreement with your drop shipping supplier where you are the only seller of record and the only entity identified as the seller of your products on all packing slips, invoices, external packaging, or any other information included or provided in connection with the products;
- Remove any packing slips, invoices, external packaging, or other information identifying a different seller or third-party supplier prior to shipping the order; and
- Remain responsible for accepting and processing customer returns, and always comply the
- Business Solutions Agreement (BSA) and applicable Amazon policies.
How Much Does It Cost to Start Dropshipping on Amazon?
The cost of starting dropshipping on Amazon can vary depending on several factors, including your business approach, product selection, and marketing strategies. Here are some cost considerations to keep in mind:
- Amazon Seller Account: To sell on Amazon, you’ll need a professional Amazon account, you will not need your own e-commerce store or Shopify store. The monthly subscription fee for a professional account in the United States is $39.99. However, fees may vary by country and can change over time, so it’s important to check current or local Amazon seller account pricing.
- Product Costs: You’ll need to purchase products from your suppliers to fulfill customer orders. The cost of the products will depend on your supplier’s pricing and any negotiated discounts or arrangements you have with them.
- Marketing and Advertising: While not mandatory, investing in marketing and advertising can help promote your products and increase sales. You may consider allocating a budget for activities like Amazon Sponsored Products, pay-per-click (PPC) advertising, social media marketing, or other promotional efforts. Using tools such as Adtomic can help simplify the process of Amazon advertising.
- Additional Tools and Services: There are various tools such as Helium 10 that can assist with product research, listing optimization, inventory management, and keyword research. These tools often come with associated costs. However, they are not mandatory and can be optional investments based on your specific needs.
- Packaging and Shipping Materials: Depending on your supplier’s fulfillment process, you may need to invest in packaging materials, including boxes, labels, or branded inserts. These costs can vary based on the nature and volume of your products.
It’s important to note that the above costs are general considerations, and the actual expenses for starting dropshipping on Amazon can vary based on your specific business requirements and circumstances. It’s recommended to conduct thorough research and create a budget plan that takes into account your product selection, marketing strategies, and any additional costs specific to your business.
Is Amazon Dropshipping Profitable?
The profitability of being an online retailer by utilizing Amazon dropshipping can vary depending on several factors. While some sellers have found success and profitability in dropshipping on Amazon, it’s important to understand the challenges and considerations involved. These can include:
- Competitiveness of your niche
- Customer demand for the products
- Advertising and marketing budget
- Quality of the products
You can take steps to see the profitability on Amazon by first installing the free Helium 10 Chrome Extension. If you find a product that you think you can dropship on Amazon, run the “Profitability Calculator.”
It will pull in the important information from the listing such as the retail price, the dimensions, and FBA fees. You then enter the price you can get it for from your dropship suppliers, as well as your shipping price, and it will calculate the estimated profit margin you can have.
Sometimes, there are multiple sellers selling the same product, they are perhaps doing Amazon dropshipping themselves or retail arbitrage. In situations like this, Amazon will rotate the buy box between sellers usually that are within 2% of the buy box price. If you see something like this, you need to plan on sharing sales with other Amazon dropshipping sellers. You should then use the sales estimator tool in the Chrome extension.
It will divide the total estimated sales from the Amazon dropshippers and other sellers who are within 2% of the buy box to give you an estimate of how many sales you would make per month
How Much Money Can You Make Dropshipping on Amazon?
The earnings potential in dropshipping on Amazon varies based on several factors. Product selection, pricing strategy, competition, operational efficiency, marketing efforts, and market conditions all influence profitability. While some sellers have achieved significant profits, others may experience more modest results. Conducting thorough research, optimizing operations, and making informed decisions are essential for maximizing earnings in dropshipping on Amazon.
How Much Does an Average Amazon Dropshipper Make?
The average dropshipping margin is between 10% to 30% margins. Amazon takes around 15% off your top-line revenue. So if your margins are around 30%, that means you’ll have a new margin of 15% after selling a product via Amazon online store dropshipping.
Is Amazon Dropshipping Hard?
Dropshipping on Amazon presents challenges that require careful consideration. The marketplace is highly competitive, and finding profitable niches or a reliable dropship supplier and making a seller agreement with them can be a challenge. Additionally, low-profit margins and the need to balance pricing to attract customers while maintaining reasonable profits add complexity. Coordinating with suppliers for timely order fulfillment, managing inventory across multiple sources, and staying compliant with Amazon’s policies also contribute to the difficulty. Providing excellent customer service, developing effective marketing strategies, and adapting to changes in the platform and market trends are essential for success.
However, despite these challenges, dropshipping on Amazon can be rewarding with the right approach. Thorough research, strategic planning, and continuous improvement are key. By understanding the market, identifying profitable opportunities, optimizing operations, and maintaining strong customer relationships, it is possible to overcome the challenges and build a profitable dropshipping business on Amazon.
Is Amazon Dropshipping Worth It?
Determining the worthiness of Amazon dropshipping depends on several factors. Consider the profit potential within your chosen niche, taking into account competition, pricing strategies, and supplier costs. Assess your ability to handle operational complexities, such as inventory management and order fulfillment. Familiarize yourself with Amazon’s policies and guidelines to ensure compliance and evaluate the time and effort you’re willing to invest. Consider the risks associated with Amazon dropshipping, and align your decision with your long-term business goals.
In summary, evaluating the worthiness of Amazon dropshipping involves assessing profit potential, operational capabilities, compliance with policies, risk management, and alignment with long-term goals. Thorough research and consideration of these factors will help you make an informed decision that aligns with your business objectives.
For some, it’s hard to make Amazon dropshipping profitable due to the costs to sell products on this model. Some use their Amazon dropshipping business as a stepping stone to build up capital to start their own Private Label Amazon business down the road. Courses such as Freedom Ticket can teach the A-Z for starting an e-commerce business using the private label model.
What Products Are Most Successful to Dropship?
The success of dropshipping products from your Amazon online store can vary depending on market trends, customer demand, and competition. However, certain product categories have shown consistent success in dropshipping. Here are some popular and successful product categories for dropshipping:
- Niche and Unique Products: Unique and niche products that cater to specific interests or solve a particular problem tend to perform well. These can include specialized hobby items, innovative gadgets, or unique home decor items.
- Health and Wellness: Products related to health, fitness, and wellness have seen increased demand. This includes fitness equipment, supplements, yoga accessories, and natural or organic skincare products.
- Home and Kitchen: Practical and innovative home and kitchen products are popular among consumers. This includes kitchen gadgets, home organization tools, smart home devices, and eco-friendly household items.
- Beauty and Personal Care: Beauty and personal care products, including cosmetics, skincare, hair care, and grooming products, have a consistent demand. Customers often seek trending and unique items within this category.
- Electronics and Tech Accessories: Consumer electronics, such as phone accessories, smartwatches, headphones, and portable tech gadgets, continue to be in high demand. Keeping up with the latest tech trends can offer opportunities for dropshipping success.
- Baby and Kids: Products targeting the baby and kids market, including clothing, toys, nursery items, and baby care products, tend to perform well. Parents are often looking for high-quality and innovative products for their little ones.
- Fashion and Accessories: Fashion items, including clothing, jewelry, bags, and accessories, have a broad customer base. Staying on top of fashion trends and offering unique designs can attract customers.
Remember that market trends can change, and competition within these categories can be high. Thorough research, staying informed about market demands, and identifying unique or untapped niches within these categories can help you find successful products to dropship.
When you have a private label business, you are advised to stay away from competitive niches since it is hard for a new seller to gain traction. It’s different when talking about an Amazon dropshipping business. You want to sell products that have high demand and are already established on Amazon since there is a lot of traffic to the product pages already.
Another thing that you have to be mindful of is processing customer returns. Since your Amazon account is the seller and shipper of record for the orders, you need to make sure that either you or your dropship supplier is ready to process your returns.
One advantage of dropshipping is that you do not need to purchase UPC codes since the products will not be processed through Amazon FBA warehouses. While you still need a professional seller account for your online business to sell products on Amazon, you can skip many requirements that FBA sellers have.
What Should I Dropshop on Amazon?
Determining what to dropship on Amazon depends on various factors such as market demand, competition, profitability, and your own interests and expertise. Here are some steps to help you identify suitable products to dropship on Amazon:
- Research Market Demand: Conduct market research to identify product categories that have high demand and consistent consumer interest. Look for products that are trending or have a steady demand over time using tools such as Black Box.
- Evaluate Profitability: Assess the potential profitability of products by considering factors such as supplier costs, pricing strategies, and competition within the Amazon marketplace. Look for products that offer reasonable profit margins.
- Identify Niche Opportunities: Consider focusing on specific niches or subcategories within popular product categories. Niche markets can offer a chance to differentiate yourself and target a specific audience with unique or specialized products.
- Analyze Competition: Analyze the competition within your chosen product categories. Evaluate the number of sellers, their pricing strategies, customer reviews, and overall market saturation. Look for areas with manageable competition and opportunities to stand out.
- Consider Your Expertise and Interests: Choose products that align with your expertise or interests, as it can be beneficial to have knowledge and passion for the products you sell. This can help you understand your target audience better and provide better customer service.
- Seasonal and Evergreen Products: Consider both seasonal and evergreen products. Seasonal products have high demand during specific times of the year, while evergreen products maintain steady demand throughout the year. A mix of both can provide opportunities for consistent sales.
- Evaluate Product Practicality: Look for products that are practical, functional, and offer value to customers. Products that solve problems or enhance daily life tend to perform well.
- Stay Above Board: To maintain a reputable dropshipping business on Amazon, you have to make sure you stay in compliance with all Amazon policies.
Remember to conduct thorough research, analyze market trends, and evaluate potential profitability before finalizing your product selection. It can also be helpful to test a few products initially to gauge market response before scaling your dropshipping business on Amazon.
How to Find Amazon Dropshipping Suppliers
To find Amazon dropshipping suppliers, you can employ various strategies and methods. Here are some effective ways to discover suppliers for your dropshipping business on Amazon:
- Online Supplier Directories: Utilize online supplier directories that list a wide range of suppliers offering products suitable for dropshipping. You can search for specific product categories, compare prices, and evaluate supplier ratings and reviews.
- Trade Shows and Exhibitions: Attend trade shows and exhibitions related to your target product categories. These events often attract suppliers, manufacturers, and wholesalers looking to connect with retailers and dropshippers. It provides an opportunity to establish direct contacts, negotiate pricing, and evaluate product quality.
- Contact Manufacturers and Wholesalers: Reach out directly to manufacturers and wholesalers to inquire about their dropshipping policies. Many companies offer dropshipping services but may not explicitly advertise them. Contact them via email, phone, or their official websites to discuss potential partnerships.
- Supplier Platforms and Networks: Explore supplier platforms and networks like Oberlo or Doba that connect dropshippers with pre-vetted suppliers. These platforms often offer product sourcing, automated order fulfillment, and integration with popular e-commerce platforms like Amazon.
- Contacting Brands and Distributors: Reach out to brands and authorized distributors of products you are interested in selling. Inquire about their Amazon dropshipping programs or inquire if they can recommend authorized dropshipping partners.
When evaluating suppliers, consider factors like product quality, pricing, shipping times, reliability, customer service, and their ability to integrate with your Amazon selling account. It’s recommended to communicate with multiple suppliers, request product samples, and clarify dropshipping policies and requirements before finalizing partnerships.
By combining these strategies and conducting thorough due diligence, you can find reliable and suitable suppliers for your Amazon dropshipping business.
Dropshipping vs Amazon FBA
Is Amazon FBA Like Dropshipping?
Amazon FBA and dropshipping are different business models on Amazon. By definition, there is no such thing as “amazon fba dropshipping” since Amazon FBA is the system where all shipping is handled by Amazon itself. Dropshipping involves partnering with a supplier who handles fulfillment, while with Amazon FBA, you own and send inventory to Amazon’s warehouses for them to handle storage and shipping. Dropshipping offers flexibility and lower startup costs, while Amazon FBA provides Prime eligibility and streamlined fulfillment. The choice depends on factors such as inventory ownership preference, branding goals, and level of involvement in the fulfillment process.
- Dropshipping is a lower cost lower risk strategy – With Amazon dropshipping, you don’t have to deal with shipping a bulk number of products to Amazon. You simply choose a reliable supplier and have the products shipped when they are ordered by the customer.
- Amazon FBA offers a larger customer base – With Amazon FBA, you will usually have a larger customer base to initially sell to; this means that you have the chance to scale up your business faster than with dropshipping. This is due to most customers preferring to see that they will get prime 2-day delivery on their orders.
Is Amazon FBA More Profitable Than Dropshipping?
Determining whether Amazon FBA (Fulfillment by Amazon) is more profitable than dropshipping depends on various factors and individual circumstances. Here are some considerations:
- Inventory Ownership: In a dropshipping business, you don’t pre-purchase nor handle inventory, resulting in lower upfront costs and reduced risk of unsold inventory. With FBA, you need to invest in inventory upfront, which may tie up capital, but you have control over pricing and can potentially benefit from bulk discounts.
- Prime Eligibility: FBA provides access to Amazon Prime’s fast and reliable shipping, making products eligible for Prime benefits. This can enhance visibility, and customer trust, and potentially increase sales. Amazon dropshipping may have limitations in meeting Amazon’s Prime requirements due to supplier locations, but once the seller fulfilled Prime is back, you’ll be able to dropship on Amazon and qualify for the Prime badge potentially.
- Fulfillment and Storage Fees: FBA incurs fees for storage, picking, packing, and shipping, which can impact profitability. However, FBA also handles order fulfillment, reducing your operational workload. Dropshipping generally has lower upfront costs and may have fewer fulfillment-related expenses.
- Scalability: Both FBA and dropshipping offer scalability, but with FBA, you have more control over inventory management and can leverage Amazon’s infrastructure to handle increased demand. Amazon dropshipping may require more coordination with suppliers and potential challenges in scaling.
It’s important to conduct a thorough financial analysis, considering factors like product margins, fees, and operational costs specific to your business. The profitability of each model can vary depending on market dynamics, competition, product selection, pricing strategies, and operational efficiency.
Ultimately, the profitability of Amazon FBA versus dropshipping depends on your specific circumstances and preferences. Some sellers find success with FBA due to Prime eligibility and streamlined fulfillment, while others may prefer the flexibility and lower upfront costs of dropshipping. It’s recommended to evaluate your goals, resources, and comfort level with inventory ownership and fulfillment to make an informed decision.
Can I Do Both Dropshipping and Amazon FBA?
Yes, it is possible to combine both dropshipping and Amazon FBA in your business model. This approach can provide additional flexibility and opportunities for growth. Here’s how you can leverage both:
- Dropshipping: You can continue to dropship on Amazon certain products that are not stored in Amazon’s fulfillment centers. This allows you to offer a wider range of products without the need to invest in inventory upfront. You can partner with suppliers or wholesalers who directly fulfill orders to customers.
- Amazon FBA: At the same time, you can utilize Amazon FBA for other products that you choose to stock in Amazon’s fulfillment centers. This enables you to benefit from Prime eligibility, fast and reliable shipping, and Amazon’s robust infrastructure for order fulfillment. You own and send inventory to Amazon, and they handle the storage, packaging, and shipping to customers.
By combining dropshipping and Amazon FBA, you can take advantage of the benefits of both models. Dropshipping allows for flexibility and the ability to test new products or niches, while FBA provides the advantages of Prime eligibility and efficient order fulfillment. You can determine which products are best suited for each model based on factors such as profit margins, inventory control, and product demand.
How to Set Up Amazon FBA Dropshipping
- Register for your own professional Amazon seller account
- Install Helium 10 software so that you can start to research potential products for your online store, and connect it to your Amazon account.
- Find suppliers who can provide wholesale prices to you.
- Use Black Box to see which brands your suppliers can provide have a lot of current sales on Amazon.
- Check profitability with the Profitability calculator.
- Use your Amazon seller account to list the product in your Amazon online store.
- As purchases come through, make sure they are transmitted to your Amazon dropshipping supplier so that they can ship them out in a timely manner.
You’ve now reached the end of our step-by-step guide to Amazon dropshipping for beginners. We hope this guide has provided you with valuable insights and practical knowledge to set you on the path to success. Remember, dropshipping on Amazon is not without its challenges, but armed with the right information and strategies, you can overcome them and build a profitable business. Stay committed to continuous learning, stay up-to-date with industry trends, and always prioritize providing top-notch customer service. Whether you’re looking to supplement your income or create a thriving online empire, the possibilities are endless. Now, it’s time to put your newfound knowledge into action, take that leap of faith, and embrace the exciting world of Amazon dropshipping. Wishing you the best of luck on your journey ahead!
Frequently Asked Questions
Dropshipping from your Amazon account to eBay is generally not recommended and may violate platform policies. Amazon does not permit using their platform for dropshipping, and eBay requires sellers to have direct control over the products they sell. This practice can lead to issues with product availability, pricing discrepancies, longer shipping times, and potential penalties or account suspension from both platforms. It’s advisable to work with legitimate suppliers outside of Amazon and ensure compliance with the policies of each platform for a positive selling experience.
Dropshipping from AliExpress to Amazon is generally allowed, but it’s important to comply with the policies of both platforms. Ensure the products you source from AliExpress do not violate intellectual property rights, maintain product quality, and adhere to Amazon’s guidelines for accurate listings and customer service. Choose reliable suppliers and stay updated with platform policies to ensure compliance and provide a positive customer experience. It is highly unlikely that you are able to stay within Amazon policies and do dropshipping by purchasing products from websites such as AliExpress.