How to Dropship on Amazon: Step By Step Guide

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We live in an era where a big percentage of the U.S. online retail sales happen within Amazon, so Amazon dropshipping is an appealing model to many sellers. In addition, the Amazon dropshipping concept has attracted plenty of dreamy entrepreneurs looking to set up their ventures.

However, Amazon dropshipping is not for everyone. Therefore, you should learn how to dropship on Amazon to determine if it's meant for you. Read on.

What is Dropshipping?

Dropshipping is the business model where an ecommerce store or seller, the dropshipper, does not keep the inventory of the product they are selling. Instead, when they make a sale, the dropshipper will forward the order to a third-party supplier who has the product. The drop-ship supplier will ship the product directly to your customers.

A dropshipper benefits from the difference between the wholesale price at which they purchase the products and the marked-up retail price. Generally, dropshipping is determined by great product research and marketing.

What is Amazon Dropshipping?

Amazon dropshipping business is the same as the classic dropshipping model except that you will be selling products on the Amazon marketplace instead of your own ecommerce store. Many drop shippers prefer this model on Amazon because of the huge market share and built-in eyeballs.

In addition, Amazon can integrate as a sales channel with your self-run ecommerce site and the Shopify store. However, although Amazon or eBay dropshipping are easy, it's quite hard to do them on Amazon.

Generally, when a customer makes a purchase, the seller uses their supply and fulfills those sales. Although it may be a complex process, we have broken it down for you to understand how it works and how to start Amazon dropshipping.

Is Dropshipping on Amazon Allowed?

Amazon has a longstanding policy on dropshipping, and it keeps on updating, and you should keep checking the few housekeeping rules. If you violate the Amazon policy in any way, you lose the ability to sell via FBM, and you can even have your Amazon account suspended.

If you intend on dropshipping as an Amazon seller, you must always:

Always be a seller of record for your products
Identify your products' seller on all packing invoices, slips, and the external packaging. You should also include any other information included in connection with them.
Remove any information that identifies your third-party supplier before you ship the order, and this includes all external packaging, invoices, and packing slips.
Responsible for accepting and processing customer returns
Follow all the seller agreement terms, Amazon and dropshipping policies.

Some examples of permitted dropshipping on Amazon include:

Purchasing products from an online retailer and letting the retailer ship the products directly to your customers or
Shipping orders with invoices, packing slips and any other information indicating the seller's name and contact information other than your own.

Can Amazon Dropshipping be done Using Amazon FBA?

Yes, dropshipping on Amazon should be done through Amazon's Fulfilled by Amazon (FBA) program. With FBA, Amazon picks, packs and ships your orders for you. They will also provide tracking information to your customer, handling customer service and processing customer returns.

However, Amazon FBA comes at a cost, and the cost will be determined by the product you are selling and the time of the year. In addition, if you want your goods to stay in Amazon's warehouse for over 6 months, you may need to pay long-term storage fees.

As an FBA seller, your product listings state, "Sold by [seller name] and Fulfilled by Amazon." Among the major benefits of using FBA fulfillment methods is that you are eligible for Prime Shipping to customers and have a higher chance of winning Buy Box.

Although Amazon doesn't permit the traditional dropshipping methods, some sellers still do it. So if you find a listing with a 7-14 day shipping time, then it's likely it has been purchased from a dropshipper in China or somewhere else.

How to Start Dropshipping on Amazon?

Now that you have some information about how Amazon dropshipping works, you may want to know how to set up your Amazon dropshipping business.

Below is a step-by-step guide that will show you how to dropship on Amazon:

1. Plan Your Online Business

Although setting up your dropshipping business model on Amazon is quick and easy, having a sound plan is necessary, and it will be crucial for your success as an entrepreneur. Apart from the basics such as your business name and logo, you will also need to think of the products you would like to sell, your target market, your suppliers and the potential marketing initiatives.

2. Get an Amazon Seller Account

You will need an Amazon seller account to sell on Amazon, and you can sign up at Seller Central. In addition, you will need to answer details about your business, such as the address or tax information and other identity and credit card information. Amazon will offer you two types of accounts: an Individual Amazon account or a Professional account. A professional seller account attracts a monthly fee and other Amazon selling fees.

3. Find a High-Demand/Low-Competition Product

Next, you should find the best product to sell on Amazon, and it should be a high demand but low competition product. You should start by identifying the product category you want to sell and the type of product you want to dropship. A few tools can help you research profitable products using Amazon data if you have no idea.

Some basic principles to help you find profitable products include:

Find niche products that have demand all-year-round.
In addition, products should be useful or obscure.
For the high-maintenance products that would need warrant storage, you will be better off dropshipping.
For eye-catching products, you can market on social media
Try to avoid Prime Products that are getting shipped through Prime because an FBA-registered seller sells them. This might be next to impossible to compete with.

4. Find a Supplier

Once you have product ideas, you will need to find wholesale suppliers. The biggest relationship to dropshipping products is Aliexpress, a business-to-business site that connects ecommerce store owners with suppliers looking to drop ship their products.

Some proven ways of connecting with dropshipping suppliers include:

a). Google Search

You can run an internet search for suppliers, and because that is a lot of work, you can contact suppliers through their websites. You are not getting tools or sourcing agents to connect you to a supplier but an actual dropship supplier.

You can use forms to sign up to become a dropship retailer, and all their sites provide contact details. If they don't have contact details, you should take that as a red flag.

b). Attending Trade Shows

Although attending trade shows is harder than scouring the internet, video calling with your potential supplier could be a great way to start dropshipping on Amazon. Also, trade shows are suitable because you can vet multiple suppliers in one location.

c). Dropship Directories

Directories are where you will find and pay a vetted list of suppliers that are ready to work with dropshippers or retailers.

Notably, most drop-shipping suppliers will only work with legit online retailers, and therefore, you must practice your pitch to come across as an experienced Amazon seller.

In addition, you can also drive traffic to your Amazon product listing through external methods like blogging, Facebook ads, email marketing or social media marketing. Although this method is more difficult to boost, especially if you lack a brand following, it can differentiate your product from your competitors.

5. Create an Amazon Product Listing

Dropshipping products are not automatically listed on your Amazon account.

To start dropshipping on Amazon, you should select the Amazon sales channel link, look for the "Create Listing" button and choose "Select Product."

It gives you two options: One is meant for brands that produce their own products, and it is for ensuring they get Universal Product Codes (UPCs).

However, as a dropshipper, you will need to select the second option, and it's meant for those who sell products made by other sellers or brands. After choosing this option, search for the products you want to sell or click "Select" if you find the product you want to sell. Once you are all set, click on "Publish" to finish the process.

When setting the price for your drop-shipping products, remember to account for Amazon fees.

6. Sync your Inventory with Your Amazon Sales Channel

If you have a Shopify store, sync it with your Amazon sales channel as it will help to prevent customers from making orders when the goods are out of stock. In addition, Shopify automatically updates your product listing on Amazon to match the inventory levels. This will help your ecommerce business avoid potential customer issues or negative reviews.

7. Promote your Amazon Store

Amazon is a competitive marketplace, and to earn by drop-shipping successfully, and you should invest in marketing initiatives such as paid promotions. In addition, you can also run ads on Amazon to draw in new customers, and you can advertise on social media networks to increase your sales.

What are the Softwares You Can Use For Dropshipping on Amazon?

To have a successful Amazon dropshipping business, you need to use the best software to automate your processes. Some main areas that will need automation include inventory management, repricing, order creation and tracking.

You will find a lot of tools online and some of these popular softwares:

a). Helium

This is one of the most popular all-in-one Amazon software out there. Helium 10 features tools for business analytics, listing optimization, product and keyword research. Plans are discounted if you decide to be billed annually:

Free Trial
Starter ($37/month; core tools and expert training)
Platinum ($97/month; It is the most popular single-user plan)
Diamond ($197/month- This is a multi-user plan with expanded limits)
Elite ($397/month- highest-tier plan and a live expert training)

b). Jungle Scout

This is a must-have for Amazon sellers, and the tool helps find, launch and sell your products on Amazon. In addition, Jungle Scout features an assortment of additional tools such as the Supplier Database Tool.

Plans are discounted if you choose to get billed annually;

Basic ($49/month and get full access to Jungle Scout browser extension)
Suite ($69/month with review automation and access to the advanced seller features)
Professional ($129/month, and its ideal for the experienced sellers with priority onboarding and 6 users included)

c). Sellery

Sellery software is an automated repricing tool that allows Amazon dropshipping sellers to set price limits, including shipping. As a result, it boosts the chances of winning Buy Box.

Some of their plans include:

Free Trial
1% of your gross monthly sales, a minimum charge of $50/month and a maximum of $2000/month.

d). Oberlo

Oberlo is designed to help dropshippers hunt down contact dropship suppliers' products and come up with a niche. Some of their plans are:

Explorer (Free)
Grad ($7.90/month plus coaching, courses, and trends reports)
Boss ($29.90/month plus tools for advanced sellers)

e). Shopify

Shopify software is the home of dropshipping. On your Shopify store, you can integrate Amazon as a sales channel, and it will allow you to track your inventory while keeping tabs on the sales that should be fulfilled.

Free (14-day trial)
Basic Shopify ($29/month for newbies)
Shopify ($79/month for a growing business with at least a retail store)
Advanced Shopify ($299/month for the growing businesses with two or more retail stores)

f). Spocket

Spocket is a machine-learning-powered tool for product discovery and sourcing, and it's suitable for sellers looking to dropship on the U.S. and European marketplaces.

Some of their plans include:

Free
Starter Plan ($24/month with 25 unique products and email support)
Pro Plan ($49/month with branded invoicing and chat support)
Premium Plan ($99/month with 10,000 unique products and premium products)

g). FeedCheck

FeedCheck allows sellers to view all the product reviews in one place, and it makes a great tool if you have a huge selection of Amazon products in your online store. When you have easy access to the reviews, you can offer better customer service and monitor your competitor's products.

How Much Will it Cost to Dropship on Amazon?

Amazon dropshipping fees vary by product category, ranging between 10 to 15%. If you are working with small margins when dropshipping Amazon products, this will dig into your profits.

In addition, you will have to come up with a selling plan. An individual plan costs $.99 per unit sold, whereas the Professional plan costs $39.99 per month no matter the number of products you sell.

Pros of Dropshipping on Amazon

Like with all business models used on Amazon, dropshipping also has its share of advantages and disadvantages. Amazon dropshipping business has a range of benefits, making it attractive for beginners looking to open their own online store. Some of the advantages include:

1. Needs Less Capital

Dropshipping on Amazon has little to no upfront costs, and it's a highly accessible and economical way to start your online store. Compared to the traditional retail methods and the ecommerce models such as wholesaling, you can sell products without purchasing products upfront or handling your products physically. In addition, you don't need to pick, pack or ship your orders to consumers.

Compared to other ecommerce methods like the private label or wholesaling, dropshipping on Amazon does not need you to have your own inventory. Instead, what you get paid by the customer on sale, you can turn it around and use some of it to purchase products from your third-party supplier and have them shipping orders to your buyer.

2. Quick Setup

Most people may be afraid of the technical aspects of starting their own ecommerce store, but with Amazon, you don't need the technical skills. In addition, you don't even need a website hosting company or need to know any information about conversion optimization.

All you need is set up an Amazon seller account, and you can start to sell products online. You can set up your Amazon account in no time, and once you find the best dropshipping supplier, you can start selling your products immediately.

In most cases, you won't need to create a new listing because one already exists, and therefore, you may also not need to take product images or purchase UPC codes. However, ensure you read the Amazon seller agreement and the terms of service before you start selling your dropshipping products.

In addition, since you don't need to buy and store inventory to run a reputable dropshipping business, it is convenient for new entrepreneurs looking to start an online business. All you need is a sale.

3. No Warehouse Cost

Amazon offers its fulfillment centers through a program known as Fulfillment by Amazon. This allows you to complement your dropshipping Amazon products with your own items without having to pack, ship or warehouse.

4. Multiple Product Categories

Amazon has over 30 product categories and uses the right dropshipping suppliers, and you can sell in as many niches as you would like. However, avoid selling products in Amazon's restricted categories such as Powersports, medical devices and alcohol.

5. High Potential to Get Discovered

Amazon is among the popular online marketplaces in the world, and therefore it has a huge customer base and a huge array of dropshipping niches you can try on Amazon. You can sell in as many dropshipping niches as you want. With the right products and dropship suppliers, you will have a huge market potential allowing you to meet your profit margins.

6. Shopify-Amazon Partnership

As a Shopify merchant, you can connect your Shopify store to Amazon and tap into the marketplace. When you link Shopify and Amazon, you can easily manage your orders on the two platforms. In addition, this will help you keep inventory levels synced between Amazon and your Shopify store, and thus you will avoid over-selling.

Cons of Dropshipping on Amazon

Dropshipping on Amazon also has some disadvantages, and you should know them before you decide to start your ecommerce business.

1. Lack of Quality Control

Lack of quality control means that there is no way to manage the quality of products your dropshipping supplier will ship to your customer orders. This is why you must choose the dropshipping providers you partner with.

However, products may travel for 10,000 miles or more to get to their final destination, and they could get damaged in the process.

2. Competition

As expected from an ecommerce model with low barriers to entry, the Amazon dropshipping business is a competitive business model. Therefore, you will need to put a lot of thought into the products you will sell to avoid oversaturated niches and achieve a competitive advantage.

3. Low Product Inventory

One of the major downsides of dropshipping on Amazon is low product inventory. When relying on one dropshipping supplier, they may be working with other merchants, so you might lack enough products to sell to customers.

However, you can source from other sellers when inventory is low, but working with multiple suppliers will add complexity to the operations. Notably, sourcing from multiple suppliers defeats the purpose of hassle-free dropshipping.

4. Limited Promotional Deals

Since your customer purchases are not in bulk, you cannot offer promotional discounts and deals. However, you can still offer free shipping or discounted bundles, and you can sell products from your Amazon store in bundles to generate higher sales.

5. Customer Service Concerns

Since your Amazon dropshipping suppliers handle the packing and shipping of your orders, you may not always know the order status. So, when your customer asks for delivery status, you may not be able to respond unless you ask your dropship supplier for that information.

Also, when a customer gets an incorrect package, you may not respond to them immediately. This is because you will have to check with your dropship supplier and verify the information before you act.

This is a huge downside as a small miscommunication may lead to larger issues such as bad reviews and poor customer experiences. Therefore, for effective communication, both Amazon sellers and the wholesale suppliers must agree and adhere to high communication standards to promote better customer service.

Is Amazon Dropshipping Profitable?

Yes, it can be. An average online retailer usually sells its products at a 10% to 30% margin where if they dropship on amazon, the platform takes about 15% off their top-line revenue. So if you are selling products at a 30% margin, your net margin after selling products will be 15%, and it's a decent margin if you consider the wide audience you have tapped into.

Although Amazon dropshipping is an easy business model to try out, it can be difficult to master it if you want to make significant profits from your online store. This is because you have low margins due to competition, and therefore you can only make significant profits at a scale.

For maximum profits on your online store, you need to ensure that your product descriptions and inventory counts are accurate to prevent your Amazon account from getting banned. As a result, you won't be able to do this using your hand, and you can depend on softwares to manage operations.

Here is what you need to automate for you to get a chance of making a profit:

Purchase Order Creation- When an order comes to your Amazon seller account, you have to send it directly to your dropship supplier for the fulfillment, having that retailer ship directly to your customer.
Inventory Listing Management- When you run out of stock, ensure you deactivate your product listing to prevent unfulfillable sales.
Repricing- Since Amazon prices are constantly fluctuating, you have to ensure that you own the Buy Box because otherwise, you won't make sales. Of course, your Amazon dropshipping margins could be higher with the Buy box, but it's highly competitive, and an online retailer shouldn't focus on it at the beginning.
Order Tracking- Your third-party supplier must provide shipping and tracking information electronically, and you must send it to Amazon immediately. This should be an automated process to handle all the orders you receive successfully.
Product Data Syncing- The products getting synced by your third-party supplier should match your product listing. In addition, any change in the external packaging or the product version should be accounted for.

Generally, to dropship on Amazon, all areas of your ecommerce business need to communicate with each other. Amazon dropshipping success is a high-risk game with low margin volume, meaning you can lose your entire business with one mistake.

Tips for Successfully Dropshipping on Amazon

Now that you understand the Amazon dropshipping business, it seems like a simple process, right? Creating your dropshipping business on Amazon is easy, but succeeding on Amazon with dropshipping may take a little more work:

Below are tips that help you succeed in your dropshipping business.

a). Promote your Product Listing

To maximize your sales, you will have to drive traffic to your product listing, which can be achieved in several ways.

First, you should have Amazon's internal sponsorship program, Amazon Pay-Per-Click (PPC. The PPC program allows sellers t create advertisements for their products, making the seller's product appear higher in the Amazon search results for the keywords they have set.

b). Focus on your Own Brand

There are several ways you can focus on your Amazon dropshipping business, including:

i). Maintaining a 95% Seller Rating

Aim for at least a 95% rating as having a high sales rating makes you look more trustworthy to consumers. Also, it increases the chance of your Amazon dropshipping business appearing in organic searches and thus gives you a competitive advantage over the seller with lower ratings.

ii). Pricing your Products Wisely

Before you set the prices of your Amazon online store, you should account for all Amazon fees, including Amazon's monthly fees and other fulfillment expenses. In addition, to succeed in the Amazon dropshipping model, you will need to have high-profit margins where your markup should be between 30% and 50%.

iii). Optimizing your Product Titles

All your product titles should be relevant to the buyer's search queries, and instead of stuffing your title with keywords, try to optimize your product titles. For example, your brand name should always be the first word in your title, and then you can add the product attributes such as model, color or size to make your title more descriptive.

c). Aim for the Buy Box

On Amazon, you will find different Amazon sellers selling the same product, and you will have to compete with the other sellers for sales and the Buy Box. The Buy Box is a small, highly visible section on the right side of your Amazon product page, and it enables customers to make a quick purchase.

An Amazon seller with a Buy Box drives more sales to their Amazon seller account than other sellers of the same product. Amazon determines the Buy Box winner based on fulfillment, seller rating, history and other variables. After all the factors are considered, Amazon gives Buy Box to the sellers that perform well on the platform.

d). Get Some Samples

Before listing your product on your Amazon store, ensure you know the product you want to sell online. Order one unit in advance, and if you can make the order without the third party drop shipper knowing it's you, then the better.

Once your samples arrive, inspect them to check how they looked on arrival, how long it took and if the products were as your Amazon business describes. These details will help you predict how your customers will receive their product when you start Amazon dropshipping.