So, you like to start dropshipping on Amazon?
In case you didn’t know yet, an Amazon dropshipping business is a business venture like any other, and it will need some effort and time from you to execute and plan your launch strategy. Jumping right into starting an ecommerce business can be exhilarating, but doing so without previous research could cause major problems for you down the road.
The question now is, what should you do then?
You must certainly consider collecting as much information as possible. That will help you to make informed decisions and develop a complete plan.
I have made this post as your step-by-step guide to effortlessly starting your Amazon dropshipping business in 2022. Nonetheless, before I jump right into steps and tips on how to start your dropshipping venture, let me talk about first what dropshipping is and a little overview of what Amazon is.
What is dropshipping?
Dropshipping is a subdomain of the ecommerce business industry. It indicates that you’ll be selling products to your customers. Nonetheless, unlike setting up a classic ecommerce business, you’ll be doing it uniquely.
Your dropshipping business won’t need to keep the products it sells in stock at any time. Rather than buying products beforehand from other manufacturers, wholesalers, and online retailers, you’ll only make a purchase when your customers place an order with you. That’s precisely what makes this retail fulfillment approach unique.
Remember that a dropshipping business model also indicates that you don’t need to do anything with packaging the products and shipping them to the clients or customers. A third party does that for you too.
In other words, your dropshipping venture will become an online store that your consumers can utilize to order different products. Nonetheless, your business has nothing to do with selling products except listing them on the website.
What is Amazon?
Amazon is a giant online retailer with a market capitalization of $268 billion as of June 2018. As an ecommerce store, Amazon enables businesses and individuals to sell and display products for sale online.
Originally started as an online bookselling firm, Amazon has transformed into an ecommerce store that is massively focused on offering ecommerce, digital streaming, cloud computing, and artificial intelligence services.
Following an Amazon-to-buyer business model, the company provides a monumental product category and inventory, allowing consumers to buy just about anything, including jewelry, books, beauty supplies, clothing, gourmet food, movies, pet supplies, electronics, furniture, garden supplies, and household, goods, among other things.
Headquartered in Seattle, the company has individual websites, customer service centers, software development centers, data centers, and fulfillment centers across the globe.
What is Amazon Dropshipping?
As the name recommends, Amazon dropshipping is a business model where you list products on Amazon and start selling them without owning the inventory or delivering the products to your customers.
You are running an online store on Amazon without purchasing any stock or making upfront investments. Alternatively, a third-party drop shipper (often a wholesaler) will be responsible for procuring the said product, keeping the inventory, and shipping it to the buyers on time.
Your job there is to serve as the middleman on Amazon and drive necessary traffic to your products and forward all the orders to your online retailer or supplier. Also, you can have an automated system in place to serve that purpose.
What’s more, you must communicate with your supplier and guarantee that the orders are delivered on time, and everything else is running efficiently and smoothly.
You then take away whatever you make for each sale, minus the overhead costs and potentially Amazon selling fees and handling fees that go to the third party or manufacturer.
That is all there’s to it. Sounds easy and exhilarating.
Amazon’s Recent Dropping Policy Updates to Consider
Amazon accepts the dropshipping model of enabling a third party to fulfill shipping orders on your behalf. However, before all that happens, you should meet specific conditions like:
You must be an Amazon seller of your products on the record.
Acknowledge yourself as the Amazon seller on all invoices, packing slips, and other seller details provided with the products.
You are responsible for processing customer returns and refunds.
You must eliminate any details determining your third-party supplier as the third party fulfilling your shipping orders.
You can’t purchase products from another online retailer or online store and have them ship the product straight to the customer.
You should comply with your Seller Agreement and adhere to Amazon’s selling policies.
Does Amazon Accept Drop Shipping?
Are you allowed to start dropshipping on Amazon? The short answer is yes. Amazon enables dropshippers given that you follow the platform rules, as follows:
You are the seller of all the products in your online store.
Your seller information should appear on the product’s external packaging slip and invoice.
The information of the third-party supplier should not show on any part of the orders.
You should handle all the concerns of the customers about the product.
You should follow all the terms provided in the seller agreement of the Amazon policies.
Remember that Amazon became one of the largest ecommerce stores as they offer opportunities for small or big vendors to use the website and market their products.
Apart from the guidelines mentioned above, here are other rules you must keep in mind to avoid account suspension:
The order defect of your ecommerce store should not exceed 1% of your overall shipped orders. Also, a delivered item with negative feedback, a chargeback, or an A-Z claim is considered defective.
The cancellation rate of your online store should not exceed 2.5%. Before shipment confirmation, those are canceled orders by the customer or you.
The last shipment rate is another factor to keep in mind. You shouldn’t go beyond 4% to prevent account suspension.
How Does Dropshipping on Amazon Work?
As explained earlier, dropshipping on Amazon is permitted, but it’s a bit more difficult than the standard dropshipping model.
Given this model, many dropshipping providers ship out products without the retailer’s brand name, enabling them to work with as many dropshippers as possible without incurring customization expenses.
Moreover, suppliers also include their warehouse address on the packing slips so that buyers and couriers know where to return the package in case problems arise. Those practices are normally acceptable, but not when it comes to Amazon.
You are already informed about the dropshipping policy of Amazon. As you know, Amazon wants dropshippers to handle their own online store as if they have their own brand selling their own products. They do not like the details of your third-party suppliers sent to your consumers, and not complying could lead to suspension or termination of your Amazon seller account.
Thus, how can you start dropshipping on Amazon? There are two ways to do that. But before discussing that, you must understand that there are dropshippers out there, especially Amazon sellers and other sellers who source their products from Walmart, tricking the entire system.
They list products on Amazon, order from Walmart using their buyer’s information, and have the order shipped from Walmart directly to their customers. Indeed, with Walmart’s information on the external packaging.
That’s considered a policy violation. However, those Amazon sellers hide their practice through different methods, including taking advantage of Amazon’s Feedback Removal request to remove customer reviews mentioning Walmart’s external packaging.
I do not suggest this practice, as it will only result in account termination. Alternatives, you can follow all the rules, make one of the recommendations of drop shipping, and set up your own store for long-term business.
1. Dropship via FBA
The Fulfillment by Amazon (FBA) program is one of the easiest ways to fulfill orders while guaranteeing complete compliance with Amazon’s policies.
After you get accepted to the program, you can order inventory from your supplier, have the retail ship directly to the nearest or most strategic Amazon fulfillment center, and allow Amazon to deal with the storage, packing, delivery, and processing of customer returns.
Remember that FBA is not free and could defeat the benefits of dropshipping (such as overhead costs and low startup costs) if you pursue it without proper preparation.
With that, it is best to begin with a less costly fulfillment method (such as dropshipping through private label Amazon packaging), understand more about FBA and its fees, and determine later on if registering in the program would be lucrative your online business.
2. Dropship with private or custom label packaging
This method works the same way as the standard dropshipping model, including finding third-party logistics partners or suppliers who can personalize packing slips.
It’ll be simpler if you go for suppliers experienced and proficient in dropshipping on Amazon. That way, you’ll have little to no issues in branding packages and dealing with potential post-shipment issues, like order tracking returns.
Remember that private label packaging might incur extra charges, particularly if you have not established a strong relationship with your dropship suppliers or your selected 3PL company. That said, consider the overall fulfillment cost before pricing the products on Amazon.
How Much Does Amazon Drop Shipping Cost?
Well, the fees on dropshipping on Amazon differ by product type but are often in the ten percent to fifteen percent range.
Are you working with relatively low-profit margins when dropshipping your Amazon products? That will take a big chunk out of your profits.
You will also have to pick a selling plan. For instance, the Individual Plan often costs $0.99 per unit sold, but the Professional Account plan costs $39.9 per month, no matter how many Amazon dropshipping products you sell.
Nonetheless, is Amazon dropshipping profitable? Well, it can be. The average Amazon dropshipping margins are between ten percent to thirty percent margins. The Amazon business only takes about fifteen percent of your top-line revenue.
Thus, suppose your margins are about thirty percent. That means you will have a net margin of fifteen percent after selling a product through Amazon store dropshipping. Those margins could be higher, especially if you win the Amazon Buy Box.
Still, it’s highly competitive and should not be something you can depend on in the long term.
What is the Shipping and Customer Returns Policy in Amazon Dropshipping?
If you want to start your Amazon dropshipping venture, you might be thinking about whether it’s lucrative or not. Without a doubt, Amazon dropshipping is beneficial due to flexible prime shipping without overhead costs.
· Shipping methods
Remember that Amazon dropshipping suppliers facilitate their dropshippers by purchasing products at low fees and carrying inventory to the customers through following prime shipping methods.
Free two-day shipping – It takes place through the FBA Amazon dropshipping providers.
Free same-day shipping – It’s possible with the Amazon FBA Sellers and happens only in particular locations.
Free standard shipping – It’s also possible when you order products for more than $25 in total. There are a few limitations on the size, weight, and external packaging.
Ineligible items for fast shipping – You will find a few ineligible items, such as international destinations, personalized gift cards, magazine subscriptions, and Amazon FBA items that do not label as Prime.
· Return policy
The customer return policy on Amazon provides a better alternative to refund the products. These policies include:
Thirty days return policy whether you’ve opened up the external packaging.
Baby products have a 90-day return policy for intact external packaging.
But note that you should contact the suppliers first to return the item.
Amazon Dropshipping versus Other Platforms
With more than 300 million active users and about $88,000 spent each minute, there’s no doubt that Amazon is an international eCommerce giant. However, it is not the only platform you can utilize to create a successful and lucrative dropshipping business.
Perhaps, it is best to use a variety of channels. One option you can use is eBay. It may not be as giant as Amazon, but eBay has a substantial pool of customers and enables dropshipping. Nonetheless, it charges a listing fee for every product you post.
On Amazon, you can list as many items you wish and remove any that do not sell without being out of pocket. Meanwhile, this approach would cost you on eBay. Hence, testing products is a lot better on Amazon. Still, you can add proven top sellers to eBay to maximize profits.
The Advantages and Disadvantages of Dropshipping on Amazon
Did you know that the global market for dropshipping was valued at $102.2 billion in 2018? It’s also anticipated to increase at a CAGR of 28.8% between 2019 and 2025. There’s no doubt that it’s a massive market with numerous opportunities to make some money.
Here are the benefits of starting your Amazon account through dropshipping.
· Simple scalability
A business in Amazon or eBay dropshipping is simple to scale up or down. Given that you’re only a storefront, you can efficiently remove or add products on your Shopify store or website.
Once you’re completely familiar with that process, you can scale your offer to match the demand in only a few minutes.
· A wide selection of product choices
You can sell anything through your dropshipping store, even wholesale. Being able to pick from a broad spectrum of product selections without thinking about particular warehousing and shipping requirements puts you at a huge advantage.
Furthermore, you can test numerous ideas and easily change your offer, especially if you’re not producing enough sales from customer purchases.
· No need for a business location
Another advantage of having a Shopify store through dropshipping is the ability to do it anywhere you like. There’s no need for a fancy office or business location. You can become a dropshipping guru and yet do everything on your laptop from the comfort of your home.
Also, you can source new product items and add them to your Amazon seller account even if you’re traveling. How cool is that?
· Start your business quickly
Starting an Amazon dropshipping store is quick and easy. You don’t need to consider top-sourcing talent from the market, creating elaborate business and marketing plans, or scouting for a reasonable storage facility.
You can effortlessly launch your business in a few hours since you only need a functional website.
· Low upfront investments
Remember that the initial costs of creating a business can add up to a significant amount. But that’s not the case with this online business. You don’t need to invest in a business license, inventory management, storage facilities, or hire added staff.
Your money will not be trapped in the inventory that you’d otherwise need to create upfront.
· No business knowledge is needed
Ultimately, you don’t need any prior experience as a manager or entrepreneur to start a dropshipping store and sell products. Instead, dropship on Amazon means you only need to be familiar with the dropshipping process (such as retail arbitrage, market research basics, Amazon sales channel link, profit margins, processing customer returns, etc.) to launch an operation to equip it for success.
But like most things in life, dropship on Amazon also comes with disadvantages.
· You don’t have control over your inventory
Not having inventory is a great thing, as it saves you from the troubles of investing. Nonetheless, inventory not in your control means it will be damaging to your business. That’s especially true when your supplier goes out of stock.
Inventory level is a crucial metric in Amazon SEO. The minute your purchasing products go out of stock, Amazon will replace the listing in the search results with that of your competitors. When that happens, you need to begin from scratch to reclaim your position.
· Unimpressive profit margins
The margins you receive after paying your supplier all the item costs and any associated shipping or handling fees might not be enough.
The best thing you can do to negate that disadvantage is to go after an item that has remarkable margins.
How Do You Start Dropshipping on Amazon?
Now that you have a basic understanding of the dropshipping business model. Do you still want to begin one?
Here are the steps you need to complete to become a proud owner of your dropshipping venture.
1. Find the ideal niche for your dropshipping business
The initial step you need to do involves understanding your target niche market and doing the necessary market research.
A market is a broad term, but a niche market is not. In case you didn’t know yet, a niche market is a smaller part of a broader market. It Is ideal for selling specialized items. Also, a niche has its unique demands and preferences.
If you concentrate on a niche market, you will excel at catering to particular customers and beat your customers who are concentrated on a broader market.
Finding a demand
To create a niche market, you must not take market research lightly. Your main goal is to find demand. Your dropshipping ideas are only good if they’re lucrative, and the only way to determine whether they’re lucrative is to study further the niche you wish to target.
You can also use tools such as Google Trends to determine trending products. On top of that, you can utilize keyword research tools like SEMrush to determine products with hugger demand.
Also, the high monthly search volume of products is in high demand. Always bear that in mind.
Make sure there is not much competition.
Having competition in your niche market is considered healthy. However, having too much of it isn’t great. It only indicates that your niche market is saturated with product offers. Also, the only way to cut through the noise is to lessen your profit margin.
Just type product names into your search engine and check the number of eCommerce stores already selling them. You can also experiment by including “free shipping,” “buy online,” “online,” and other relevant keywords for product names to determine more competitors.
That is where tools like SEMrush are extremely useful. You can utilize it to find how competitive your market is for particular products. Enter the keywords of your product and look for the Competition value.
Remember that the “Competition” value stands for competition data and CPC. In short, the number of advertisers running their ads on Google AdWords for your targeted keyword.
Usability value
Do not forget to see whether there’s a justified need for your products in your niche market. Is there a problem, goal, or need that your potential customer has that you could solve? Also, a good niche market offers different opportunities to solve concerns for and enhance your potential customers’ lives.
Impulse-by-products
Ultimately, the ideal niche market is one where impulse-buy products flourish. It indicates that you can produce more sales in shorter time frames that convert into more revenue.
For example, niche impulse-buy product markets are places where you could sell pet products, smartphone equipment, and fitness gadgets.
2. Determining the right products
After you determine your niche market and understand which products you wish to sell, you’re now ready to begin searching for the best products to sell. That’s an essential step since you’re the success of your dropshipping venture mainly depends on whether you pick the best products to sell.
Here are crucial things you need to keep in mind:
Quality of the product
Most manufacturers create the same items. Nonetheless, not all items are made the same. Other manufacturers use quality materials, have better designs, and practice innovative product procedures.
That is all reflected in the product’s quality. To delight your customers, stop returns, and guarantee repeat business, the items you sell must be high quality.
Quality is a simple thing to check out. If you’re not a professional on the product, you could read reviews on products made by bloggers specializing in the niche. You can Google the products you want to sell by manufacturer and check for customer ratings and reviews on competitors’ websites.
The ratings and reviews will be more than enough to help you gauge the quality of certain products.
3. Find a dropship supplier
The next step in your Amazon dropshipping is to look for a dropship supplier for your products. By a dropshipping supplier, it means an honest, legitimate wholesaler who knows the idea of dropshipping and is not out there to take your money.
Numerous wholesalers will require monthly Amazon fees or place at least a minimum order size for you to do business with them. That goes against the concept of dropshipping, where the point is to get things done with less investment.
Therefore, to help you find the best dropshipping suppliers, here’s what you must do:
– Begin with a simple Google search
Nonetheless, you may need to do quite a bit of research to find a third-party supplier specializing in your product or niche. The best thing to do is collect a list of ten to fifteen dropship suppliers and contact one of them to get estimates and learn their seller agreement and requirements.
– Attend trade shows
Trade shows are one of the ideal ways to find multiple suppliers for your Amazon dropshipping business. Each year, thousands of trade shows are done all across the globe, attracting wholesale suppliers and manufacturers from various industries.
Here, you can find wholesale suppliers and industry experts from various industries under one roof and build great connections. Of course, attending these trade shows isn’t cheap. However, if you only have the money to invest, you must go for it.
– Contact the wholesale suppliers directly
It’s a fantastic approach to finding genuine dropshipping suppliers for your product. To do this, you must call a reputable dropship supplier and request a list of their wholesale distributors. Contact those distributors and ask if they drop ship and how to set up an account.
– Invest in a supplier directory
Remember that a supplier directory is a complete database of distributors and potential dropship suppliers, organized systematically by markets or niches. Whether your product is in the hardware industry or automotive sector, you’ll find directors dedicated to each niche.
Getting your hands on those directories means you will have all the information you need at your fingertips.
Since you plan to be in the business for a long time, you must screen those dropship suppliers thoroughly. Communicate your goals and ideas and get a clear picture of whether they can process your orders or not.
Discuss the pricing and all money-related concerns beforehand to prevent any issues down the road. Before heading into the business with your supplier, ensure you and the supplier are on the same terms.
Tip: the supplier you pick will be responsible for processing and shipping orders to customers. That’s why you need to ensure they are up to it. Always have an open line of communication to deal with any business-related problems that may come in the process.
4. Set up your Amazon Seller account
After sorting through the dropshipping products and suppliers, the next step you need to do is to set up your Amazon Seller account and get the show underway. It’s a simple process with straightforward steps to follow.
Head over to sellercentral.amazon.com to sign up. You’ll be asked for information about the online store, such as tax information and address, as well as other credit card and identity information.
You must pick whether you’re making a professional seller account or an individual account. The latter is ideal for vendors who can sell forty items or less each month. On the other hand, a professional account is perfect for vendors who can market over forty products per month.
5. Do your keyword research
We have briefly discussed this in the earlier part. But again, the importance of Amazon keyword research must be emphasized, all for the right reasons. Without speaking your shopper’s language or even learning the type of concerns they use to find purchasing products online means, you’ll have a hard time making your dropshipping products visible in the marketplace.
Thus, your first plan of action after registering an Amazon seller account is to collect all the top keywords for your selling products. The collection must have your regular concerns, high search volume, and the coveted long-tail keywords.
On top of that, you must target your leading competitors via the reverse ASIN feature and determine the keywords they’re using in their listings.
Equipped with that arsenal of strong keywords, you’re now ready to create a compelling listing that sells all your own products. That brings us to the next step in creating your dropshipping on Amazon.
6. Prepare your product listings
Remember that your product listing is the first thing your customers will read every time they visit your Amazon online store. They will also decide to purchase products based on the content and information you give there.
Thus, it should be compelling, innovative, creative, and, most essentially, carry all your products’ best keywords.
In other words, it should answer the question of your readers. Why should I purchase products from your online store? While making sure that it’s easily discoverable by Amazon’s search engines. Remember that for your Amazon dropshipping business to become successful. You must attract people to your listing and motivate them to buy products.
Also, preparing a persuasive product category is an art in itself.
7. Launch your product on your commerce store
You are almost there, pal! The final step in launching your Amazon dropshipping business is to launch your products on your Amazon account. You can create a strategy concentrating on giveaways, social media promotion, and Amazon Sponsored Products campaigns.
After launching your product must make it visible in Amazon’s search results. Begin with a simple PPC campaign and market your products on Twitter, Instagram, Facebook, etc.
Create hype about your product in the market. Come up with various giveaways and discounts to get traffic to your listings early. After your product’s sales history enhances on Amazon, its position in the search results will also improve.
While you’re at it, you must also concentrate on getting positive reviews for your online selling products. Indeed, the rule is never to purchase or ask for positive reviews. You must adhere to Amazon’s terms and conditions and get reviews naturally.
8. Monitor the performance of your reputable dropshipping business on Amazon
Participating in dropshipping on Amazon means you are responsible for two main things: ensuring everything is in place on your supplier’s end (external packaging, logistics, inventory, etc.) and getting orders and traffic for your products on Amazon.
Thus, the last step of your journey of starting dropshipping on Amazon will be to ensure that your own eCommerce store is operating like a well-oiled machine. You must track your listing’s position in the search results, track and optimize your ad campaigns, and work towards taking your listings to the top page.
Also, you must keep in touch with your third-party supplier and ensure that the retailer ships directly and that your orders are fulfilled on time.
Six Tips for Success When Dropshipping on Amazon
There’s no doubt that dropshipping is one of the best business models for a new online store breaking into the ecommerce game. That’s because dropship on Amazon is simple to begin with, is low in costs, is highly automated, and gives a lower risk.
But what are the tips you need to start your own Amazon dropshipping store? We have put together six Amazon dropshipping tips all new business owners must know before they start selling.
1. Always go niche
Do you still remember the beginning of Amazon? The entire business started in a narrow niche of online books—adding to their store as their online brand improves and, with it, their niche—which, as you know, includes anything and everything.
The point is that they were selling in a narrow niche when they started. Unless you’re only opening up a broad Amazon store to test the waters before you pick your niche, narrowing your focus is the key to major success.
A dropshipping Amazon store that’s too general won’t allow you to easily hone in your potential shopper audience or create a brand building.
To choose the best niche, look at where your passions are, research different industry trends, and consider your target audience. Analyze and assess the demand, market, and competition to determine how you could fit in.
2. Select the best supplier
The products you pick directly impact your brand, and thus it’s essential to be particular about your products. There are two important steps to choosing the best supplier for your online store.
Consider a supplier audit. Check all the information about the supplier, the selection of products they provide, and their reviews to guarantee quality and credibility. Next, you can narrow down the list. You can do that by comparing wholesale price, guarantee, and whether they involve e-packet service.
After all your research, don’t hesitate to replace the holes if a bad supplier manages to slip through them. Numerous suppliers are dependable and sell similar products.
3. Put some effort into your website
Indeed, it’s true. Amazon dropshipping enables you to cut costs and corners, but that does not indicate you must be doing the same with your website. Remember that customer experience goes a very long way to establishing trust.
So, ensure you put effort and thought into your home page, that your Amazon store is properly optimized for SEO and the user, that your product descriptions have substance and are free of errors, that your product photos are quality, and that the shipping and return policies are crystal clear.
You can also look at successful, competitive online stores within your niche for inspiration. Consult online store-friendly Facebook groups for excellent tips and make your own online store optimized for conversions.
4. Consider the numbers
When picking a particular product, you’ll like to ensure it is at the best price point for the service you’ll be receiving. It must have profit capabilities and marketing potential, which is not easily discovered in your selling areas.
Consider your gross profit and profit margin. Amazon dropshipping enables you to get the products at wholesale cost. That means you should be priced at or below market value to make a profit.
5. Improve customer service
Did you know that conversational commerce is trending right now? It must be no surprise that better customer service is a drop shipper’s best friend, allowing you to enjoy a competitive advantage in your niche, including giant guys like Amazon.
Also, making your customers feel important, respected, and valued drives sales and improves your customer base. When we talk about customer service for your Amazon dropshipping stores, you must understand that you’re responsible, that your customers’ needs and wants are essential, and that their overall happiness is your top priority.
6. Consider automating
Automate your Amazon dropshipping business as much as possible. Indeed, other dropshipping apps will deal with most automation for you, but there are still cracks you must cover, like your blog content, marketing, social media, Google, PPC campaigns, etc.
Automating what you can and when can allow you to live your entrepreneurial dreams and begin your entire business before ditching your 9-to-5 job.
Conclusion of Amazon Dropshipping
There you have it! Amazon dropshipping is a simple and fast way to create your own brand and start selling through your online store. In return for the low overhead costs, you will find that Amazon dropshipping margins are much lower than other online businesses.
You can also get started without creating your website, but since branding is a big part of online business success, it is smart to add it as part of your entire Amazon dropshipping strategy. On top of that, you will have more control over where and how to sell your products.
You can also stop paying Amazon selling fees on products you sell straight at your retail stores outside of your Amazon dropshipping store.
Is Amazon dropshipping profitable? We genuinely believe that Amazon dropshipping is a worthwhile pursuit, given your supplier is reliable, trusted, and knows what should be done. On your end, you must take care of running the show on the platform—listing creation, marketing, collecting reviews, and improving the visibility of your products.
If you feel you’re quite knowledgeable in such aspects but don’t have the money to invest in buying inventory and start selling, then Amazon dropshipping is the best answer for you.
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Contact us today to get your Amazon Dropshipping started!
