Are you looking for a low-risk way to start selling on Amazon? Dropshipping might be the perfect way for you to start your e-commerce empire. This seller-friendly business model allows you to sell products without holding inventory, making it an attractive option for aspiring entrepreneurs looking to make money through Amazon.
In this comprehensive guide, we’ll explain the ins and outs of dropshipping on Amazon. From understanding the fundamentals to implementing proven strategies, you’ll discover how to navigate the platform’s ecosystem and set yourself up for success. Whether you’re a novice looking to dip your toes into e-commerce or an experienced seller seeking to diversify, this step-by-step roadmap will help you learn how to dropship on Amazon and capitalize on the opportunities Amazon dropshipping offers.
What Is Dropshipping on Amazon?
Dropshipping is a retail fulfillment method in which a store doesn’t keep the products it sells in stock. How does this work?
The process begins with the customer, who places an order on your online store. Once the order is received, your store processes the transaction and forwards the order details to the supplier. The supplier, who holds the inventory, then directly ships the product to the customer, completing the delivery process. This model allows your store to sell products without needing upfront inventory or warehousing, minimizing risk and overhead costs while leveraging the supplier’s stock and shipping capabilities.
While this selling method isn’t entirely unique to Amazon, it doesn’t take much thinking to realize why it’s such an appealing option on the platform. Since Amazon is by far the preferred marketplace for consumers, it offers a tremendous opportunity to leverage its massive consumer base, which includes more than 200 million Amazon Prime subscribers worldwide.
While dropshipping in any capacity can be intriguing, the benefits are compounded on Amazon due to sheer market size, trust and credibility among consumers, and perks of Amazon FBA, which streamlines customer service, returns, and so much more for an even greater hands-off selling experience. Below, we’ve included an example scenario that explains the dropshipping basics, specifically regarding how to dropship on Amazon:
- You (the entrepreneur) source a product to sell
- You then find a supplier for the product
- You list the product on Amazon
- The Amazon customer purchases your product on Amazon
- You then purchase from the supplier and get them to send it directly to the customer’s address.
It’s all about positioning yourself as the middle person so you’ll never have to invest in large quantities of stock, pay storage fees, or ship container loads of inventory to Amazon fulfillment centers.
Amazon Dropshipping Policies Explained
Understanding guidelines within the Amazon dropship program is crucial for maintaining compliance and staying in the good graces of Amazon. A failure to follow Amazon guidelines and policy could spell doom for your online business. Key policies include:
- Prohibited Practices: Listing products as available for sale without ensuring they are in stock and ready to ship is against Amazon’s rules.
- Order Fulfillment: Sellers must ensure that all packing slips, invoices, and other information included with or provided in connection with the product identify the seller as the seller of record.
- Returns: The seller must be responsible for accepting and processing customer returns of their products.
It is essential to stay updated with Amazon’s constantly evolving policies to avoid account suspension or other penalties. For more details, visit the official Amazon Dropshipping Policy help page. Once you’ve created a Seller Central account, make sure to follow the news and updates, as rules and guidelines can change over time.
Amazon Dropshipping Pros and Cons
Like any other business model, dropshipping on Amazon has strengths and weaknesses, each of which may appeal to different audiences. Let’s examine the advantages and weaknesses of dropshipping through Amazon.
Amazon Dropshipping Pros
- Low startup costs: You don’t need to invest in inventory upfront, which differs from the typical FBA seller.
- Easy setup: You can launch your business quickly without worrying about warehousing or fulfillment.
- Wide product selection: You can offer a variety of products without the limitations of physical storage.
- Scalability: It’s relatively easy to scale your business as you grow, as countless sellers have demonstrated.
- Access to Amazon’s humongous customer base: Leverage Amazon’s reputation and traffic to reach potential buyers.
Amazon Dropshipping Cons
- Lower profit margins: Since you’re not buying in bulk, your per-item costs may be higher.
- Limited control over inventory and shipping: You’re dependent on your suppliers for product quality and timely delivery.
- High competition: The low barrier to entry means you’ll face stiff competition from other sellers.
- Reliance on supplier: If your supplier runs out of a product, you might have to cancel orders.
6 Steps to Get Started Dropshipping on Amazon
If Amazon dropshipping seems like the ideal selling method for you after weighing the pros and cons, it’s time to figure out how to start dropshipping within the marketplace. We’ll walk through the process of how to dropship using Amazon with a step-by-step guide to their dropshipping setup below.
1: Set up Your Amazon Seller Account
Before doing anything else, you’ll need to create an Amazon seller account, if you don’t have one already. When creating your account, you’ll have to make your first business decision and determine which type of seller account to choose. Amazon offers two options:
- Individual seller account: Ideal for those selling less than 40 items per month.
- Professional seller account: Better for higher volume sellers, offering additional features.
Pro Tip: Learn more about creating an Amazon seller account and the critical differences between the two seller plans in our detailed guide: How to Create an Amazon Seller Central Account
To set up your account, you’ll need:
- A business email address or Amazon customer account
- A chargeable credit card
- Government-issued national ID
- Tax information
- Phone number
- For your business to be registered in an Amazon-approved country
2: Choose a Profitable Product To Sell
Next, it’s time to find a product to sell!
Utilizing a product research tool like Viral Launch’s Product Discovery tool is highly recommended. With its data-driven approach, you can reverse-engineer lucrative product ideas that align with your customizable goals and resources. Plus, it can save you hours upon hours of product research by letting you sift through vast amounts of powerful market data to ensure your Amazon venture isn’t doomed from the start.
Ideally, your product will be in high demand with as little competition as possible. If you enter a marketplace that’s more saturated with sellers, you’ll want to avoid household name competitors like Amazon-owned brands, Apple, or other names with a recognizable brand name, as competing with these larger corporations with more resources and a leg up on consumer trust makes for an uphill selling experience. Depending on your goals, you may want to avoid seasonal products that can run cold for months at a time and may see increased competition during hotter sales seasons.
Pro Tip: For a more in-depth guide to finding a winning product to sell, check out our Complete Guide to Amazon Product Research and keep it handy when perusing the market for a product to launch or expand your Amazon venture. Additionally, we’ve compiled the most profitable Amazon product categories and the most profitable items to sell on Amazon to help guide you in the right direction in your product hunt.
When selecting a product, remember that selling units isn’t the only goal. Selling units while maintaining profitability is what you’re aiming for. To determine profitability, use our FBA Calculator, which can be customized with individual costs and accounts for general Amazon seller fees.
3: Find a Reliable Supplier
Choosing the right supplier is crucial for your dropshipping success. Look for suppliers that offer:
- Reliable shipping times
- High-quality products
- Good communication
- Prices that allow you to end with a profit
Popular platforms to find dropshipping suppliers include AliExpress, SaleHoo, and Worldwide Brands. SaleHoo and Worldwide Brands specialize as a dropship directory that connects you with potential suppliers. AliExpress generally connects Chinese businesses with customers and offers low prices, which makes it attractive for dropshipping. However, delivery times can be slower as items are being shipped internationally, which can hamper sales and reviews.
When vetting suppliers, consider:
- Customer reviews and ratings
- Shipping times and methods
We recommend purchasing a product for inspection, ensuring all elements of the product are up to par for a positive consumer experience from a quality and shipping perspective. Products that are fragile and more difficult to put together or use can lead to negative feedback, which can crush an Amazon business in the long run. If the product you’re interested in pursuing has a slew of negative reviews, pay attention to what customers are saying and consider if it seems like a sustainable product to associate with your business.
Pro Tip: Our free Amazon seller course goes into great detail about finding a supplier with helpful information and strategies to run your business like a well-oiled machine. Enroll today for our step-by-step formula to go from employee to entrepreneur with tips from those who have successfully taken the leap.
4: Optimize Your Product Listing
Your product listings are your virtual storefront, where customers find out if your product is what they’re searching for and if it’s worth purchasing. Since dropshipping skips many time-consuming steps associated with other methods of selling, optimizing your product listing is where you can set yourself apart from the competition. Here’s how to make them shine:
- Write compelling titles: Include key product features and your main keyword.
- Use high-quality images: Showcase your product from multiple angles.
- Craft informative bullet points: Highlight key features and benefits.
- Write detailed product descriptions: Address potential customer questions and concerns.
- Optimize for SEO: Use relevant keywords throughout your listing to improve visibility.
Since dropshippers can streamline their selling approach regarding product selection and shipping, mastering the other elements, such as optimizing your listing for maximum visibility and conversions, becomes even more critical.
5: Flex Your Marketing Muscle
Now that you’ve laid the groundwork for a successful dropshipping Amazon business, it’s time to boost visibility. Amazon sellers are limited in their options within the marketplace, as Amazon offers a uniform shopping experience for customers that makes it challenging for individuals to stand out amongst the crowd.
However, Amazon’s Pay-Per-Click (PPC) advertising program allows sellers to create targeted advertisements for their products, which appear prominently in Amazon’s search results for specific keywords chosen by the seller. The PPC model means you only pay when a potential customer clicks on your ad. Sellers can get their products in front of more customers by bidding on keywords to appear in search or competing products within the platform.
Another approach to driving traffic to your Amazon product listings involves leveraging external marketing channels. This strategy can include:
- Facebook Ads: Creating targeted ad campaigns to reach potential customers based on demographics, interests, and behaviors.
- Social Media Marketing: Utilizing platforms like Instagram, TikTok, and Pinterest to showcase your products and engage with your audience.
- Content Marketing: Developing a blog or YouTube channel to provide valuable information related to your product niche, indirectly driving traffic to your listings.
- Email Marketing: Building an email list and sending newsletters featuring your products, promotions, and relevant content to nurture customer relationships.
- Influencer Partnerships: Collaborating with influencers in your product’s niche to reach their engaged audiences.
These external methods might be harder to start, especially if you’re new to the market. Additionally, external marketing allows you to tell a more comprehensive brand story and differentiate your products from competitors in ways that may not be possible within the constraints of Amazon’s platform. If you already have a substantial audience or following, utilizing that group via external marketing can be a boon for your business.
6: Prioritize Customer Satisfaction
Dropshipping on Amazon simplifies many aspects of entrepreneurship. You’re freed from manufacturing and shipping responsibilities, allowing you to focus on what truly matters: ensuring customer satisfaction.
With the logistical burden lifted, you can dedicate more time and energy to providing exceptional customer service. This focus can set you apart in a competitive marketplace. Prompt responses, addressing concerns efficiently, and going the extra mile for your customers can pay dividends by keeping your Amazon business in good standing.
Moreover, outstanding customer service often translates into favorable product reviews. On Amazon, these reviews are crucial. They can significantly influence potential buyers and directly impact your product’s visibility and sales performance. A steady stream of positive reviews can boost your product rankings, leading to increased visibility and sales.
Remember, in the world of e-commerce, your reputation is everything. This customer-centric approach can be a powerful driver for long-term success in your Amazon dropshipping venture.
Dropshipping FAQs
- Is dropshipping on Amazon legal? Yes, it is legal as long as you comply with Amazon’s policies, including being the seller of record and not shipping items with third-party packaging.
- Is dropshipping on Amazon hard to start? Compared to traditional retail, it is relatively easy to start dropshipping on Amazon, but it requires careful planning, market research, and adherence to Amazon’s policies.
- Is dropshipping on Amazon free to start? While you can start with minimal investment, there are still some costs involved.
- How much does it cost to dropship on Amazon? It varies! Selling on Amazon involves several expenses, including the monthly subscription for your seller account, marketing and promotional costs, and any charges imposed by your dropshipping suppliers.
- Is dropshipping profitable? Yes, it can be profitable, but success requires ongoing learning, adaptation, and optimization. Without a sound strategy, attention to detail, and execution, you may see diminishing returns.
Final Thoughts About Dropshipping on Amazon
Dropshipping on Amazon offers a unique opportunity to start an e-commerce business with relatively low risk and upfront investment. By following the steps outlined in this guide and leveraging the right tools and strategies, you can build a successful dropshipping business on one of the world’s largest marketplaces.
Remember, success in dropshipping requires ongoing learning, adaptation, and optimization. Stay informed about Amazon’s policies, keep an eye on market trends, and always prioritize customer satisfaction.
At Viral Launch, we’re completely committed to helping Amazon sellers of all selling types succeed. Our suite of innovative tools, including Market Intelligence, Product Discovery, and Listing Builder, can streamline your operations with data-backed decisions as you start your dropshipping business. And our tools don’t stop assisting once you’ve gotten your business off the ground. Our Competitor Intelligence, Keyword Manager, and Kinetic PPC tool assist with scaling your company to realize its peak potential.
We even offer a completely free Amazon seller course for beginners, which aims to help people turn their entrepreneurial dreams into a reality filled with financial freedom.
In conclusion, learning how to dropship on Amazon can be a game-changer for aspiring entrepreneurs looking to enter the e-commerce space with minimal risk. Success in dropshipping on Amazon requires continuous learning, staying updated with Amazon’s policies, and keeping an eye on market trends. By following these steps and utilizing tools like those offered by Viral Launch, you can build and scale a successful dropshipping business on Amazon. Best of luck!
