How to Start Dropshipping on Amazon: A Beginner's Guide

Table of Contents

  1. Introduction
  2. What is Dropshipping?
  3. What is Amazon?
  4. What is Amazon Dropshipping?
  5. Is it Legal to Dropship on Amazon?
  6. What is the Cost to Dropship on Amazon?
  7. Is Amazon Dropshipping Profitable?
  8. Benefits of Amazon Dropshipping
  9. 8 Steps to Start Dropshipping on Amazon
  10. Bonus Strategies for Success on Amazon
  11. Conclusion
  12. FAQ

Introduction

Ever considered the concept of Amazon dropshipping? This approach to eCommerce has touted benefits, leveraging Amazon’s extensive reach and loyal customer base to boost sales effortlessly. In the US alone, Amazon boasts a stunning 150.6 million mobile users who regularly access its app, making it an attractive platform for enterprising sellers. However, managing inventory and handling logistics can be a daunting task. Enter dropshipping—a streamlined way to sell without the need to manage stock directly.

In this comprehensive guide, we’ll explore the essentials of Amazon dropshipping, including what dropshipping entails, the specifics of doing it on Amazon, its legality, costs, profitability, and more. By the end of this post, you'll understand the ins and outs of this business model and be well-prepared to start your own Amazon dropshipping venture.

What is Dropshipping?

Before diving into the specifics of Amazon dropshipping, let’s revisit the fundamentals of dropshipping itself. Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a customer purchases a product, the store buys the item from a third party and has it shipped directly to the customer.

Thus, the seller doesn’t handle the product directly. Your main responsibilities include managing your online store, taking orders, placing these orders with suppliers, and ensuring customer service. This model reduces overhead costs and removed the need for physical storage space, making it an attractive option for new entrepreneurs.

What is Amazon?

Amazon, the largest eCommerce website globally, has revolutionized how consumers shop online. It allows vendors and brands to reach a considerable audience by selling their products through its platform. By opening an Amazon seller account, you can access millions of potential buyers who trust the Amazon brand.

What is Amazon Dropshipping?

Amazon dropshipping involves leveraging the Fulfillment by Amazon (FBA) program, where sellers ship their products directly to Amazon’s warehouses. From there, Amazon handles the storage, packaging, and shipping to the customers when orders are placed. This model benefits from Amazon’s robust logistics network, ensuring quick delivery times—a key expectation from today’s consumers.

Is it Legal to Dropship on Amazon?

Yes, Amazon allows dropshipping, but with specific rules. You must:

  • Be the seller of record for your products.
  • Identify yourself as the seller on all packing slips, invoices, and external packaging.
  • Be responsible for accepting and processing returns.
  • Comply with all terms of your seller agreement and Amazon policies.

Prohibited dropshipping practices include:

  • Purchasing products from another online retailer and having that retailer ship directly to customers.
  • Shipping orders with packing slips, invoices, or other information indicating a seller name or contact information other than your own.

What is the Cost to Dropship on Amazon?

Starting dropshipping on Amazon requires a seller account. Amazon offers two plans:

  1. Individual Plan: Costs $0.99 per unit sold.
  2. Professional Plan: Costs $39.99 per month, regardless of the sales volume.

Additionally, Amazon’s selling fees range from 10% to 15%, depending on the product category. Operating on thin margins can be challenging, so assessing these fees relative to your pricing strategy is essential.

Is Amazon Dropshipping Profitable?

Amazon dropshipping can be lucrative if managed correctly. Dropshippers generally earn profit margins of 10% to 30% on each sale. If you sell items at a 30% margin, accounting for Amazon fees, the net margin could result in approximately 15%, proving to be profitable considering the vast customer base Amazon provides.

Benefits of Amazon Dropshipping

Let’s explore some distinct advantages of dropshipping via Amazon:

No Warehouse Costs

By engaging in dropshipping, you alleviate the need for physical storage space. The FBA model simplifies storage, as Amazon handles this aspect by storing your products in their vast network of warehouses.

Access to Amazon Suppliers

Amazon sources products in bulk from various suppliers, storing them and handling returns and customer service in multiple languages. This support network helps small and medium businesses scale operations efficiently.

Large Customer Base

With over 300 million active users, Amazon provides a vast marketplace for your products, increasing your potential for high sales volumes because of the massive user base and the marketplace’s vast reach across different demographics.

Flexibility Across Categories

Amazon supports over 30 different product categories. This flexibility allows you to diversify and target multiple niches simultaneously, enhancing your business's resilience and chances to capture various customer segments.

8 Steps to Start Dropshipping on Amazon

1. Select an eCommerce Platform

Shopify integrates seamlessly with Amazon, making it easier to manage your orders and inventory across both platforms. Adding Amazon as a sales channel on Shopify ensures streamlined operations.

2. Choose the Right Products

Amazon has strict guidelines about what products can be sold. Check Amazon’s restricted products list to ensure compliance. Typically, books, electronics, video games, and office supplies do not require special approval.

3. Register for an Amazon Seller Account

If planning significant sales volumes, opt for the Professional plan to avoid per-unit fees. Sign up on Amazon Seller Central and provide necessary details about your business and tax information.

4. Get Approved in Your Product Category

Certain categories need special approval from Amazon. These often include fashion, beauty, and jewelry. Check the requirements for the specific categories you wish to enter.

5. Link Amazon to Your Shopify Store

Once you receive the necessary approvals, connect your Amazon account to your Shopify store. In Shopify’s dashboard, add Amazon as a sales channel and sync your listings.

6. List Your Products

When listing dropshipped products, choose the option reflecting that another brand manufactures them. Search and select products to publish, ensuring low competition items to maximize sales.

7. Track Your Inventory with Shopify

Track inventory levels in Shopify to avoid situations where customers order out-of-stock products, leading to negative reviews and increased customer service issues.

8. Promote Your Amazon Store

Without traffic, you won’t make sales. Use social media, and consider Amazon ads to drive traffic to your store. Promotion is key to attracting customers and increasing sales.

Bonus Strategies for Success on Amazon

1. Win the Buy Box

Achieving a high seller rating (above 95%), swift shipping times, and competitive pricing increases your chances of winning the Buy Box—a key component of most sales. Aim for quick response times and low refund rates.

2. Diversify Sales Channels

Don't solely rely on Amazon. Utilize additional platforms like Shopify’s social media integrations to broaden your reach and establish brand recognition.

3. Keyword Research

Optimize your product listings using research tools like Merchant Words. Identify popular keywords and utilize them to enhance product visibility both organically and through Amazon ads.

4. Competitive Pricing

Account for Amazon fees and margins when pricing. Use repricing strategies and consider offering free or low-cost shipping to remain competitive.

5. Enticing Coupons

Offering attractive discounts via coupons can drive sales. Promote these coupons through various channels to boost traffic and conversions.

6. User-Intent Focused Titles

Optimize product titles for clarity and relevance rather than merely stuffing keywords. Include essential product details and the brand name for better engagement.

Conclusion

Amazon dropshipping presents a potent opportunity for sellers to capitalize on Amazon’s vast customer base, streamline operations via the FBA program, and avoid high overhead costs. By carefully selecting products, tracking inventory, and employing strategic marketing, you can establish a profitable dropshipping business on Amazon.

FAQ

Q: What is dropshipping?
A: Dropshipping is a retail fulfillment method where the seller doesn’t keep the products it sells in stock. Instead, products are purchased from a third party and shipped directly to the buyer.

Q: Is dropshipping on Amazon legal?
A: Yes, provided you follow Amazon’s rules, including being identified as the seller on all packaging, invoices, and accepting returns.

Q: What are Amazon’s fees for dropshipping?
A: Fees depend on the plan chosen and product category, generally ranging between 10%-15%.

Q: Can Amazon dropshipping be profitable?
A: Yes, with the potential to earn a net margin of around 15% after accounting for fees.

Q: How to start Amazon dropshipping?
A: Select an eCommerce platform, choose products wisely, register as a seller, get approvals, link your seller account to Shopify, list products, track inventory, and promote your store.

By following this guide and staying updated on trends and Amazon policies, you can build a successful dropshipping business leveraging one of the world’s largest eCommerce platforms.