Are you looking to leverage the Amazon platform and establish your Amazon dropshipping business? Keen to kickstart your low-maintenance online store and start enjoying high profits? Then you are in the perfect place.
Dropshipping on Amazon has become an attractive opportunity for many entrepreneurs because you can outsource the packaging, labeling, and shipping part to streamline your business. Meanwhile, as an Amazon seller, you benefit from the powerful marketing engine of Amazon and gain access to a large customer base, as well as security, convenience, and easy access to products.
Our ultimate guide will provide detailed instructions for setting up a profitable dropshipping business on Amazon. We will discuss the differences between traditional retail and dropshipping models, the competitive advantage and the downsides of Amazon dropshipping, and how to start dropshipping on Amazon. The article will also cover which niches are best for Amazon dropshipping and the rules for Amazon drop shipping.
At the end of this guide, you should have all the information necessary to build a thriving Amazon business.
What Is Amazon Dropshipping?
Dropshipping is a business model in which an online retailer does not keep any inventory of the products they sell within their business premises. Instead, when a customer orders from their online store on Amazon marketplace, the online retailer contacts a third-party dropshipping supplier, who then ships the product directly.
Amazon dropshipping eliminates the need for retailers to store and manage inventory. They don’t need to handle shipping or fulfillment either, which makes their dropshipping business easier to operate and potentially brings about more profit.
Dropshipping Versus Traditional Retail
Dropshipping is different from traditional retail in several ways, and these include:
No Upfront Investment
One of the main differences between dropshipping and traditional retail is the low upfront investment. You don’t need to purchase inventory or pay for storage space with dropshipping. The products will not be shipped out or cause your fees until a customer purchases from your online store. It’s an attractive option for online store owners who are starting and don’t have a large budget.
No Risk of Unsold Inventory
If you start dropshipping, unsold inventory is not risky, making it a great way to maximize profit margins and boost your overall income. In addition, since you don’t have to purchase products upfront, you don’t have to worry about losing money if the products don’t sell.
Lower Overhead Costs
Dropshipping also has lower overhead costs than traditional retail. For example, you don’t need to pay for storage space or hire additional staff to manage inventory. As a result, it’s easier and more cost-effective to scale your ecommerce business.
Is Amazon Dropshipping Legal?
One may wonder if dropshipping on Amazon is legal. The answer is yes. Amazon does allow its sellers to ship products directly from their wholesale suppliers to their customers.
For instance, if a seller order from another online retailer and have that retailer ship directly to customers, the shipment must identify the seller as the seller of record. If anyone else’s name appears on the packing slips, invoices, or external packaging, it might confuse who is in charge of these sales and will then be prohibited by Amazon.
Therefore, the drop shippers must:
- Have an agreement with the supplier and have you (and nobody else) as the only seller of your products on all packing slips, invoices, external packaging, and other information included.
- Remove any information identifying a third-party drop shipper before shipping the order to customers.
- Be responsive to customer inquiries and handle customer service actively.
Is Amazon Dropshipping Free Of Charge?
Amazon charges drop shippers a fee when they sell on the marketplace. The average is around 10 – 15%, depending on the product. The sellers must know this, especially when working with smaller profit margins.
What Are Some of The Benefits of Dropshipping on Amazon?
Dropshipping on Amazon offers several advantages, and these include:
It Is Easy To Set Up And Get Started
As highlighted, unlike traditional retail, dropshipping on Amazon is relatively easy to set up. All you need to do is create an Amazon seller account, list your products, and start promoting them, and you can earn an income very quickly.
There are two selling plans: individual and professional seller accounts. You don’t need to pay to join an individual selling plan, but Amazon charges you $0.99 for every item you sell. But a professional selling plan is recommended if you sell over 40 items monthly. It charges $39.99 monthly, and you can enjoy multiple features, including advertising your products, using advanced selling tools, or selling in some restricted categories.
It Is Free To Win Traffic
Amazon is one of the leading ecommerce platforms in the world, with daily traffic reaching xxx. If you list your product on Amazon, you can have more traffic and exposure than listing your product on your ecommerce store, for example, a Shopify store. You do not need to pay efforts to drive more traffic to your store but can spend these efforts on other parts.
It Is Cost-Effective
As discussed, Amazon dropshipping is cost-effective as there are no upfront costs or inventory. In addition, you can start selling without having to invest in stock or other resources – these are both high expenses that traditional retail businesses face, and the ability to cut them out is beneficial.
It Is Scalable
Amazon Dropshipping is highly scalable, meaning you can increase or decrease your inventory as needed. As a result, it’s easy to adjust your business model as needed and grow your business as the market changes.
It Is Convenient
Convenience is another advantage of drop shipping – this business model allows you to manage your business anywhere. You don’t need to manage a physical store or worry about the warehouse space. The dropship suppliers will take care of all these.
It Is Profitable
These elements mean that dropshipping on Amazon can create a profitable online store, as you don’t need to invest in stock or other resources. Instead, you can focus on marketing and promotion to drive sales and increase profits.
Are There Any Downsides Of Dropshipping On Amazon?
Although dropshipping on Amazon can be a great way to start an online business, there are some downsides that you should keep in mind. These include:
It Can Be Difficult To Stand Out
Amazon is a crowded marketplace with many sellers, meaning it’s difficult to stand out from the competition. Therefore, marketing and promotion are essential to get your products noticed.
It Can Be Difficult To Manage Inventory
Though dropshipping on Amazon removes the need to manage physical stock, you still need to manage and keep track of your inventory online and ensure that it is always up-to-date. In addition, you need to stay organized, monitor your stock levels, and keep up with your dropship supplier, which can be time-consuming.
It Can Be Difficult To Source Products
Finding reliable suppliers for dropshipping on Amazon can be challenging, as you need to ensure that they are reliable and offer quality products. It requires market research to find the best wholesale suppliers for your business – dropshipping suppliers can vary hugely in their offerings. Research is needed to ensure you pick a reliable, quality dropship supplier.
You also need to check that the products received are as advertised, or you will end up with a negative reputation, demands for refunds, and ultimately a non-successful business.
Amazon Dropshipping Business: How To Get Started
Now that you understand the basics of Amazon dropshipping let’s look at how to work with Amazon.
Choose a Niche
The first step is to choose a niche for your business. It could be anything from electronics to pet supplies. You should also consider what type of niche products you want to sell and who your target customers are.
Choosing a niche for dropshipping is one of the most important decisions you will make; this can be the difference between success and failure. To boost your chances of picking the right niche products and doing a successful online business, here are some key considerations:
Choose A Product That People Want
It’s vital to find a product that people want or need. You need to research the market and understand what customers are looking for at that moment in time. Researching customer reviews and trends can help you identify potential products people are interested in.It’s also vital to choose a product that is in demand.
You must look at the current market and understand what products sell well. You should also consider seasonal trends and events affecting demand for certain products and the changing political and social landscapes. Investing all your cash in a plastic-heavy business may not be the best option at present, for example, when a growing number of consumers are becoming eco-conscious.
Choose a Profitable Product
Once you have identified a product that people want, ensuring it is profitable is vital. First, research the cost of the product and understand what your profit margins will be. It can be beneficial to run the numbers for a few different potential products for comparison, particularly if you have expertise in multiple areas to help you identify the most profitable option.
Find a Supplier
After choosing a niche, you need to find a third-party supplier. You can find wholesale suppliers for dropshipping businesses on websites like:
- Wholesale Central
- Worldwide Brands
Some of the suppliers may not be reputable. But kindly notice that they are all legit and safe platforms. It is the unscrupulous sellers who are using these wholesale platforms that are selling counterfeits or use misleading information in their listings. Therefore, before making an order, you must carefully review the wholesale seller’s profile and check the reviews.
Dropshipping With Amazon FBA
You can ship the products from your manufacturers and then store them in an Amazon warehouse rather than looking for a place to store your inventory. When a customer orders from your online store, Amazon will pick, pack and ship the product directly to the customer from one of their fulfillment centers.
All the parcels delivered from the Amazon warehouse will be Prime Shipping, typically faster than other shipping companies and at a lower cost.
Aside from the features mentioned above, Amazon FBA can also handle customer returns and customer service.
Sellers can also have a higher chance of winning the buy box, increasing customer trust, and enhancing brand identity.
Create Your Listings
Once you have chosen a dropship supplier, it’s time to create your listings. You can do this directly via Amazon Seller Central. A good listing includes detailed product descriptions, high-quality images, and accurate pricing information.
Creating a successful listing is not as simple as dropping a few words and images on the page – this is where knowing your market and understanding how to stand out from the crowd become vital. Good listings contain several key elements, and some examples include:
- Detailed product descriptions that include features, benefits, and specifications
- High-quality images that show the product from multiple angles to give the customer all the information they need
- Accurate pricing information
- Clear shipping and return policies, including prices and return limits
- Positive reviews from previous customers
Promote Your Listings
Once you have created your listings, it’s time to start promoting them. You can do this through several channels, including social media, email marketing, and search engine optimization (SEO), to reach a wider audience.
You should also consider using Amazon’s advertising services, a bonus of dropshipping on Amazon through the site rather than competitors. These include sponsored products, which allow you to target customers searching for specific products. You can also use Amazon’s display ads to reach potential customers who may not be actively searching for your product.
Track Your Performance
Finally, you need to track your performance, including sales, customer reviews, and other metrics, to help you understand how your Amazon dropshipping business is performing. You should also monitor competitors’ prices and sales and adjust yours accordingly.
Tracking your performance is vital – the data and analytics collected help you identify areas where you can improve and make changes to ensure your ecommerce business is popular. Several tools on the market can help with this, ensuring that you have up-to-the-minute metrics to help you make informed decisions. Some of the best tracking tools to try include:
Seller Central is Amazon’s tracking tool that provides detailed insights into your performance. It allows you to track sales, customer reviews, and other metrics to help you understand your business’s performance.
Seller Labs/Seller Labs PRO
Seller Labs is a third-party tracking tool that provides comprehensive analytics on your online store performance. It includes features like keyword tracking, competitor analysis, and automated reports.
AMZ Tracker is a powerful tracking tool designed to work with Amazon and includes features like keyword tracking, competitor analysis, and automated reports. It also tracks customer reviews and feedback, helping you to identify areas where you can improve using up-to-the-minute figures.
Helium 10 is a quality tracking tool that focuses on Amazon keywords and SEO and offers features such as product and market trackers, competitor analysis, and automated reports to ensure that you have the most relevant data and information.
Which Niches Are Best For Amazon Dropshipping?
Dropshipping on Amazon shows some niches are more successful than others. These include electronics, home goods, beauty products, and health and wellness products.
Electronics are among the most popular niches to start dropshipping on Amazon, including smartphones, tablets, laptops, and other tech gadgets. The market offers plenty of profit thanks to the high demand.
Home goods are another popular niche to target, including furniture, kitchenware, bedding, and other home decor items. It’s a wide-ranging niche that allows you to hone in on a particular specialty or generalize and maximize your audience. Again, this market is highly competitive, but there is still plenty of potential to make a profit.
Perhaps unsurprisingly, beauty products are another popular niche for dropshipping business – this is a massive market and can be hugely lucrative if you capture it properly. This niche is broad, including makeup, skincare, hair care, and other beauty products. The high demand means that you will always have customers ready and waiting for what you have to offer – all you have to do is choose the right products and market them in the right way.
Tools and Home Improvements
Tools and home improvements are other areas that do very well when dropshipping on Amazon and elsewhere. Popular products in this niche include items such as power tools, hand tools, and other DIY products, and it is a good niche for those looking to target a more specific audience.
Gaming is a big industry, and it’s no surprise that this popularity extends to Amazon dropshipping. Once again, this is a varied niche with several potential products, including consoles, controllers, and other gaming accessories. The gaming niche is a great way to tap into the massive demand for gaming products.
Amazon Dropshipping and Your Brand
When dropshipping on Amazon, it is vital to remember that you are representing your brand. As noted, you should ensure that all your products are accurately described, and that customer service issues are handled promptly. You should also take the time to create a unique brand identity to allow customers to recognize your brand.
How To Build Your Dropshipping Brand
Building your dropshipping brand is a vital step in becoming successful on Amazon. Here are a few tips:
- Create A Brand Identity: We mentioned the brand identity; its significance to your brand shouldn’t be overlooked. Put clearly, your brand identity is the look and feel of your products and the messaging used to promote them. Look into the elements surrounding product packaging, logos, and other visuals. When choosing these elements for your brand, make sure they are consistent and recognizable. It will help customers to identify your products, and it will also help to build trust in your brand.
- Develop A Dropshipping Strategy: Once you have established a brand identity, you need a dropshipping strategy. It should include product selection, pricing, marketing, customer service, and more. It is vital to have a clear plan before you start to sell products on Amazon, as this will help ensure that your ecommerce business runs smoothly and efficiently.
- Focus on Marketing: Finally, focusing on marketing your products by optimizing your product listings, running ads, and engaging with customers is vital. These steps can help to drive more sales and increase brand awareness.
- Optimize Your Product Listings: When it comes to dropshipping on Amazon, optimizing your product listings is essential. It includes ensuring that all the information about your products is accurate and up-to-date and using relevant keywords in your titles and descriptions. You should also take the time to create high-quality product images that accurately represent your products.
- Run Ads To Promote Your Products: Running ads is another great way to promote your products on Amazon. Popular options include sponsored product ads, display ads, and more. These can help to drive more traffic to your listings and increase sales.Social media ads work by targeting potential customers who are interested in your products. You can achieve this via retargeting campaigns, targeting people who have already visited your product pages.
- Provide Competitive Rates: You can also lure your customers into purchasing with huge discounts. For instance, Amazon sellers can sign up for lightning deals, which provides sellers with huge traffic. Sacrificing short-term profits is a good way to reach a larger audience and increase sales ranking.
- Engage With Customers: Finally, it is vital to engage with customers, including ensuring that you respond to customer reviews and questions and providing helpful information about your products. It will help to build trust in your brand and increase customer loyalty.
When done correctly, dropshipping on Amazon can be a great way to make money, but it is vital to have a clear plan before you begin.
Now that you understand the difference between Amazon dropshipping and traditional retail, the benefits and downsides of this business model, and how to start your Amazon dropshipping business, it is time to figure out if this is the right model for you. Once you start Amazon FBA dropshipping, it is essential to have Amazon dropshipping policy in mind and must not use any of these.
By following these steps, you can ensure that your business runs smoothly and build up a successful dropshipping enterprise on Amazon that stands the test of time and delivers what your customers need.