What is Amazon Dropshipping and How to Succeed at Dropshipping in 2024?

There are plenty of ways to sell products and make money online. But if you were to ask a group of seasoned eCom sellers on how to get started, some would point towards dropshipping, and there are two main reasons why:

• The absence of a steep learning curve; you can get started after watching a few tutorials 
• You don’t need thousands of dollars’ worth of capital to set up a dropshipping store

 Now, as to why you should dropship products on Amazon, consider this stat:

According to the 2021 Digital Economy Index report, Amazon generated more than $11 billion in sales during Prime Day, 2021.

Those are just sales figures for one day.

With the right business strategy, you can target the millions of potential buyers that visit Amazon daily and set the foundation for a successful dropshipping business!

In this blog, you’re going to learn:

• How dropshipping works
• What is Amazon dropshipping 
• Amazon dropshipping policy
• The pros and cons of dropshipping 
• How to start an Amazon dropshipping business 
• Amazon dropshipping or private label?

Let’s start with the basics.

What is Dropshipping?

Simply put, dropshipping is the process of selling products without the responsibility of storing or shipping inventory. Dropshippers outsource handling and shipping to a third-party who, in most cases, is the supplier (i.e. product manufacturer). 

The customer won’t know whether they’re purchasing products directly from the brand or a dropshipper. This means you’ll have to maintain high seller performance scores that reflect positively on your supplier and keep a possible Amazon account suspension at bay.

What is Amazon Dropshipping?

To dropship on Amazon, you must enter into a legal agreement with a distributor, manufacturer, or product supplier whereby they agree to let you market and sell products on their behalf. After setting up the storefront, dropshippers target potential customers through different advertising models e.g. sponsored ads.

Each time a dropshipper makes a sale on Amazon, they purchase the product from their suppliers and also pass on customers’ information. The supplier then ships the goods to buyers’ locations within the time limit. 

Amazon dropshipping has fewer moving parts as compared to other selling models like Private Label. However, Amazon maintains strict rules and regulations that govern how sellers can and cannot dropship products.

Dropshipping on Amazon – Rules and Regulations

The number one rule of Amazon dropshipping is to identify yourself as the seller of record (SoR), i.e. the one responsible for selling products to the end customer. Even though you’re technically an agent for your supplier, you still have to pay sales tax on all purchases because in Amazon’s eyes, it’s your product.   

To safely dropship products on Amazon and not risk penalties or an account suspension, here’s what you need to do:

1. When you enter into a legal contract with your supplier, make sure that they only recognize you as a seller of their products on Amazon. As such, all information included in or attached with the products must mention your name e.g. invoices, packing slips, and external packaging;
2. Remove all invoices, packing slips, and external packaging that identify a third-party dropshipper before sending products out to customers;
3. Because dropshipping is done via FBM, accept and process customer returns for all products; and 
4. Adhere to all applicable Amazon seller policies

Here’s what you shouldn’t do:

1. Buy products from other online retailers like eBay and Walmart and ship them to customers via the retailers’ shipping service network
2. Ship orders that contain contact information or a seller name other than your own

When you dropship products, both your supplier’s and Amazon’s reputation is at stake. If the product packaging contains the name of an online retailer other than Amazon or other sellers’ contact details, customers will lose trust. 

Don’t try to find loopholes in Amazon’s dropshipping policy, should you get caught (as most dropshippers breaking Terms of Service do) your Amazon seller account will get suspended.

As long as you operate within Amazon’s dropshipping guidelines, you’re good to go.

Does Amazon Offer Dropshipping Services?

Amazon doesn’t offer dropshipping services but it allows third-party sellers to dropship products on its website. You could leverage its highly popular FBA services to make online selling easier; with FBA (Fulfillment by Amazon), you just have to ask your supplier to ship products to an Amazon fulfillment center. 

From that point on, Amazon will pack, store, and ship products to your customers. It even handles customer support on sellers’ behalf, albeit at a cost. 

Do You Need a Website to Dropship?

Not necessarily. You can open up a virtual store on popular eCommerce websites like Amazon and eBay and start dropshipping products. It only takes a few minutes to create an account and the cost of basic selling plans are within the range of most sellers. 

Keep in mind, though, that such retailers maintain strict dropshipping policies—failure to comply may result in a suspension of seller privileges, withholding of funds, or a termination of your seller account. 

Dropship Products on Amazon – Weighing the Pros and Cons

There’s no ‘perfect’ selling model on Amazon—each one has its advantages and disadvantages. Some people get into Amazon dropshipping because of how easy it is to set up a business (and even make a couple of hundred dollars in the first few months), only to face the drawbacks a few months later and ditch dropshipping altogether. 

Go through the pros and cons of dropshipping (and other business models like Amazon private label and wholesale) to know what you’re getting into.

Advantages of Dropshipping on Amazon

Dropshipping has some advantages over other selling models like private label (or private labeling), wholesale, retail and online arbitrage, and handmade products. These include:

Minimal investment required 

Dropshipping attracts new sellers because it requires a relatively smaller investment to get started. Basic knowledge on how to get in touch with suppliers, how to set up an online store, and the dos and don’ts of Amazon selling is all that’s required to dropship products.

No Fulfillment Fee

Amazon charges FBA (Fulfillment by Amazon) fee in exchange for providing shipping and customer support services. Because dropshipping is done via FBM (Fulfillment by Merchant), fulfillment fee doesn’t apply and you get to retain a significant chunk of sales, especially if you’re dropshipping heavy or large-dimensional products.

No overhead costs 

Dropshippers don’t manufacture products nor do they need to rent out expensive inventory storage facilities. Also, the burden of shipping products falls on the supplier’s shoulders giving you plenty of time to create and optimize your Amazon product listings and fine-tune your ad campaigns.

Fulfillment channel and location independence 

When dropshipping products, you’re not bound to a domain—you’re free to sell through a website, an Amazon store, on eBay, or via multiple channels simultaneously. 

Sell multiple products 

Dropshippers are known to work with many suppliers and operate numerous online stores. Although such a strategy lets you increase your monthly income, running multiple dropshipping businesses requires extra time and effort!

Disadvantages of Dropshipping on Amazon

Amazon dropshipping has its fair share or drawbacks, the most obvious of which include:

Low profit margins 

Low barriers to entry mean that you’ll end up competing with tons of sellers offering similar products. The result? Price wars that often lead to razor thin profit margins and for many dropshippers, a situation where the revenue doesn’t justify the effort.

Little to no control 

Dropshippers aren’t involved in either the product manufacturing or shipping phase meaning they have no control over product quality and fulfillment times. 

Even if you respond to buyer queries on time and offer excellent customer support services (some suppliers let dropshippers handle customer support), poor quality and delayed shipping times will inevitably push you out of business or have your selling privileges revoked due to poor seller performance. 

As bleak as it sounds, the harsh reality of Amazon dropshipping has caused many to migrate to other business models like private label and wholesale.

Inability to run product promotions 

Holiday seasons present third-party sellers with a golden opportunity to boost sales, increase revenue, and climb relevant search term rankings. Unfortunately for dropshippers, the inability to run promotions causes such opportunities to go to waste.

Still want to dropship on Amazon? Move on to the next section to learn how.

How Amazon Dropshipping Works

The following is a step by step Amazon dropshipping guide to help maximize your chances of success:

Step 1: Sign-up for an Amazon Seller Central Account

The first step is to sign up for an account in your local Amazon marketplace. Visit the Amazon sign-up page, and hit the Create your Amazon account button to get started. Provide Amazon with the necessary information and verify your credentials to set up your own Amazon seller central account.

Once your Amazon seller account goes live, sign up for an Individual or Professional selling plan. The Individual plan costs US $0.99 per sale (not including other fees). On the other hand, the Professional plan has a flat $39.99 per month fee and includes access to powerful seller tools. 

Step 2: Find the Right Product

Extensive product research is at the core of dropshipping success. The general rule is to search for products with high-demand yet low competition and although there isn’t a set criteria to uncover the perfect dropshipping product, here are a few factors that help indicate whether a product is dropship-worthy or not:

• Non-seasonal product
• Selling price above $20 (profits below this price point operate on thin margins)
• Around 200+ monthly sales

If you’re new to dropshipping, start searching for simple and low maintenance products usually found in categories like home and garden, sports and outdoors, office products, and pet supplies.

Step 3: Find the Right Supplier

After finalizing the product you want to dropship on Amazon, it’s time to start hunting for the right supplier, but where do we begin?

Fortunately, there’s no shortage of dropshipping websites. Names like SalesHoo, Worldwide Brands, Wholesale Central, Doba, and even Alibaba are home to suppliers looking to partner up with dropshippers and sell on Amazon. However, the best place to find dropshipping suppliers is AliExpress. 

AliExpress is a B2B (business-to-business) platform that features manufacturers across dozens of product categories. Just type in your product name and browse through the search results. 

Let’s take the example of a dog bed product. Visit aliexpress.com, type in “dog bed” and hit search. You could also pick out another search term from the drop-down suggestions if you want to target a specific niche.

Take note of the product prices and pick out one supplier at a time. We clicked on a random name that appeared in the top 10 search results.

In the image above, the product costs $4.28 but also comes with free shipping (some suppliers offer free shipping whereas others don’t). At the bottom it says “75-Day Buyer Protection”, i.e. if the product doesn’t turn out to be as described, you can claim a refund.

The process of finding and sourcing suppliers isn’t as difficult as it seems; however, because you’re dealing with people and companies across the globe, implement the following best practices to avoid costly mishaps:

1. Do extensive research: Shortlist 5-10 suppliers, visit each store. Then, take a look at customer feedback and how long the supplier has been active on the platform. Prioritize established suppliers with 4+ average seller ratings and plenty of positive customer reviews.
2. Ask to speak with a representative: Ask to speak with a company representative over a video call, if possible. Inquire about things like fulfillment times, payment terms, and inventory management practices. Doing so helps separate the wheat from the chaff, i.e. lets you pick out the ideal supplier.
3. Order product samples: Before reaching out to the supplier you’d like to work with, order a product sample—but don’t let them know you want to dropship their products yet. Note down the delivery time, product quality, and product details. Look at the product from a customer’s perspective.
4. Try selling different products: We mentioned how selling multiple products via dropshipping lets you earn more money when discussing the advantages of dropshipping. Listing multiple products also mitigates the risk of failure. It’s a common practice among seasoned dropshippers and something you should do as well.

The last tip is to keep an open line of communication with your suppliers to make sure you’re both on the same page. The more committed you are succeeding, the more likely suppliers will maintain relationships with you for months and possibly years to come.

Step 4: Create the Best Possible Amazon Product Listing 

Product listing optimization is prerequisite to Amazon success. You could unearth the most amazing product to sell for private label, wholesale, arbitrage, and dropshipping, but without an optimized product listing in place, your business won’t get off the ground. 

Product listing content informs readers about your product and compels them to action. Also, based on how well you incorporate keywords into your copy, Amazon will either push your listing up relevant search term rankings to keep it away from customers’ sight. 

Ensure your product attracts the most visitors and wins favor with Amazon by implementing the following guidelines:

1. Product title: Add your main keyword (the search term that best describes your product) in the product title, capitalize the first letter of each word, and keep the title limit to less than 201 characters.
2. Product images: Upload 7 product images with the first one set against a clear, white background. Add infographics if possible and ensure picture dimensions are 500 x 500 or 1,000 x 1,000 pixels.
3. Bullet points: Each bullet point must be short, descriptive, and highlight the product’s salient features.
4. Product description: Use this space to add information that you couldn’t include in the bullet points section. 

Use secondary keywords (search terms related to your main keyword) in the bullet points and product description section. 

Finally, create content that is informative yet attractive and compelling at the same time—if you aren’t confident in your copywriting skills, you could always hire someone to do it for you.

Step 5: Promote Your Store!

With everything set and ready to go, all that’s left is to promote your Amazon store and bring in much needed traffic. Traffic can come from both on and off Amazon. 

To target the most relevant buyers, you’ll need to utilize Amazon’s primary ad platform: Pay-Per-Click or PPC. Start by running sponsored product ads to increase buyer clicks and impressions. 

If Amazon PPC or advertising in general seems overly complicated, go through this Amazon PPC strategy guide for 2022. 

Once your PPC campaigns are up and running, look to drive traffic through external methods like social media campaigns, blogging, email marketing, etc. Both internal and external marketing methods help drive traffic and also enhance your store’s reputation, which brings us to another crucial aspect of Amazon store promotion: brand building.

Given the nature of dropshipping and how difficult it is to influence product quality and shipping times, you should direct your efforts into building a powerful brand. Enroll in the Amazon Brand Registry program to create A+ content, maintain an active presence on social media, engage with the audience, respond to followers’ comments, and if your budget allows, work with influencers to bring more eyes towards your Amazon store.

Of course, you’d want to implement the external methods once your PPC campaigns drive sales and it’s easier to identify which products are worth promoting. As with most things, both time and effort are required before you can expect returns from your dropshipping business.

And that sums up how to dropship products on Amazon. But before we wrap things up, let’s answer some of the most commonly asked Amazon dropshipping questions.

Amazon Dropshipping – FAQs

Here are some of the most commonly asked questions we get regarding dropshipping on Amazon.

Is Amazon Dropshipping Profitable?

The competition is tough across most product niches given the ease of setting up an Amazon dropshipping business. And because profit margins tend to be slim, sellers have no option but to fight on the price point to secure the buy box (have all customer orders redirected to your store). 

Unless you manage to uncover one killer product after another, get ready to invest considerable time and launch multiple products just to make the business viable.

Do You Need a Website to Dropship?

You don’t necessarily need a website to dropship products. You can dropship via eBay or an Amazon store. Each method has its advantages and disadvantages, so do your research before diving in.

Is Amazon Dropshipping Free?

Amazon doesn’t charge a dropshipping fee; however, there are other fees dropshippers have to take into consideration. The main ones include referral fees that vary based on product category and range from 3% to 45% (visit Amazon’s fee schedule page to view referral fees for each category).

You’ll also have to bear a monthly subscription plan cost ($39.99). Because dropshipping generally has low profit margins, you’ll have to dropship multiple products to make the business worthwhile.

Is Amazon FBA the Same as Dropshipping?

Amazon FBA is different from Amazon dropshipping. For starters, when you dropship on Amazon, you operate as a middleman between the customer and your supplier and don’t own inventory. In Amazon FBA, you own inventory but store it at an Amazon fulfillment center. 

Also, with Amazon FBA, you own the brand (and by extension, all intellectual property). In dropshipping, you’re more of an agent and don’t really have a say in important aspects of the business like inventory management or product quality control.

Conclusion – Start an Amazon Private Label or an Amazon Dropshipping Business?

Having made it this far, you now have the basic knowledge needed to dropship products on Amazon! 

But before you leave, there’s something you should know. Dropshipping—like any business model—has its pros and cons. With dropshipping though, there are strategies that can help you increase your monthly income, but you won’t operate and manage a business that’s truly your own.

To earn more, you’ll have to invest more of your time and also research more products for dropshipping, but there’s only so many hours you can give to an online business before burning out.

Why not go for something like Amazon private label that gives you greater control over your store, offers bigger profit margins, and doesn’t require sellers to sacrifice most of their day just to boost the income cap?

What’s more, it’s possible to automate much of an Amazon business by leveraging the FBA program and using powerful seller tools like ZonGuru. 

Think of ZonGuru as your very own AI-virtual assistant, one that helps you each step of the way starting from basic tasks like keyword research to bringing in buyer reviews post-launch. It’s exactly what you need to create a thriving Amazon business, so why not try out a free 7-day trial? 

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