What is dropshipping?

Before we dive into dropshipping on Amazon, let’s take a look at dropshipping in general.

Dropshipping is an online business model where the seller does not keep or maintain physical inventory or ship goods to customers. 

The seller only acts as a middleman and forwards the buyer’s order details directly to the manufacturer, supplier, or distributor. The manufacturer/supplier then ships the goods directly to the buyer.

You can either dropship using your online store or third-party sites like Amazon. However, we recommend Amazon dropshipping for beginners

Why dropship on Amazon?

There are several reasons why you’re better off dropshipping on Amazon instead of your own eCommerce store. 

First, Amazon is the world’s largest online marketplace. In the US alone, the online retailer controls 40% of the eCommerce market. 

Just how wide is Amazon’s reach? Well, the site has over 300 million active users and 2.45 billion visits every month.

There’s no way your eCommerce store could ever get that much traffic. By selling on Amazon, you can enjoy some of that traffic without spending so much on SEO and marketing. 

Amazon’s customer base is not only vast; it is also fiercely loyal. According to eMarketer, there are over 157.4 million Prime members, most of whom begin their product searches on AMZN. 

Considering all of this, Amazon dropshipping certainly has a lot of sales and revenue potential.

Amazon Prime Users in the US

How Amazon Dropshipping Works

Amazon dropshipping is just like dropshipping on any other platform. The only difference is that the seller lists the item for sale on the Amazon marketplace.

When a customer purchases a product, the seller sends the customer’s order information to their dropship supplier. The supplier then ships the product directly to the customer.

The supplier handles manufacturing the products, storing and maintaining inventory, and fulfilling customers’ orders. On the other hand, the seller manages the online store by taking care of every customer-related function, such as receiving orders, forwarding the orders to the supplier, and handling customer service.

Does Amazon Allow Dropshipping?

Amazon allows dropshipping as long as you comply with the conditions laid down in its dropshipping policy.

If you want a dropship supplier to ship orders on your behalf, these are the requirements you should adhere to:

You should be the seller on record. All packing slips, invoices, external packaging, and other connected information should identify you as the seller. The supplier should not be identified at all.

You should get rid of any packing slips, invoices, external packaging, or other information identifying a third-party drop shipper before the order is shipped.

Customer returns should be accepted and processed by you.

Comply with the terms of the seller agreement and other applicable policies.

The following forms of dropshipping are strictly prohibited on the platform:

Purchasing products from another online retailer and having that retailer ship orders directly to customers (and the shipment does not identify you as the seller of record)

Including packing slips, invoices, external packaging, or other related information with a seller’s name or contact information other than yours.

If you fail to comply with these requirements, your account may be suspended

Can Amazon Dropshipping Be Done Through FBA?

Many resources online advise sellers to dropship

Pros of Dropshipping on Amazon

Apart from dropshipping, there are other lucrative selling models such as private label and wholesale. Under a wholesale model, you purchase branded goods in bulk from a supplier at a discount and resell them online. Private label, on the other hand, is when you use a third-party manufacturer to manufacture products under your label or brand.

So why should you choose dropshipping over private label or wholesale?

1. Low upfront costs

Private label and wholesale require huge startup capital because you need to purchase goods in bulk and keep an inventory. With dropshipping, your upfront costs are next to nothing because you do not buy goods directly from suppliers or hold any physical inventory. All you need to do is create an account (which costs a meager $39.99 if you’re using the Professional selling account) and list items for sale.

When a customer pays for the product item, you purchase it from the supplier with a portion of the proceeds and have them ship the product to your customer.

2. Fast and easy to start

Amazon dropshipping is quick and easy to start, particularly because you do not need to own inventory. The products you want to sell are already manufactured and ready for shipping. So you don’t have to wait for your products to be manufactured and shipped to Amazon’s warehouse. As long as you have a Seller account and an agreement with dropship suppliers, the only thing left is to list your item and make a sale.

3. Easier product research

Both private label and wholesale require extensive and time-consuming product research. But with dropshipping, you are selling already existing products from manufacturers. It’s easier to decide on products to sell when no manufacturing or branding is involved. And as you will soon see, there is an awesome product search tool to help you see how well items are selling on Amazon.

4. Easier marketing

Amazon dropshipping gives you access to a vast customer base that you may never get on your eCommerce store.  Your products are visible to a myriad of people, which potentially means huge returns. In addition, you are selling already existing branded products. This means you do not need to invest much effort in advertising and promoting your products. With optimized product listings and pay-per-click (PPC) ads, you can easily drive traffic and boost sales.

However, there are no advantages without disadvantages. So let’s take a look at some of the cons of dropshipping.

Cons of Amazon Dropshipping

Below are some of the drawbacks of the dropshipping model:

1. Slow delivery

Before you can forward a customer’s order to the supplier, payment has to be processed, and this can result in a delay. More importantly, dropshipped items are mostly from manufacturers or suppliers overseas. This means delivery to the customer may take some weeks or even months. And slow shipping times may lead to negative reviews, which is bad for business.

2. High Competition

Dropshipping is so quick and easy to start that many other sellers use this model. Also, many other sellers can sell products identical to yours. This means competition is quite high. And to get ahead of the competition, you have to distinguish yourself, which is difficult because you have little control over product customization. Many sellers resort to setting low prices, but this may reduce your profit margins.

3. Lack of quality control

You can’t assess the quality of the product because the items are being shipped directly from the supplier to the buyer. Your only option is to order product samples or hire a third party to perform physical inventory checks. And if the products are being shipped from overseas, China, for example, you face the risk of the products getting damaged in the process.

4. Communication issues

Although you don’t own or stock inventory, your business is dependent on your supplier’s inventory storage. If your supplier is low in stock or out of stock on some products and you are not promptly informed, you won’t be able to adjust your listing. A customer may place an order and be unable to receive the product quickly, or at all.

Is Amazon Dropshipping Worth It?

Can you drop ship on Amazon? Yes. If you have wondered how dropshipping works or have been searching for helpful posts on how to get into dropshipping on Amazon, there’s only one reason: you want to make money, and that’s fine.

However, before getting into any business, Amazon dropshipping inclusive, ensure you have a good idea of the chances of profitability. There’s only one way to estimate the profit potential of the dropshipping model, and it’s by finding out how much dropshippers make.

So, how much do drop shippers make? About 50% of AMZ’s revenue comes from third-party sellers, and drop shippers are responsible for a huge chunk of this revenue. The average drop shipper makes about $1000-$50,000 per month. So, if you’re looking to set up an Amazon dropshipping business, now is a great time.

Dropshipping for beginners may seem daunting, especially because it seems impossible to sell on Amazon without owning any inventory. In addition, many “dropshipping for beginners guides” tend to focus on the complex aspects, leaving out the basic stuff for sellers to figure out.

So, if you have searched “How to dropship on Amazon”, you probably won’t find concrete, practical steps to walk you through the entire process. However, if you do not understand how to get into dropshipping on Amazon, you may have difficulty navigating your way around the marketplace.

To make your ride a smooth one, in the next section, we’ll provide a step-by-step guide on how to get into dropshipping on Amazon. Let’s get right into it.

How to Start Dropshipping on Amazon

Create a Seller Account

The first step is to create an Amazon seller account.

Go to https://sell.amazon.com/ or https://sellercentral.amazon.com and click the sign-up button.

You should have the following information readily available before setting up your Amazon seller account:

Phone number

Bank account number and bank routing number

Internationally chargeable credit card

Proof of identities, such as Government issued national ID, driver’s license, or national passport

Tax information