When most people hear of dropshipping, the first thought that comes to their mind is Shopify. The reason for that is not hard to guess – Shopify has become a household name in the dropshipping industry and is the first name that comes to mind when dropshipping is mentioned.
Little do people know that they can also build their own dropshipping store or a general e-commerce store using WordPress and some plug-ins.
Many others do not also know that they could dropship on eBay – yes, eBay actively supports dropshipping, but you have to play by their rules. Another platform that supports dropshipping, albeit surprisingly is Amazon.
But how does Amazon dropshipping work? How can it be a profitable venture for your eCommerce business?
In this step-by-step guide, you’ll learn how to dropship on Amazon.
Does Amazon allow dropshipping?
Amazon allows dropshipping, but you must read and abide by their dropshipping policy. Some of the information contained in their dropshipping policy, which can also be found on their website include the following:
- You must identify yourself as the record seller of the products you dropship. What this means is that Amazon doesn’t want a situation where a customer buys something from a supposed seller, and another supplier with a totally different name supplies the product.
- You must remove every label, invoice, marketing material, etc. that indicates that the products you are selling are coming from a third party.
- If a customer seeks to return a product, the seller must be the one to process the return. Amazon does not want you to refer a customer to the supplier that drop shipped the product. To amazon, the customer does not know the dropshipping supplier; you and Amazon are the only parties known to the customer, so you must be available to process all returns.
- You cannot order products from another online retailer and have the retailer drop ship the product directly to a customer. By that, you are already prohibited from sourcing products from aliexppress.com or any of the other popular online retailers. You are then left with the option of ordering from local suppliers.
- You must be able to comply with all other Amazon policies regarding selling on the platform.
Apart from complying with the above rules, Amazon also expects you to drop ship using their FBA program. FBA simply means Fulfilment by Amazon – it is a program developed by Amazon where the company fulfills your orders on your behalf.
This basically means you will get products from your suppliers and keep them in Amazon’s fulfillment centers. When you get an order, Amazon helps you to ship the product to your customer. Then they will take a certain percentage of the price of the product and pay the remaining to you.
Learn more about how Amazon FBA works.
Pros and cons of Amazon and dropshipping
Pros of dropshipping on Amazon
Selling on Amazon has similar advantages to selling on eBay-it’s easy to get started, you have immediate access to a large audience, and you don’t have to worry about marketing or SEO:
Having access to a large audience: Amazon currently has close to 30 million active users – this means you will be selling to this vast number of an active audience. Though the competition is high, you can still grab your own cut from the huge pie. Even if you are just able to convince only 0.001% of that audience to patronize you, that means you will still be smiling home at the end of every day.
Dropshipping suppliers vetted by Amazon. Most of Amazon’s products are purchased in bulk from European suppliers. The item is then held in Amazon’s warehouse until it is ready to ship. No matter how experienced you are, you can sell quality products to a global audience at scale.
Zero warehouse cost. Besides dropshipping, Amazon also offers fulfillment centers, known as Fulfillment by Amazon, where you can add your own products without having to deal with packing, shipping, or warehousing.
More opportunities for discovery. Amazon offers over 30 categories. As long as you find the right dropshipping suppliers and products, you can sell in as many dropshipping niches as you’d like. You can optimize your listing using relevant keywords so that when potential buyers search for the type of products you sell, yours will pop up in the search results.
Cons of dropshipping on Amazon
Stiff competition: Amazon is a huge marketplace, and a lot of sellers have storefronts there. No matter what you want to sell, there will be a lot of other sellers selling the same thing. So, you’ll have to set yourself up in a way that makes potential customers choose you over your competitors.
Low margin: Many sellers set their prices so low that they are laughable. This is how they try to beat the stiff competition. Most of them are dropshippers, who buy from an online store and have it shipped directly to the customer. Amazon doesn’t like this, but people still do it. People like this don’t really care about following rules. They only care about making money, even if it’s just $1.
Upfront investment. In order to meet Amazon’s fulfillment requirements, you’ll need to stock the supplier’s products. In other words, dropshipping on Amazon requires an upfront investment of money, so you’ll have to save up for that.
Exposure of sales data. If you use Amazon’s platform, you run the risk that Amazon will be able to see everything about your sales, from which items sell best to how much you make overall. Some reports say that Amazon uses the data to improve its own market opportunities and get deeper into its own niches, making it harder for other merchants to sell on its marketplace.
Customer relationships are less long-term. Long-term relationships with your customers are unlikely. It is Amazon’s business model to sell products, not to build relationships with customers. There will be severe restrictions on how you brand your company, display your products, and interact with your customers.
No customization. You’ll have a limited amount of customization options. You have no control over branding, UI, marketing, or anything else.
How to start dropshipping on Amazon in 5 steps
You can dropship on Amazon by following the steps below:
Step 1: Register an Amazon seller account
You’ll need an Amazon seller account in order to sell on Amazon. Sign up at sellercentral.amazon.com. You will be asked to provide details about your business, such as your address and tax information, as well as your identity and credit card information.
Once you have created your account, you will need to choose your selling plan. Amazon offers two selling plans – individual seller and professional seller.
The professional seller account offers you more flexibility in terms of the number of products you can sell. Unlike the individual seller account that allows you to list only 40 products, with a professional seller account, you can list an unlimited number of products. You can list as many as 10,000 products – that’s if you will be able to fulfill all the orders that you will be getting.
Learn more about how to create an Amazon seller account.
Step 2. Obtain approval for your product category (if necessary)
Amazon requires sellers to obtain approval for certain types of products. There are several popular categories that need approval before you can set up an Amazon store, including fashion, groceries, music, and jewelry.
Learn more about what you can and can’t sell on Amazon.
Step 3: List products
After you create and approve a seller account, the next step is to list products and start selling. If you use an individual seller account, you can list only individual products. However, with a professional seller account, you can list or upload products in batches using third-party services or tools.
Learn more about how to list products for sale on Amazon.
Step 4: Start selling
If the products you list are truly relevant and necessary, then you should expect to receive your first order on the same day you list your products. Amazon is a huge platform with millions of users – so if your products are relevant, you can expect to receive your first order on the same day you list them.
That is why you should research thoroughly and ensure that you aren’t simply selling the same product as thousands of other dropshippers. Learn more about Amazon product research tactics.
Step 5: Fulfil your orders
The fulfillment by Merchant (FBM) program is better for dropshippers, rather than FBA. Once you receive an order, send the order details to your supplier – remind them that you prefer blind dropshipping.
There should be no marketing material on the packaging of the product, and everything that ties the supplier to the product should be removed. It should be your brand name that appears on the packaging of the product.
Upon confirmation that your customer has received their order, the money for the product will be added to your Amazon balance, which will be paid to you at regular intervals. Amazon will notify you when you receive payment. In most cases, payments are sent directly to the bank account you provided during registration.
Dropshipping from Amazon to eBay
This type of dropshipping is one that many dropshippers engage in – they find cheaper products on Amazon and sell them on eBay. Amazon is known for selling items at low prices – so dropshippers leverage that to make money on eBay.
When the product is ordered on eBay, the dropshipper orders the same product on Amazon and ships to the customer. The profit the dropshipper makes is the difference between the price of the product on Amazon and the price the dropshipper listed on eBay.
The above model cannot be said to be strictly dropshipping – retail arbitrage will be a more suitable term for it. The retailer scouts through the Amazon website looking for cheap deals, when they have found it, they list same on eBay and make a profit.
This model of dropshipping has a lot of problems. One is that the product usually arrives packaged by Amazon. The customer might get angry if they discover that their product came from Amazon instead of eBay.
Moreover, the customer may discover that they could have gotten the product cheaper on Amazon rather than on eBay. All of this will result in a bad customer experience, which could cause the customer to leave negative feedback or escalate the issue with eBay. eBay could suspend the dropshipper’s account if that happens.
In 2017, eBay allegedly banned hundreds of Israeli companies from using the Amazon-to-eBay arbitration model.
Dropshipping with your own online store
Instead of dropshipping Amazon products through third-party sites such as Amazon and eBay, you can start an online store. Most people who are interested in starting a successful dropshipping business are drawn to this fulfillment method.
More control. Owning your own online store allows you to create an environment conducive to selling your products, while at the same time adding value to your customers. By customizing the look and layout of your product pages, you can help your customers learn more about your products.
Easy design. Creating your own eCommerce store is easy thanks to platforms such as Shopify. You can choose a store design from hundreds of options, make any changes you want, add your products and connect a payment gateway – and you’re ready to go. Depending on the type of online store you want to create, you can do it all in one day.
No third-party fees. Since you won’t have to pay eBay or Amazon 10% to 15% of every sale, your profit margins might increase. With their own online stores, some dropshippers can make more money.
More shipper options. As a dropshipper, you can source products from wholesalers through sites like AliExpress and Alibaba. There are vendors who use ePacket shipping to speed up the shipping process and deliver products to customers more quickly if you’re worried about long shipping times.
Less organic traffic. With your own store, you are responsible for driving traffic to your website through marketing, social media, SEO, and paid advertising. In order to promote your new store, you will need to invest either money or time, and you will have to commit to a long-term campaign.
Dropshipping on Amazon can be a great way to grow your business, whether you’re new or experienced. Shopify offers all the tools you need to be successful with dropshipping fulfillment, sourcing, pricing, and marketing. Check out our guide to dropshipping.