How to Dropship on Amazon? Does Amazon allow dropshipping? Amazon dropshipping is a sales channel that can yield big returns for entrepreneurs. But how exactly does Amazon dropshipping work, and how can you make it profitable for your ecommerce business?
Ahead, learn how to dropship profitably on Amazon, and discover top dropshipping tools to help you start selling today.
How to Dropship on Amazon?
Amazon dropshipping is a business model where sellers list products on Amazon without holding inventory. When a sale is made, the seller purchases the item from a third-party supplier who ships it directly to the customer.
Does Amazon allow dropshipping?
Yes, Amazon lets you dropship on its marketplace—as long as you follow these rules:
- You must be the sole seller of record for products.
- Your business must appear as the seller on packing slips, invoices, and other information in connection with products.
- All information identifying the third-party seller must be removed before shipping the order to customers, to avoid confusion.
- You must be responsible for accepting and processing returns.
- You must follow all terms of your seller agreement and Amazon’s dropshipping policy.
How much does it cost to dropship on Amazon?
Amazon dropshipping fees vary by product type but are usually between 8% and 15%. If you’re working with small margins when dropshipping Amazon products, this could eat into your profits.
Product categories with the lowest referral fee percentages include appliances, consumer electronics, tools, and automotive products.
However, because Amazon charges fees as a percentage of the total price, the actual fee amount will vary considerably depending on an item’s overall cost. For all types of products, Amazon takes a minimum fee of 30¢.
To sell on Amazon, you’ll also need to choose and purchase a selling plan. Amazon’s Individual plan costs 99¢ per unit sold, while the Professional plan costs $39.99 per month, no matter how many products you sell.
Is Amazon dropshipping profitable?
There are many pros to Amazon dropshipping, and it can be profitable. The average dropshipping margin is between 10% and 30% (but remember, Amazon will take referral fees on sales).
That means if your margins are around 30%, you’ll take 15% to 20% after selling a product via Amazon dropshipping.
Margins can be higher if you win the Amazon Buy Box, but that’s a highly competitive process and not something you should rely on.
Pros and cons of Amazon dropshipping
Pros of Amazon dropshipping
The advantages of selling on Amazon are similar to the benefits of other large online marketplaces. Here are four benefits of dropshipping with Amazon:
1. Vetted Amazon dropshipping suppliers
Amazon buys products in bulk, mostly from European suppliers, and holds these products in its warehouses until they’re ready to ship. Thanks to these basic quality commitments, new sellers can promote decent products at scale to an international audience.
2. More discoverability
Amazon gives you immediate access to a large potential audience and has more than 30 product categories to choose from. You can sell in as many different dropshipping niches as you want, which means you can reach highly targeted markets.
3. No need for external marketing or SEO
While you may want to promote your items on Amazon, you don’t need to worry about driving traffic to your product line with expensive external marketing or search engine optimization (SEO) campaigns.
Cons of Amazon and dropshipping
Like any dropshipping model, the pros of convenience and low startup costs need to be weighed against disadvantages, such as reduced control over products and potential customer service difficulties. Here are four disadvantages of Amazon dropshipping:
1. Exposure of sales data
A condition of using Amazon’s platform is that the company can see all of your sales data, from bestselling items to overall sales figures. Historically, Amazon has been accused of using this data to optimize sales opportunities and strengthen its own involvement in the niche, ultimately pushing out other merchants selling through its marketplace.
2. Fewer connections with customers
You may struggle to grow long-term relationships with your customers when dropshipping through Amazon. By design, Amazon is geared toward helping providers sell products over building brand loyalty. Be prepared for limitations on how you brand your business, display your products, and communicate with customers.
3. No customization
Amazon is largely restrictive when it comes to customization. Everything you do in terms of branding, user interface and experience, and marketing is under Amazon’s control.
4. Upfront investment
To meet Amazon’s fulfillment requirements, you’ll want to have products from the supplier in your inventory. This means you’ll need to invest money upfront in order to start dropshipping on Amazon.
How to choose a dropshipping supplier
Your main competitive edge over other Amazon dropshippers will be price, and—beyond cutting your profit margins where possible—the best way to outcompete sellers in your niche is to partner with the right dropshipping supplier. Here’s what to look for in a supplier:
- The supplier offers Amazon dropshipping for sellers in your location.
- It produces a range of products in your niche of comparable or superior quality to competitors.
- No customer service red flags or regular poor reviews.
- Low per-order fees that won’t eat into your profit margin.
- Other successful dropshippers use the supplier.
- The supplier can compete with average shipping times in your niche.
- It offers live customer support for dropshippers.
- It has detailed dropshipping dashboards with information on sales and average order values.
Thanks to the popularity of dropshipping in recent years, there’s been an increase in fake or malicious dropshipping supplier services. Follow the latest guidance for dropshipping beginners to avoid wholesalers that charge unnecessary fees.
How to run an Amazon dropshipping business without money
Most dropshippers need to spend money to build their businesses, investing in assets like an online store, content creation, advertising, and marketing or management software. But it is possible to start dropshipping on Amazon without spending a dollar. Here’s how:
Choose the Individual Seller plan
Unlike Amazon’s professional seller plan, which is a paid subscription, the Individual plan is charged per item sold—so you won’t be billed before you’ve made a sale.
Pick suppliers with zero upfront costs
Most reputable dropshipping suppliers will not charge an upfront fee to do business with you. That means you shouldn’t need to pay your supplier until you’ve made a sale and have been paid by the customer.
If you can spare a few dollars, you may want to purchase the product(s) you intend to sell. Being able to physically hold, view, and try out your product will greatly help when creating marketing content.
Create your own content
Write your own product descriptions and reviews, take your own product photos, and create product demonstration videos using your phone.
There’s no denying that self-made marketing content is time consuming, and depending on your writing and production skills, it may be hard to replicate the quality of professional copy and images.
However, by paying close attention to your competitors’ content, and deeply researching your target customers, it’s possible to create effective content that communicates the key details of your products—and explains why your customers will benefit from buying them.
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