Dropshipping on Amazon has exploded over the world in popularity in recent years. By leveraging Amazon’s logistics and customer service, you can sell products to your customers at competitive prices without paying any extra overhead costs. However, dropship on Amazon comes with its own unique challenges that you must be prepared to handle if you want to be successful in the long run.
Before you get started, check out this guide on everything you need to know about starting and growing a flourishing dropshipping business on Amazon!
1. How does dropship on Amazon work?
Before we go into a deeper discussion of how to dropship on Amazon, let’s first discuss what it is and how it works. In short, dropshipping is a business model that allows you to sell products without having them in stock. With dropshipping, all customer orders are delivered directly from a supplier or manufacturer.
When you dropship on Amazon, your order is fulfilled by a third-party merchant. You choose which products you want to sell and if a customer buys that product, they will purchase it from Amazon. It’s at a set price, which is usually discounted compared with retail prices. When customers buy your product, all of these details – pricing and inventory – are handled by Amazon.
You don’t have any worries about storing or shipping as everything is done for you automatically. Some merchants also choose to use third-party fulfillment companies to manage their shipments and storage needs.
For example, let’s say that you want to sell iPhone accessories like earbuds and cables online. Instead of purchasing products from a manufacturer and storing them in your warehouse, you partner with a third-party supplier who can supply directly from their warehouse.
2. How Much Does It Cost to Start Dropshipping on Amazon?
The cost of getting started is always a crucial question, so let’s get right to it. The good news is that if you are planning to sell new products, you don’t have to spend any money. You simply list your products on Amazon using their product listing services. However, there are fees associated with selling on Amazon that can quickly add up if you decide to do it yourself.
For example, FBA (Fulfillment by Amazon) fees alone will cost anywhere from 15% – 40% of your revenue. It depends on how much work they are doing for you and whether or not your products are eligible for Prime shipping. On top of that, there are other miscellaneous fees like storage fees which can really add up if your business scales quickly.
3. What are the Pros and Cons of Dropshipping on Amazon?
There are a number of benefits and disadvantages in terms of dropship on Amazon, including some that may surprise you. Let’s take a look at a few of each.
The number one benefit concerning dropship on amazon is that you don’t have to store any products. You also don’t have any additional costs like renting storage space or having employees for picking and packing. This allows your start-up costs to be very low, giving you a better chance of succeeding in business.
Since there are no set prices for how much it costs you to buy goods at wholesale prices, making a profit can be easier than traditional retail businesses that sell goods at marked-up prices. Another dropship on Amazon’s benefit is that dropshipping allows your customers access cheaper versions of high-end products they might not otherwise be able to afford.
Besides some advantages, dropship on Amazon also has several drawbacks. Dropshipping might not be for everyone and could bring more issues than benefits if not done correctly. The main downside of dropshipping is that it has an inherent lack of scalability. If you decide to hire someone else to fulfill your orders, your profitability is bound by their efficiency.
If a merchant dropships a bad product, then it reflects poorly on your brand. Therefore, if you are going to dropship products from an unknown company, make sure they have a good return policy and warranty. Also, make sure that your customer service is top-notch in case people have issues with your supplier’s product.
4. How to Dropship on Amazon: 5-Step Checklist
Below is a step-by-step instruction to dropship on Amazon.
Step 1: Choose an eCommerce platform to dropship on Amazon
There are tons of eCommerce platforms to choose from, but we highly recommend Shopify, which is a user-friendly solution.
Step 2: Choose your selling products to dropship on Amazon
You can choose any products to sell, but remember to avoid prohibit items that Amazon does not allow you to sell on its site.
Step 3: Create an Amazon seller account
Step 4: Set up your Amazon account on Shopify
Once you have created your Amazon store, connect it with Shopify. You can do that by clicking to the left panel, click on “Sales Channels” and “+” button.
Then, the Amazon button will appear, click “Add channel”
Next, click “Connect to Amazon”
Step 5: Start the dropshipping process
Click on: Amazon sales channel -> Create listing -> Select product -> ‘This product is made by another brand’ -> Select products -> Publish
5. Best Softwares for DropShipping
There is countless software that supports dropship on Amazon, but we have combined the best ones for your preference.
5.1 Merchant Words
Merchant Words is a free tool for anyone who’s thinking about starting an online dropshipping business. It’s great if you want help with keyword research because it allows you to see which products are most frequently searched for each month. It also shows estimated volumes (i.e., how many people search for that term every month).
If there’s any demand for your product, Merchant Words will tell you instantly by showing its volume and monthly search results. You can use it as part of your keyword research or as a standalone tool. Plus, it has a very easy and intuitive interface.
One of our favorite dropship on Amazon software, eComdash can be your powerful assistant. You can easily import products, list them for sale, and manage orders all from one place. eComdash also has an app for smartphones, so you can manage your store on the go. One of its most useful features is access to product information from AliExpress, which makes sourcing products easy.
If your product sells well, it’s easy to go through Aliexpress and order more inventory without doing any additional work. It also helps manage your cash flow since payments go directly from customer to manufacturer. So there’s no need for a merchant account or credit card processor accounts.
Oberlo is a free eCommerce toolkit that helps anyone start an online store and dropship products from AliExpress. It’s incredibly easy to set up shop, as it takes less than five minutes to create an account and connect your existing AliExpress products to your online store. The intuitive Oberlo interface allows you to manage all aspects of your store, including new product additions, inventory levels, customer service inquiries, and more with a few clicks.
With Oberlo, small businesses can save hours of precious time by automating daily tasks such as listing new products on their eCommerce platform. What’s more, Oberlo offers 24/7 live chat support who can answer questions within minutes.
Sellery is software developed specifically for drop shippers. The good news is that, with options like Sellery, it’s possible to forget about finding specific products and worry more about branding and marketing your store. It uses AI, machine learning, and over $150 billion in sales data to recommend new products based on your inventory.
By connecting multiple stores across different marketplaces, Sellery automates repetitive tasks like order fulfillment or customer service. Thanks to that, you can spend more time growing your business. However, if you want to use certain features then you will have to pay monthly or yearly fees.
6. Tips for success when dropshipping on Amazon
6.1 Offer Product Bundles
Bundling products can increase your sales by enabling customers to purchase more than one product at a time. This is why it’s important to drop ship items that go well together. If you decide to bundle them, ensure that your customers know that they’re getting a discount. It’s also wise to avoid mixing fragile and extremely heavy items in one bundle since shipping will cost more if they are shipped separately.
You should note, with most eBay sellers using Fulfilment by Amazon (FBA), they don’t have direct control over how their packages are delivered so consider potential difficulties when planning your bundles.
6.2 Focus on Mastering Marketing
When it comes to dropshipping, most newbies focus way too much on finding a supplier and managing inventory. In reality, that only makes up a small part of your business. To dropship on Amazon, what matters most is marketing. If no one knows about your store, it’s going to be difficult for people to buy from you. Some Marketing strategies you can implement are:
- Try Amazon ads, including Sponsored Brands and Sponsored Products Ads Paid
- Follow best practices for SEO, including detailed product descriptions and keyword optimization
- Utilize negative keywords on ads campaign
- Conduct A/B testing to choose the best version of your product listings
- Set a target ACoS
- Leverage social media marketing to reach potential customers
- Schedule limited-time/ lightening offers and discounts
6.3 Avoid Underpricing Your Product
Just because you can set a product price at $1 doesn’t mean you should. Underpricing your products is one of the biggest mistakes new sellers make when starting out on Amazon, but luckily it’s an easy mistake to fix.
Before setting your price, do some research and find similar products with high ratings that are priced higher than yours. Avoid items that are too cheap, have bad reviews, or have multiple sellers with only one or two-star ratings. This will ensure that you’re not undercutting yourself and ensuring that customers don’t shop for your product somewhere else.
6.4 Automate More of Your Business
Automate as much of your dropshipping business as possible. The more work you do upfront, the less busy work you’ll have later on. Try using a Dropshipping Tool for help with getting and managing inventory and other eCommerce tasks. These kinds of tools can help your business run more smoothly, freeing up your time so that you have more time for marketing and growth.
Additionally, having access to a steady supply of products means that you’ll be able to fill customer orders faster. Many dropshippers say that automating has led them to focus more on building their brand. You can choose one automation tool that we have mentioned above to dropship on Amazon.
6.5 Offer Excellent Customer Service
The best way to differentiate yourself from other dropshippers is by offering outstanding customer service. If your customer can’t reach you when they have a problem, they will likely move on to another option. That is why it’s so important that your products and site are fully functional and streamlined for easy use.
And when your customers do reach out, be sure that they feel like they’re talking directly with a company representative rather than just another person with no vested interest in their satisfaction. It can take more work. But treating all of your customers like VIPs ensures that every single one of them will see themselves as an invaluable part of your brand. And most likely choose you over any competitor who isn’t willing to go above and beyond for each client.
6.6 Monitor Your Competition
One of the most important things to do dropship on Amazon is to always be aware of your competition. Knowing what other companies are doing in your niche will help provide insight into what your customers want, and how you can deliver it better than your competitors. Monitoring your competition also helps keep you up-to-date with new trends that could benefit or damage your company.
To monitor competitors effectively, start by using Google Alerts. You can set up alerts for relevant keywords or topics based on competitor company names or website domains, which will send you notifications when new results are found in search engines.
7. Final thoughts
Dropshipping allows you to fulfill orders placed on your website without having to carry any inventory, which makes it easy and cheap to get started. But if you don’t know how to find products, properly brand your online store, and keep yourself in compliance with Amazon’s rules, then dropshipping can also be very challenging. Fortunately, we have provided you everything you need to know regarding dropship on Amazon. Just follow our guidelines and you will be fine!